From a £4M Deal Collapse to a Perfect Exit: The "Sell-Ready" Roadmap with Matt Fox

Before we dive into today's conversation, I want to quickly shine a light on the 3 partners who are behind the mission of the podcast this year. First up, we have Atlas. This isn't just another CRM with AI added on as an afterthought. Atlas 2.0 is the first platform in our space built with AI from the ground up and at its core. Next up, we have our longtime partner Sourcewell. You may know them as a world-class outbound sequencing tool, but they fully evolved into a multi-modular system. And the best part is you can plug and play their tools from the AI note-taker to the inbox agent, all without ripping out your entire tech stack. And finally, Raise. They remain the most powerful way to fund and run your contract book if you want to unlock cash flow and scale your agency with total confidence. You have to check them out. So if you go to the link in the description below, you're going to be able to get access to exclusive offers to all three of our partners this year. Let's get into this week's episode. Matt, welcome to the podcast.

Thanks very much for having me.

Obviously caught you when we prepared for this, she was in Singapore. I was recently back from Spain, completed— did you say a half marathon or a marathon?

Half— Malaga half marathon on, um, on Sunday. Yeah, I was— I'm a bit A bit obsessed. It's because, it's because I'm over 40, you know, so I've got to stave off the, the dad bod.

Absolutely. So I know you've come up to London to go through this, and I was just saying to you before, you're part of a very small percentage of people in our industry that actually successfully get to an actual exit or a financial event with their recruitment business. So whenever I sit down with people like you, I I'm really keen and curious to talk about what you learned, what you feel like we did differently. And now you've— haven't come out of that chapter, or in a really interesting position where you found yourself passing on that knowledge, information, things that you've had to learn the hard way onto other recruitment leaders, onto other recruitment founders. So we've also got this combined lived experience, and now you've also probably met anywhere in the region of like 50 to 60 recruitment leaders, maybe more that you can also speak to in terms of what you keep seeing, the common challenges that come up, the common bits that you end up giving advice on. So our goal here really is to talk about everything that we've learned, that you've learned, that hopefully we can impart on other founders that are on the journey that maybe have aspirations to get to some sort of exit someday, whatever that looks like. Is the goal.

Yeah. Yeah. Good.

So to give everyone— let me not forget anything wrong— but to give everyone some context then in terms of your lived experience, but you built and sold a recruitment business called Dynamite Recruitment.

I did. Yeah.

So I've got here built and sold twice because we got to that deal stage just before COVID 2019, but then that completely collapsed.

It did. Yeah.

At that point, to give people an idea, we were circa £4 million turnover around £650K profit before tax, and we had circa 25 staff. And worth mentioning as well, so you'd always had a split of like permanent contract, right, in terms of revenue. And then when the actual deal went through, so you ended up partnering with a company called Bluestone Group for this deal to happen. To give people an idea, this was in second time in 2024. Business was a lot more streamlined. So there was circa 9 people in the business, um, and came out of COVID with about, with about 9.

There was a few more than that by the time the deal went through, but yeah, pretty much.

And they're about, uh, circa £3 million turnover and then £400K profit before tax, is to give people a bit of an idea. And then I've got it here written down somewhere, but what, what was like your world at Dynamite Recruitment? Like, was it multi-sector, or just, just share that with us?

Yeah, yeah, it was it to start, to to start with, um, you know, I'd launched the business, um, recruiting in all the areas that I'd had exposure to over the years myself, you know. So we did a lot of commercial and office support, call centres, sales, marketing, that kind of thing. But then over time, you know, business had evolved and we did a lot of work in technical. Um, to us that was kind of sort of HVAC and, you know, fire alarm installation and, um, and, you know, commercial gas roles, that kind of thing. Um, a little bit of the senior end, but also we had a, um, you know, financial services team as well, which seems like quite an eclectic mix. But the business kind of sort of grew around, um, around the people, and it worked.

And then in terms of how it was structured, I think this is helpful for people. So obviously on the— I've got here on the first attempt, let me know if this is wrong, but I had 50— so 50% paid up front Oh, the deal, you mean? Yeah, the deal. Sorry, in terms of how it was structured. Yeah, because I think that this is worth noting for people have a bit of an idea. So yeah, on the first attempt where it fell through, it was like 50% paid up front, and then over a certain time period there's like an earn-out depending on if certain things would, um, were hit, then you'd, uh, unlock the rest of, I guess, what they valued the business at, what you know. Yeah. And then The structure of Bluestone was different. It wasn't upfront, it was like over a period of time. And you obviously have people that you brought on the business journey that are now running the business.

Yeah, no, so the deal structure, um, so in the, the, um, the first sort of sale that I'd, um, you know, negotiated was 50% of it was upfront. But like a lot of deals, you know, the remainder was paid over a period of time, and some of it was dependent on, you know, gross profit, on, you know, fee income. And the deal was very much that I needed to be there to run that business, because if performance dipped, then so too ultimately did, you know, the rest of my payout. So there was quite a sizable proportion of that deal that was linked to an earn-out. And straight after we'd got to heads of terms, signed, as you quite rightly said, 3 days later, Boris went on the TV and called a lockdown, and then the whole thing evaporated, unfortunately. But I'd come back to the table quite a few years later to then, you know, go back to the market and sell. And I'd changed an awful lot over those few years and I'd, you know, changed the structure of the business. I'd used it to take quite a lot of cash out and achieve some of the stuff that ultimately I wanted to achieve initially if the sale had gone through. Second time around, it was similar in that it was, you know, 50% upfront, but the remaining payments was guaranteed, but over, you know, a period of time, over an 18-month period. So that wasn't, weren't related in any way to sort of to business performance. But of course the trade-off for that was that I didn't necessarily need to be there in order to run the business, and it was a much quicker exit for me.

And then other useful bit of context for people, first attempt was actually through like a national broker that we had some options on the table. 12K instruction fee, around about that.

It was, yeah, it was about that. Well, it actually, you know, the, the, the buyer in the first deal didn't actually come through this national broker at all. It was somebody that, um, you know, my accountant had linked me up with. But that was a, um, a terrible experience. A terrible experience.

It's always— because we'll touch on that, because I think that's always interesting, like how do we even get— like how do we even find potential, uh, buyers, right, of our, um, business. Okay, so what we wanted to do then is ultimately, obviously there's there'll be a lot of stories, a lot of things you've learned the hard way to get to that point, right? But I think what we really wanted to try and do with this conversation is really trying to impart some of the things that you've maybe now found yourself consistently giving to other people and what you've seen. Because we're now out of this chapter in your life where it wasn't all about Dynamite Recruitment, getting to a point where you wanted to, and now actually expanding your horizons almost, and like really opened up what other people are doing, whether on their businesses, the challenges they had. And I'm sure there's been things that you've seen that you haven't been surprised by because you lived through them, and there'll be things that maybe you are surprised by. So we're going to sort of really try and break that down. So I just wanted to ask you firstly, like, a bit of an open question with, like, we can't not mention and talk about, like, AI and tech, right? I think so. I'm just, like, curious, just from from the conversations and the things that you've seen over the last 12 or so months, like, if I was just to say to you, like, do we think more recruitment entrepreneurs will sell their businesses going into next year and the few years, uh, ahead of that, or do you think less people will? What do we think about that from what you've seen?

What do you mean, in terms of sort of, you know, just overall? Yeah, because I feel like volumes.

Yeah, just overall deal volumes. Like, how do we because I'm— I just feel like, I think like recruitment business could look very different and how that's going to impact how they're, how they're valued, what they're worth. Yeah, actually I've now got several AI agents running this, so actually it's a really good profit center for me and I am less involved, so I don't need to exit the business, you know what I mean? I'll just— because I'm sure it's come up a lot in your conversations, tech and these things.

It does, it does.

So I was just curious just to see how you feel about that. No one probably knows, but do do you think there'll be more deals and activity happening and people exiting their recruitment business, or less overall?

I think, I think there are so many different factors that kind of sort of play into deal appetite and, um, you know, the number of, of sales and completions. I think firstly you've got to think about, you know, what are the reasons that people launch a recruitment business, um, and, you know, and you do get, you get the odd few that will want do it because of the fact that actually it's a social enterprise and they like the idea of sort of doing something, you know, good and helping people. The vast majority of us who launch a recruiting business do it because we want to make a load of money, um, and we love what we do, obviously. Um, so I think, is that, is that element going to change? Is the ultimate goal that people have, is that going to change? I don't, I don't think it is. I think as far as, you know, the, the sort of the, the increase in the amount of AI and tech that's being used in the industry, is that going to broadly change things? Look, I don't— how we, how we calculate value in a recruitment business is based on its profitability, isn't it? You know, and I can't see that that's going to change anytime soon. I think you're right in that, um, you know, profitability could be increased, you know, with the advent of a lot of sort of tech, of tech agents and, um, and what have you. But at the same time, there's been an awful lot of downward pressure in profit margins in the last few years because the cost of candidate acquisition has increased quite a lot. So, um, you know, look, this, as I said, there's so many different factors. I think what What we can see is that actually there is consistent appetite to acquire recruitment businesses at the moment. Um, lots of companies out there on a buy and build model, and, and certainly, you know, I'm having conversations on a weekly basis with, um, you know, trade buyers, um, in some cases PE that are interested in, in acquiring recruitment companies. I don't think that's going to change. Um, so broadly, I think there will be you know, sort of continued appetite for that. I think perhaps, you know, the understanding that, you know, that buyers have of recruitment businesses will probably need to evolve because as there's more and more tech out there, it probably means that actually, you know, historically you'd have bought a recruitment business with 15 staff. Well, they might only have 4 or 5 in the UK, but actually they will then have some offshore people. Maybe then, you know, South Africa has become really popular at the moment in terms of, you know, offshoring over there. You know, agents, a lot more AI doing the work perhaps. And so actually, you know, buyers' understanding will probably have to evolve in terms of, you know, how much importance we place on visibility in a way. So, you know, I don't know, it's probably—

yeah, I just want to just get your take on that. Yeah, what you're saying, because like you said, you're having a lot of conversations with people that are interested in buying recruitment businesses. And then just before we get into some of the parts I think will help people then. So is that, is that sort of your overall— is that your overall perspective, that there is like a good amount of appetite from, uh, organizations that want to buy recruitment businesses? You said buy and build. What would— just explain that to us.

What does that mean? Well, so, so actually what you see in, in the market, especially companies that, that are, um, you know, high net worth individuals, recruitment businesses that want to grow, um, You know, look, if it's hard work, isn't it, to, you know, to recruit trainee recruitment consultants and build a scaled business, you know, from the ground up. So there are quite a few businesses out there that, you know, that are really kind of sort of making a growth plan out of buying up smaller recruitment businesses, putting them together into a group, creating something with, you know, more turnover, more profitability, and then either floating or selling that on in a few years' time once it's been built ultimately. And I think, you know, there is certainly an opinion among a lot of businesses that actually it's easier to, to, to do that by adding turnover and, um, and whatnot than it is to, you know, just sort of organically grow.

Yeah. Okay, nice. So where I wanted to, to start on this, and it'll be interesting to hear if you run into this, so when then, whenever I've sat down with people who find themselves advising, coaching, helping recruitment founders, recruitment leaders, after going through their own experience, a bit like yourself. Something that comes up quite a lot, and I definitely run into it as well in the conversations I have, is not having clarity on what people want for their business. So I'm just curious to hear your journey with this because I know this is something that a lot of people struggle with. It's a loaded question. What do you want for your business? Someday you may want this, another week you you may want something else. But if me and you were to meet for a drink or whatever, we went for a run and I was talking about your business, would you have always said to me, yep, Hishem, I'm building Dynamite, I want to exit it, I want to sell it? Or did that change? Like, did you, did you have clarity on what you want, wanted? Because I feel like there's something here that we tend to have to understand and start on. Because especially on my own journey as an entrepreneur, if you learn or read anything about selling a business, what's your number? And you've got to work backwards, you've got to be clear on what you want. What would you have shared with me? Like, was you— did you always have that clarity on what you wanted, or did it evolve and change?

No, of course not. I don't think— I don't— I don't think anybody launches a business on day one and thinks, well, I'm going to sell it on this date and then it's going to be worth this amount of money. And that's just— that doesn't happen, does it? I think, um, from my perspective, when I launched the business I knew very clearly I knew I was going to sell it at some point, that because, you know, I already had that clarity in that I knew that that ultimately would be the aim. And I was thinking to myself, oh, you know, maybe 5 years, 7 years, something along those lines. Well, you know, when you're launching a recruitment business from scratch, um, and it's self-funded, literally you turn around and 5 years has gone. You know what I mean? You're like, you're like, where is that even, even gone? And I thought, well, actually, you know what, I'm having quite a nice time. I'm enjoying this, you know, it's good. You know, I still liked all the team at this point, you know, and I think that's something that as time goes on, sometimes people struggle with, you know, and, but no, I was having a lovely time and I thought, you know, this is really, really good. And I thought, no, I don't want to sell this. I'm starting to make, you know, some good money. It's starting to, you know, provide a really nice lifestyle for my family. You know, when I launched, I think, you know, my initial plan in my naive naivety was that, um, well, you know, I'm going to grow this into a, you know, a single-site operation. And at the time you had people like Match Tech who were marketing themselves as a sort of a single-site technical recruitment business, um, you know, leading in, in many ways in, in that area. And I thought, well, I could do the same thing but only, you know, in, in, um, in sectors that we really know and understand, which were, you know, commercial and sales and marketing and, and at that point accountancy and finance. I thought that'd be, that'd be brilliant. And then I realized pretty quickly that the idea of having 100, 200 people in a business would probably make me want to throw myself off a bridge. So actually, that, that, that idea kind of just went out of my mind pretty, pretty quickly. Um, and actually, my focus was very much more on the, on a sort of, on the boutique market, um, because that's where I was comfortable. That's what I'd known. Um, you know, my background was at, was at Huntress working for, um, at the time, a couple of, you know, really inspirational people, um, and they ran that, that business at a boutique level within the commercial division. Um, it was high-end, there was a lot of brand prestige, but it wasn't so big that, you know, identity got lost and, um, you know, the standards got diluted in a way. So I'd kind of always carried that with me, and that was the aim.

So again, I feel like there you're talking about some clarity of what you wanted. So when we talk about recruitment entrepreneurs, ambitious recruitment entrepreneurs listening to this, that at some point would love the option or opportunity to exit the business that they're building, or that is something that they know they definitely want, um, like, surely do you, do you sort of give the advice, give the advice that you have to know that, like, in order for me to get to that point, I have to know that's what I want?

Um, I think, I think, I think you do. I think you, you need to, because I think you've, I think you, I personally, I encounter, I would say, two kinds of business owners.

Okay.

Um, and, you know, the first kind is the individual who has launched that business because they know that they want to, um, go on a journey. They want to make money to provide whatever it is that they're looking to achieve, um, and they want to sell it. It. The others have launched this business because they loved recruitment, they wanted to make a lot of money, they've done really well at it, and then they kind of— but they haven't really thought what things look like moving, moving forward from that. And so actually, those are the ones that then think, oh, I want to sell this business, but they're nowhere near ready. So, you know, if you're— if you kind of fall into the first camp and you're somebody that, that has launched a business with with the idea, even if it's just a distant idea or a kind of a, you know, a sort of maybe a thought that at some point you probably will sell that business, then there are things that you generally will tend to do on that journey that will make it easier for you to do that. And I think that's maybe psychological perhaps because you almost detach yourself from it a little bit as time goes through. Whereas if you're the business owner that's in the thick of it and you're absolutely sort of involved in everything, in the relationships, in the numbers, in the billings, in, you know, then actually you, you then suddenly decide, well, hang on, I want to sell this business, you're then looking at another sort of 2 or 3 years before you're actually able to, to do so, in a way. Yeah, but you, you, you, sorry, you, you know, you, you mentioned about what people are— you're talking about what people actually want.

Like, with what you're talking about, it's a really good point, the way that you put people in those categories. From what you found is almost like, from what you've seen, do you feel like you could end up selling your recruitment business or exiting it by accident? I'm not sure, by just by building a good business and these things. But actually what I'm getting to is if we are a bit more clarity on what type of business that we want and where we want to end up to, whatever that looks like, we can then work backwards from that and make some smart decisions. And that's a lot of the things that we're going to go through, right? So I'm almost like, have you found people can just almost building these good principles and building these infrastructures and the things that we're going to go through by accident? Or actually, do we probably need to have a bit of intention and know what we want to have a better chance of making good decisions?

I think it helps, doesn't it? I mean, look, there's a chance, of course, like there is with anything, you know. You, you know, you kind of sort of build a business and you end up with something that, that somebody has a look at and thinks, oh yeah, you know, that, that, that'll work all right. But actually, I'd much rather have a bit of focus and, and a bit more certainty that, that I'm going to ultimately achieve, you know, or build something that is, that is sellable, you know. Um, I don't know that. I don't know that anyone sort of sells a business by accident. Yeah, nice concept, but yeah.

And then just final point on this, so like, is that something that you've run into? Like, have you had to sort of almost really peel back the onion with the people that you work with or spoke to or spent a bit of time with to like, for them to get clarity on what they want, what they want the business to be, sell or not? Is that something you run into or not really?

All the time, right? All the time. Yeah. And, and whenever— in fact, whenever I take on a new client Um, you know, the first kind of session that I'll have with them is it almost has to be kind of sort of almost built— a, building that chemistry. But before I even get on to start talking about their business or, you know, understanding where it's at, first thing that I always want to understand is that person individually. I've got to understand, you know, what their life looks like, what their background is, who's at home, um, you know, what do they do, what are their aspirations, you know, why have you set this business up, what is it that you want from it. Because every single person that I work with now, you know, you can't just assume, well, they've launched a recruitment business, so they want to achieve A or B or C. It's different for everything, every single person, um, you know. And it might— for some people, it will be an income goal, you know. I just want to get this business to a point where I can achieve X amount, um, in terms of sort of, you know, personal income every month, um, and that's, that's my aim. And that's fine. Somebody else will want to build a business to a certain level of profitability because they know that means they can sell it for such and such, or they've had a look online and that's what they reckon, you know, their goal ultimately needs to be. For other people, it's leaving legacy. It's the fact that actually I've got people in my team that I've worked with for 25 years in another business and now here, and I really want them to be able to afford to buy it and take it over. And if that means I make a bit less so be it. I've got— I've actually got a client like that at the moment, and she's— the business she's built is just awesome, but that's her goal. Now somebody else would look at that and think, well, you're mad, you could sell that for twice as much. But that's not what she wants to do, you know. And, and that's what I mean, it's, it's different for every single person.

Why— I'm— I just find this topic of conversation interesting, and honestly, I know I'm harping on a bit here, but like, it is just a common thing that I run into, so I'm not surprised that you've run into it. Like, why do you think that is? Like, why do you think people do find it hard to sort of get clear on what it is that they want? From your— from what you've seen, like, what is it that you find people find hard?

I, I think it's not— I, I think what doesn't help is the fact that, um, you know, selling a business from— well, for the vast majority of people, is a once-in-a-lifetime thing. And if you think, no one's around that, are they? You know, so most people who launch a recruitment business are people who've been really good recruiters, really good consultants. Perhaps they've run a team in another business and thought, hang on a minute, I can do this better, bigger, more efficiently myself, for whatever reason. But unless they've worked in a business that is highly acquisitive, they won't have seen that business sale and purchase process, um, previously. They probably might have been told internally, oh great, look, we've bought this business, it's now part of our, part of our group. But they won't have ever had any exposure to that. Um, so actually it's a completely new thing. It's like walking through the Wild West, you know, when you come to actually sell a business. And I think people probably don't realize what's involved. They haven't really thought about you know, the process or what they'd need to do or what that might look, look like or how much money they could come out of that with. Um, because when you think, I'd kind of like to sell my business, um, chances are you might have been on Google, you might have had a, you know, a sort of ask ChatGPT a few questions about it. We don't really have much understanding of what's involved in that. And I think because of that, it's quite difficult for people to actually formulate goals. So there are quite a few people that run recruitment businesses that kind of— and this sounds in a way, but who go through life, um, running really good businesses but haven't really thought about what they're going to do with it. And I bet as we're talking, there's probably a few people that are thinking, oh yeah, that's me.

Yeah, just, just my thoughts on it from my conversation, even like just on my own journey as well, is I think because you're an entrepreneur doesn't necessarily mean you're someone that's self-aware. So you could easily be running a business and actually how much self-awareness you've developed, and that's probably pretty important to have a bit of an understanding of actually what do I care about, what's important to me, what my values are. That's a reflection. Like, I've got here a lot of the, the typical businesses that you worked with, sub-35 headcount, average 8 to 14 staff. I've got here, I speak to a lot of those businesses as well, and as you'll know, it's very hard to take a step back when you're in the fucking trenches.

Yeah, it is.

So to actually even have time to— on the headspace, particularly when maybe you're going through a challenging period, to think, what is it that I want? When all you're thinking about is that invoice that hasn't been paid and that dropout that's happened, what are you gonna do? It's hard to get into that headspace. Yeah. And then I'd probably also say comparison as well is a factor in terms of if you haven't got that clarity, then it is hard to get it when one week you see one person talking about outsourcing all of their team to South Africa and using AI, and their profitability is that, and you're looking at your team of 8 full-time headcount going, fucking hell, that's, that seems a lot better, and vice versa every week. So then you're like, oh, maybe I should be doing that, or maybe I should be doing this. So they're just a couple of things that I feel like are at play here, and It is important because I think if we're gonna, um, get anywhere near achieving whatever we want, it has to start with understanding what we want. And it is a personal question.

Yeah, it is.

Do you know what I mean?

I think actually, you know, we— you mentioned comparison. That's such a— that is such a big deal for so many people in our industry, especially as, you know, um, you know, social media is so prevalent to everything that we do from a marketing perspective, um, you know, and all you've got to do is look at LinkedIn and there are a thousand people all over LinkedIn, millions of people all over LinkedIn, you know, telling you what a wonderful business they run and how awesome their recruitment business is and how you should do this and this and this and how, you know, you look at, look at all of, look at all of these things I've, I've achieved, look at this, you know, all of these social and, um, you know, sort of community initiatives that we're involved in and what have you. And it's very difficult for recruitment and business owners, especially when they are quite isolated because the size of business that you've mentioned, I mean, what is that? 80% of UK recruitment companies have got less than 10 staff, I think. I forget what the actual— yeah, something like that, isn't it? Um, and actually what, what's quite enlightening, um, or what has been quite enlightening for me is actually, I mean, look, there have been a couple of people that I've come across as part of this journey, and I know what their numbers are, and I've seen what their businesses are generating. And in those cases, actually, there was a real disconnect between what the numbers were saying and this online persona that you would think was an absolute god of running, um, running recruitment businesses. And so that's quite difficult for people, isn't it?

Because there's no real, like, realism there a lot of the time, especially when it's people that you may have worked at some point with, or you're aware of, and they maybe started the business same time as you, and they've—

they're all—

they're all the way over here doing really well when you're over here. It's hard.

Yeah, you got it.

But it's even more hard when you haven't got that internal clarity of what it is that you want. That's why I'm always a huge advocate. It's always what I say to particularly small business owners, like, really, it's a loaded question. You've got to reflect on it. Something you've got to keep coming back to. It may evolve, but it has to start there, whatever it is that you want.

You've got to run your own race as well, haven't you?

Yeah. So when we thought about this and the types of conversations you had, the clients that you work with, we came up with a couple of like typical constraints, right? So these would fall under the category of challenges, things that may be holding a business back from being— regardless of wanting to exit or sell— more valuable. Maybe more efficient, more profitable, just constraints that are holding that founder or business back, right? And we've got here no leadership layer, we've got client relationship anchored to the founder, we've got no documented processes, founder dependency, tolerating bad behavior for revenue. These are a couple of the, the common ones.

Yeah, yeah.

Should we start with no leadership layer? Yeah, I feel like that's That's one that I see a lot, particularly in this cohort of types of companies, uh, that you spend a lot of time with as well. Why is that, do we think? And like, why is this important, this leadership layer? Should we just start there?

Yeah, 100%. And I think just to sort of to mention, you, you said about the generally the size of businesses that the business that I work with, that's purely because that's just where my, my experience lies, you know. I built my business at peak to just under 30 heads, um, and, um, you know, and that's a space that I'm really knowledgeable in and sort of quite, quite comfortable. Um, but I think, yeah, I mean, in terms of leadership layer, I suppose when you come to, when you come to selling a recruitment business or exiting it, it's all about, um, it's all about risk and the perception of risk, isn't it? So, and I think I think what recruitment founders could probably do better when they come to sell a business is to almost kind of sort of view their business from a buyer's perspective. And if I'm buying your business, I don't want to buy something that I've immediately then got to go and fork out to replace you, um, because of the fact that obviously that really kind of sort of takes a little bit of the shine off the financials of the, of the deal for me, you know. um, and also it's going to affect your, your valuation as well. But most buyers will want to buy a business that does stand up on its own. So if you've got somebody in that business that you can maybe kind of elevate or develop or train, or basically a second tier of management that can effectively run that business when you're not there, um, and that's something that you see in quite a lot of businesses is, is absent because you've got that owner or that founder that's kind I suppose got too many hats on and he's involved in too many areas.

And I guess that also, would that also be the reason why sometimes maybe a common deal structure will be, well, there's quite a bit of risk here, so we'll give you X money up front, but then you're staying in seat for a time period and there'll be that earn-out period because it de-risks it?

Yeah, absolutely. De-risks the business, but also, you know, there is a likelihood that they're going to need you still there running the business. And, you know, the advice that I always give to, to people who are selling a recruitment business is actually, you might think to yourself, well, that doesn't matter, I can, I'll sit here for a year, 2 years, you know, no, no big deal, and I'll just keep running the business till I've had all, you know, all my money out of it. But that relationship, that feel, how you feel I can't tell you how much that changes once that deal has completed, because the kind of, you know, the experience of actually sitting in a business that you built, you know, there's like desks and chairs there and you bolted the damn things together when they came out of the packet, you know what I mean? You have built this business from scratch. It's a very strange feeling to then have somebody else who's running it and, you know, and obviously, you know, dependent on the kind of sort of relationship that you've got, but the control, the balance of control shifts. So actually, if you'd have had an issue in that business previously where you've thought, you know what, actually you've done really, really well. I can see that there's a couple of things that need ironing out and I think it's the right time. I'm going to give you a little bit extra or I'm going to do this or do that or whatever. You can't make those decisions anymore. You know, you've got to get, you've got to get that stuff signed off. And that is the dynamic. It's just, it's weird. It's just a weird feeling. And I think a lot of people struggle with that.

And also, like, just mentally, I can imagine, like, there's a few people that I've interviewed where you've got that massive high, right? You've got to that end goal that you've maybe been thinking, dreaming about for a long time, and then you go back to the office the following day and it's doing, doing the weekly sales kickoff meeting, and it's like, right, fucking hell, I've got 12 more months of this. Like, that's hard mentally as well. Yeah, as well as having to report to someone.

Totally, totally. But things change in, in a business as well, because you've got to bear in mind, you know, whoever your team are, well, you know, you're, you're not, you're not the top dog anymore, are you? You know what I mean? And I've got to build new, sort of new relationships. I've got to impress other people. And actually, you, you notice a real shift, which is totally normal. Natural, but it's just, it's very un— it's very uncomfortable for someone who's, you know, been the founder and, and, and the owner of the business as well.

So you mentioned earlier challenges that you experienced growing, scaling your team, but from the conversations, meetings, clients that you work with, the leadership layer piece and just building that next layer of management and leaders, is that like a— what's behind that? Is it a want to do that? You've typically found that people actually— I don't, I don't like the idea of building a leadership layer, I want to stay in control of things. Or is it more of a skill set piece, like they've just found it hard to develop the skills to keep their best people and, um, you know, engage them and develop them themselves? Like, what is it that you found is behind this? Because I'm sure for the most part people can understand that if I'm gonna buy your recruitment business but every single customer, every single part of it is anchored to you as a person. I think that's pretty straightforward to go, well, how valuable is that, right?

Yeah.

So what, what's like the reason behind this? Is it like, what have you found?

Well, I think again, I think there are— there's, there's two types of people that, that sort of, that kind of sort of launch a business, aren't they? There's the real, like, there's the super biller who's been in a bigger business and, and he or she has, has, you know, smashed in, you know, massive revenues. And sometimes you've got somebody who's been in a management role in a previous business, um, and they will then go off and launch their team, their business. And I think actually kind of some of the reasons why people struggle with creating that kind of second tier of management is if you think about your average recruiter, um, they're a control freak. They're into absolutely everything. They need to be in control of every element of that deal. Um, and that's great for somebody who wants to bunch of business who's going to go around grabbing all the low-hanging fruit and make sure that there's revenue on the board. Problem is, what you need in some, I suppose, in the skill set of somebody who's going to be great at building that second tier of management is somebody who is going to delegate, who's going to let go, and someone who's going to enable people to like fuck things up, you know, make mistakes and, and, and, um, and whatnot. And so there's a real contradiction there in terms of the skill set. So some, the people that generally, and this is a real generalization because obviously there's exceptions to every rule, but the people that you find are sometimes a bit more successful at creating that second tier of management are the people that have come maybe from a management background. And so that, you know, that kind of sort of those behaviours of delegation, of sort of stepping away, of allowing other people to shine in a way, perhaps come a little bit more naturally to those who are, you know, almost from a billing background, and they really struggle to kind of sort of step back and to sort of to step away. But I think you've got to empower people, you know. You've— if you're— if your mindset is such that you want to grow and develop your business, well, you can't do everything yourself, you know. That's— and, and that, again, that's a journey that a lot of people go through when they run a, um, you know, and launch their own recruitment businesses. They try and do everything themselves because nobody else can do it as well as they can. Um, and I think we've all probably met people who've got almost to that point where, you know, their head's about to fall off because of the fact that they, they are— they're just trying to do everything. Um, but trying to get people to actually sort of go through that journey of delegating and kind of upskilling people, um, that's, that's quite an achievement if you can get someone to go to kind of sort of look at their business a little bit more holistically and, and, and kind of sort of recognize where they've got people who could really develop and, um, and take on more, you Um, what's coming to mind is something that I'm always a huge advocate for, for particularly for small, um, businesses, is I've had an assistant for over like 3 years, UK-based.

Met them initially through, um, like Upwork and like paying them hourly, and then that's like progressed over time. And the reason I'm bringing that up is because I think That's a really good exercise because if you do that effectively, and we're also talking about outsourcing here and delegating, as you said, if you do that effectively, what you have to do is document processes and systems and actually look at your time and audit it and go, what am I spending my time on? Am I just spending time in the areas that I'm comfortable with that aren't moving the business forward? And like really looking at that, that's a really good exercise to like get into the rhythm and build that muscle of processes, building systems, and delegating. So I'm always a big advocate for that. And I think, feel like even if you're not nowhere near building a leadership layer, even just looking at that and delegating, or thinking about your time and where you spend a lot of time doing repeatable tasks that you could pass over to someone else. Because I feel like once you build that muscle, you can like build on that.

Yeah, sure. Yeah.

So that's just something that I feel like would be— that, that's something that people should really consider. I feel like that could hopefully then make it a lot more easier to do some of the things we're talking about.

What, outsourcing, you mean?

Yeah, or like even like just if you haven't had that experience of like audit— auditing your time, delegating tasks, I think you should, just because like that's a good experience. Like going for that whole process, I feel like you're going to find it a lot more easier then to pass on responsibility, delegate. Yeah, build that leadership layer because you're having to think about your time, thinking about actually I shouldn't be doing this, someone else should be doing it, and going through that mental process.

Yeah, 100%. Um, you know, look, if you, if you're going to get to a point where, you know, you're able to sell, to exit from, from your business, it's, it's really not, it's not optional. You know, you've got to have, um, you know, a team of people there that will allow that business to run without you being present. Um, and that's probably one of the biggest things that you've got to get right. Because if you don't have that, then, you know, okay, there might be the odd situation and there will be a few businesses where, you know, you can, you could look at selling to maybe a much bigger recruitment company that perhaps if you've got a big book of contractors, maybe could that just slot into another, another business. Then yeah, of course there are situations like that. But, you know, the stereotypical, you know, trade sale, I'm selling to, you know, another recruitment business or a PE, a PE house or a funder, you know, they're going to want to buy something that runs. Um, you know, the day of the deal, um, but also, you know, 3, 4, 6, 6 months, 10 months, 3 years after the deal, you know. And so that's why it's so important. But, you know, look, there's, there's so many different ways that you can upskill the team that you've already got, you know. And actually, it's fair to say, you know, the, the, um, the individuals that actually formed my second tier of management, they're, they're absolutely— I've got nothing but, you know, love and admiration for them. Um, one of them though, um, you know, she would be quite open in saying actually a lot of this, you know, the management abilities and the management skills probably didn't come naturally for her. So she needed a bit of help and some development in terms of getting that right. But my God, you know, when she did, she's flying. Um, and so, you know, you can achieve that normally.

I feel like, oh, as well, like, again, talking to like the small business owner here, but like, if you're— if you also get better at this stuff, then I'd like to think you— we started this conversation about you traveling, spending time in different locations. I don't know what it's always like for you, but it must be really hard if you feel like when you do go away or spend time with your family that you find that really difficult to do because everything is so reliant on you as well.

Oh my God, the first few years of running the business, I remember, you know, it caused practically domestics with me and my wife because we'd be away on holiday and, you know, she would be sat there saying to me, I don't know what the fucking point is in you even coming to work. And she was right, you know, she had a point because I would be— the phone would be just going constantly. It was emails, it was calls, it was— and actually it's not until you sit there and you think, hang on a minute, why, why am I getting all of this? It's for, you know, now and again, obviously there's an issue that, you know, as a business owner you do need to be involved in, or a decision that perhaps, you know, you, you do need to give, um, some input into. But for the most part, I was looking at all of these, these queries and I thought, well, hang on a minute, it. This is stuff that I don't, I don't need to be involved in this. You know, we've got this new client on, great news, but actually they want this fee or they want these extended terms or, um, you know, they're asking if we can do X or Y or Z. And I'm thinking, you know, look, I've got people in that business with the level of experience that they don't need to be asking me about this stuff. And you mentioned self-reflection. So I think, why do they feel like they need to? Why, why are they checking this stuff with me? And is it because of the fact that I'm kind of sort of displaying elements of that control freak behaviour that I mentioned earlier on? And so you kind of have to look a bit inward sometimes to think, well, hang on a minute, if I want to change something, it's like that whole cliché, isn't it? Nothing happens if nothing happens. And you, you've got to kind of sort of look at yourself a lot of the time and think, well, hang on, what do I need to do to empower people to actually not need me.

Yeah, I love that. We've got client relationships anchored to founder. I'm, I'm interested to get your thoughts on this. So I'm definitely of the belief that one of the last things that you want to outsource or try and pass on to someone else, whether that be outside your business or, um, in it, is out there spending time in front of customers and winning customers. I feel like as a founder, as a leader of your business, that's going to be one of the things for the most part, for most people, that you could— is one of the highest leverage things that you can do. But I understand that we don't want all of these relationships anchored to you as a person because again, it's, it's risk, right?

Yeah.

So what, what's like too much? Because like, do you, do you agree with that? I feel like that's probably one of the things I can keep having an impact on as I go on this journey. Yeah. Helping the business, empowering the businesses, going out there spending time on relationships, but then I guess it's not having that control freak around, that's my client, and all that, all that. It's that everything I'm doing is of service to the business and the team. But what is like— yeah, when we say client relations anchored to the founder, what is like too much? Because I feel like they should always be out there winning, but maybe it's not like, like I said, like my clients.

And I think, I think as a founder, as an owner of a business, you, you know, you'd have you'd have to be beaten away from that, wouldn't you? Because surely that's, that's the fun bit. Yeah, in a way, that, that is one of the best bits in, in my opinion, because I've always loved, absolutely loved business development and sales and being out there and talking to clients and, you know, and, um, and running events and, and whatnot. But what we come back to here is that actually, from a buyer's perspective, they're going to buy your business, um, and actually they don't want to find that in, you know, 3 months' time some of the key clients that they've really counted on have turned around and gone, oh well, we kind of really like dealing, we like dealing with you, um, and you're not there now, so well, you know, we just entertained somebody else, or, you know, we've been having phone calls from, from this agency or that agency, and well, we're just going to give them a go. You know, that, that's like the kiss of death, and that's one of the biggest areas of risk, isn't it, if you think about it, from a, from a buyer's perspective. So how much is too much? Well, really, you want to be in a position when you come to sell your business where, you know, you don't really hold any of the key relationships, or as few as, as possible. Um, and especially you don't want to be involved in any of the billing or the delivery. Um, and I think it's quite a sensitive thing for a recruitment business owner to do that, to hand that over, because if you think about it, you're at— you've got a risk there of almost your identity being lost a little bit? Because I'm pretty sure if you went out and spoke to most of the clients of an SME recruitment business, they're going to say, well, yeah, and say to them, well, you know, look, why do you deal with them? The answer is probably going to be, well, because I've got a really good relationship and I really like, um, you know, the guy that runs the business, and I've, you know, you know, I've got quite a good relationship with him, and that's why we tend to sort of, we tend to work with them. So actually, how do you, how do you manage that? For me, it's kind of a, it's a gradual process. Um, yeah, it's a, it, and actually, well, you know, you're not there for a week or so, so you can, I'm gonna, you're gonna be dealing with such and such. Um, and then actually that person just does a little bit more on their account. Um, and then actually where you might have picked the phone up to them to kind of sort of, you know, do a check-in call and see if you could pick up a couple of new jobs, you get that person to do that instead, you know. But you still go and see them and you, it's that, that whole sort of, you know, gen, it's just gently sort of removing yourself from, from that process, isn't it? Um, and I think there's no right or wrong way to do that. It's just something that people just achieve over, over time. But obviously you've got to have the team in place where you can be confident in their ability that they're going to deliver to a, you know, similar level to, to you.

I feel like what I've seen is there's definitely, like you've alluded to, that control element. So especially when you're a small team and every pound means something and like you can really feel it, especially if it's clients that you've worked really hard to bring on and you, yeah, really value the relationship. It can be hard to watch your team make mistakes or do the wrong thing.

It's awful, isn't it?

Because, yeah, yeah, so like I can imagine that's part of it, but also especially when it— again, we're talking about SME recruitment businesses here if I'm not the person generating the most revenue, what's my purpose? I feel like that's something as well that people will run into. And I feel like, again, the mindset that we need to get more into is if you're gonna grow a recruitment business or get it to anywhere in terms of like it be a sellable asset, it can't be about you being at the top of the billing leaderboard.

It's not about you.

Yeah, that's what I mean.

This is it, you know. If, if you're, if you're you're building a recruitment business to sell, it's not about vanity and it's not about ego. And it depends how you're measuring, you know, the person that generates the most revenue as well, because in most recruitment businesses we would probably look at the consultant, wouldn't we? Or, or, you know, whoever is in that sort of— whoever is kind of sort of doing the deals in a way. Um, and are you going to be the top biller in, in your business? Well, yeah, you might be for the first for the first few years, maybe. I don't think I was the top biller in my business for probably any longer than about the first 8 months, actually, um, because that wasn't, that wasn't my job, you know. I billed because I think you've got to, um, you've, you've got to demonstrate capability and you've got, you've got it, absolutely. But in so many cases, you know, I went out there and brought on, brought on clients, one business, and then passed it out to, to the team. Because for me, um, you know, and I, I quite openly say I, I think I've always been a much better manager than I have a consultant, actually. Um, but for me, I would always want to build my team, build my people. And sometimes, you know, by giving them something, by winning a client and giving it to somebody, actually you elevate that person so much. Because it's, it's not only the fact that they've got something to work on, it's the fact that you believed in them enough to give them that business. And that's so important.

Yeah. And then we've got here, is this something you've also seen quite a bit? Tolerating bad behavior for revenue, is that something that comes up in your conversations?

You know what, I put a LinkedIn post on about that, um, I think it was probably about 6-8 months ago, and the amount of, um, comments that I got from people, you know, like when you sort of go to like networking events and everything else, amount of people that, that said to me, I saw that post you put on LinkedIn, um, about, um, you know, behaviors, and that really kind of Yeah, it really made me think of a sort of hit home that did. And I, you know, so many, in so many cases, you know, I said, well, I'm really, well, I'm not pleased to hear that, but I'm kind of, I'm pleased, I'm pleased that I'm, you know, I put something out there that you kind of related to, but you, you didn't comment. And well, yeah, well, I know, but you know, you don't want to put that out there necessarily. Um, but I think that is a thing, that is a thing, because look, as an industry, what, what do we do? We bring trainees in, in a lot of cases, people that have not really got any experience. Um, you know, we teach them, and let's hope we teach them really well. Um, you know, we give them, you know, the confidence, the skills. Um, they start making placements, and they start bringing on clients, and we start telling them they're really, really good. Um, and we keep telling them they're really, really good, and then we start paying them lots of money, and they start earning lots of commission. Um, and then and, you know, they want to earn more money and more commission, which is great because that's what we want them to do. But then we keep telling them they're good, and then we keep taking them, you know, away on holidays and telling them they're amazing. And then eventually what happens is they start telling you how amazing they are, um, and they start telling you that they're really, really good. And then they think they're better than you are. And, you know, and we know, we know how this, this story goes. And what, what sometimes happens then is, and I I think most of us will have seen this, this journey in people in, in various different businesses and walks of life. You sometimes can then get to a point where actually people's behavior can become a little bit toxic in some businesses. Um, and there is a risk sometimes if you've got somebody who's generating a lot of revenue and who is billing that you almost start accepting some of that behavior. Because of the fact that you don't want to have to deal with the risk of losing that revenue. And that's something that owners who are, who are preparing for sale and are in that kind of sort of sale journey, um, that's something that I've, I've seen and quite a few owners have admitted to actually, is that that's really— that they found that's really affected them. So I think there's a conversation to be had about how you can, how you potentially deal with that so you don't end up with the tail wagging the dog.

Affected them what, like just mentally?

Well, mentally, but also in actually in their, in their businesses, you know. And so actually left them feeling a little bit resentful towards, um, towards certain people in their business because, um, maybe they'd felt like there was an element of respect that was lacking, um, you know, in terms of, you know, towards other people in the business, towards rules, towards general courtesies, you know, whatever it might, whatever it might be.

And then, which is what I want to get on to, I've got here no documented processes. Is that like across the board? Because something that I find myself, uh, like encouraging, uh, sharing with recruitment founders— again, because of the types of businesses I speak, uh, a lot to, and I'm talking to them about getting their new hires up to speed more quickly, the development of their existing team— sometimes I run into it a lot where founders expect their team to be performing to a certain level, but then when we break it down and they want want them to be pulling more leads or, uh, you know, getting more commitment from clients. But a lot of this stuff is like consistent advice and in their head versus like actual documented processes.

Yeah.

And systems which we can hold people accountable to, or at least give people resources to go, did you do this, or have you looked at that, versus you just keep bringing it up. And, uh, and I see that a lot in yeah, smaller businesses, it just stays in people's heads. I don't want to say to people, like, so much of that, whatever you do, get out of your head. Um, it's just a good exercise. It's a good exercise to do, and it just makes your life a lot easier when you start adding people into your business. So is that what we meant by this, just documenting?

Yeah, I think if I remember rightly, I think we were talking about actually some, you know, things that can hold people back as far as, you know, achieving, um, an exit is concerned. And that is quite important. I don't think it's— I don't think it's in the, in the top sort of 2 or 3, but it certainly is up there as something that, that, you know, you need to think about. Um, and actually, in actual fact, you know, when, when I, I sold my business, some of the feedback that I'd got from the buyer was that actually a lot of the processes that were in place, they would— they'd seen— they were the sort of processes that they would expect to see in much bigger, much more sort of corporate entities. And I think that was my background background was obviously from, from a larger business before I, before I launched this. And I think that, that is important because otherwise, if it's all in, in people's heads, when you go through, you know, due diligence process, for example, you know, any buyer is going to turn around and say, right, well, how within your business, what's the process? How do you deal with X, Y, or Z? X, Y, and Z. And that could be anything. Could be compliance related, could be what's your, um, what's your candidate registration process? What's your lead generation process? Um, you know, anything that you, that you do in that business. Um, and then the next question that's probably going to come up is, prove it. You know what? Well, actually, well, yeah, that's easy because I've got, you know, this process, this is the training file, and this is the— and actually SME businesses, a lot of, as you quite rightly say, a lot of the time they don't have that. So actually then what you might have is a bit of a confused kind of sort of silence and a bit of a scratting around of a few bits of paper and trying to come up up with, with some stuff. But do you know what, um, years and years ago there was, um, someone I, I, um, I worked with and I was opening up, um, branches for her for a commercial recruitment business. And she said to me, um, this phrase, and it is a, it's a right cliché, but it's stuck in my mind for the last sort of 20-odd years. And it's, it's not what you expect, it's what you inspect. Um, and that is absolutely just, just stuck in my mind and And that in a way kind of sort of drove a lot of the processes that were in place in the business because of the fact that you've got to have some kind of measure and you've got to be able to look at what's been done versus, you know, what the map was for that. And you've got to have some kind of check and balance. And that's why the, you know, the process documentation is so important.

Yeah, because we've also got on here, like, again, getting processes by ready is what we sort of titled it. Clear financial records and forecast thing? Because I can imagine, I'm sure even in my own business, uh, recruitment founders are going to be great at forecasting how the year is going to go, and then how accurate that is. Is that something that would be expected to be looked at? So, um, I'd love to find out, Matt, over the last 2, 3 years, what you forecast and what you hit. Is that like fairly standard?

Yeah, I think so.

I think it is.

But it's— there's a number of things with this. I mean, I was always— I've always been very, very focused on, on my numbers. So, um, you know, I've— anyone that's ever worked with me will know, um, I'm— I love a spreadsheet, um, I love any kind of sort of integration with a CRM system where it will track placements and revenue generated in real time, anything like that, because I feel like you've got it, you've got to be on, on your numbers, same as KPIs. Um, what, what really surprised me when I started, you know, doing what I do now is the amount of recruitment businesses there are out there in the SME recruitment business space who don't have a budget or who don't have a forecast, um, you know, who don't have, who don't have a cash flow forecast or don't understand necessarily what their, what their costs are. Um, and it's, it amazed me how many recruitment business owners there are who you'll say, well, you know, what, how do you know what good looks like? And, um, you know, there was this, this one person who, um, who I spoke to, not a client, but I spoke to, and I, I said to her, how do you know what a, um, you you know, what a good month looks like. And she said, well, I look at the bank and there's, there's, there's money in it. I said, well, hang on a minute, that's cash flow. That's not, you know, that's not performance. That's not a sort of a performance metric. Um, so it's, it's really, it's, it surprised me actually how many businesses there are out there that, that don't have much of a handle on the, on the financials. Um, and that is so important when you come around to looking at sort of selling or marketing a business. So, uh, it's quite important for if, you know, anyone's sort of listening to this and thinking, hang on a minute, that's me. Well, the good news is you're not on your own because there's quite a few people that are in that camp. But it is something you really need to think about sort of putting in place.

Should we— I think it'd be beneficial going right in there for a sec, but like, how would you define the difference between a budget and a forecast? So if I say, here's my budget, what do you expect to see? And as a recruitment business owner, and here's my forecast, what's the difference?

Right, so terminology, um, it's, it's often different in every— in, in different recruitment businesses. Um, and that, you know, that was a real kind of sort of almost a harmonization for me that I noticed when my business was, was acquired, because I'd be sat in a meeting and they'd be asking for this figure and that figure and that, and I'm talking of— I'm going off a completely different hymn sheet here because that's not what we call it, you know. So, um, but in my language, to me, if you give me a budget, that's going to show me what level of GP, um, your team is going you produce over the course of the year. And it could— you could have a quarterly budget, you could have an annual budget, whatever it might be. So I would expect to see, if you're a perm biller, I would want to see, um, on there, um, you know, your budgeted perm revenue figures, your GP, um, and possibly your average invoice value and how many placements we're budgeting that you're going to make. And if you're a temp or a contract biller, then it would be number of temps or contractors out, your day rate or your hourly margin, and what kind of level of GP that's going to translate to. Basically, that's what I would want to see in your revenue budget.

Okay, so there's no like costs in there or anything?

Not in a revenue budget, no. In a forecast, then I would want it. Then again, to me, I'd be looking at a P&L forecast. So, you know, what are we anticipating that our gross profit is going to be, our costs are going to be, what's our bottom line look like, which of course is one of, you know, the most important figure on that piece of paper, basically. And then obviously We'd want to see running in conjunction with that, we'd want to see a cash flow forecast, which of course would incorporate, you know, all the forecasted liabilities like your tax payments, your VAT, corporation tax, whatever else you've got to fork out for, basically.

Nice. Appreciate breaking that down. I'll be honest, I'm not— that's something that on my own journey I've had to consistently get better at, but I'm not overly surprised that that you found that a lot, because again, if we go back to the typical type of persona that launches a recruitment business, how much exposure experience have they got to that?

Well, I know exactly, exactly. But it's also important that, that we kind of sort of note that, you know, look, when you, you run a business, you don't have to be expert at everything. But I think what you do need to do is probably just understand if there's areas that maybe you haven't got much of a handle on. And just get some help. You know, there's plenty of help available for that sort of stuff, isn't there?

Yeah. And again, I wouldn't be surprised if we surveyed 100 recruiting entrepreneurs who are SME, how many of you really enjoy getting into the nitty-gritty numbers and doing a budget and a forecast? I don't know. I feel like it'd be more people.

No one. Yeah, no one.

That's what I mean. So it's also— and I'm also speaking about myself— it's also, it can make you feel uncomfortable. And it's, do you know what I mean, particularly when there's a bit of a knowledge gap there and it's like, it can be a bit overwhelming for people. So I'd rather just like avoid it.

Yeah, yeah. And you know what, that there, what you just said, that is probably how— I don't know, I don't know, I'd hazard a guess maybe sort of 30-40% of SME recruitment business owners probably have that kind of, that kind of a view and a perception. I've got this far without needing it, so I'm just going to carry on without needing it. And that's fine. Do you know what? You know, you, you, you're making money and, and you, whatever kind of sort of judgment, however you're judging that, it's working for you. So, so fine. But, um, in my role now, what I'm doing is working with people to grow, to develop that business, and in some cases, if it's what they want, get it to a point that actually you could value and sell sell it and then sell it. So that kind of, that, that kind of advice is, you know, I'm, I'm never going to sort of meet a founder and say, oh, it's all right, we don't, we don't need financials, don't need to worry about a budget, because that's one of the first questions that they're going to be asked by anyone who's thinking about acquiring it.

So let's, let's like build on this then. So what is— so you'll always hear this is like really typical, uh, advice around this, which is if you want any good sort of multiple in your recruitment business, you need contract revenue. How do we feel about that statement? Is that true? Is that— what do we feel about it?

Yeah, it's absolutely true. Um, and again, that comes back to risk, you know, because if, if I've got, um, if I've got a perm-only recruitment business, um, and I want to sell it, well, there are, there are a few, a few buyers that I know of that will buy perm-only recruitment businesses. Businesses, but they're not going to pay a lot for them. And the reason being is, you know, it's that age-old, it's that age-old sort of consideration of, you know, there's no recurring revenue. So I buy that business and it's got, you know, £150 grand on the board this month, but there's nothing on the board for next month. And then, so that immediately, that's high risk. If I get a couple of the key consultants who decide as the new owner, they don't like me very much and they're going to go off and do something else, then, you know, I'm left with not a lot, aren't I, after a little while. Whereas if I buy a business and it's almost exclusively contractor-led, you know, whether that's temp, PAYE, or contractor, you know, business, and there's a good number of contractors out there on long-term contracts with creditworthy businesses that, you know, we've got exclusivity with and we can see that actually we've got consistency there, then, you know, look, that's obviously worth a lot more because there's recurring revenue. And if I buy that business today and 2 of the consultants go for whatever reason, um, I'm probably still going to be making a similar amount of revenue next month and maybe the month after, after that, you know, come to think of it. So that it just reduces the risk. Um, again, a lot of SME recruitment businesses, when they new launch, they— and especially if they're self-funded, you've got quite a cash gap, haven't you? So if you start a business now purely focusing on contractors, um, you know, you're going to be doing very, very well if you are sort of covering your costs and, you know, and putting cash back in the bank within that kind of sort of 3 to 6 month period. So a lot of founders, when they launch and they're self-funded, they go after the low-hanging fruit, which is the perm business, and try and make quick revenue. And there's nothing wrong with that at all, but they need to just have one eye on what they're going to do about contractor and temp revenue, because there's a lot of small recruitment businesses that, you know, 4, 5, 6 years later, they're still doing a 100% perm. Um, and in some ways that's a choice. Well, in all ways that's a choice actually. But you know, if they want to really kind of increase future value, then they do need to think about— you do need to think about contractor business for sure. That's a very long-winded answer, I know.

Yeah, but that's why I asked it. When you said just from what you've seen, conversations that you've had, um, which is what I wanted to get into next with you, is when you say it won't pay a whole lot for them, what are we talking like multiple-wise versus like number-wise?

Low, you know, in some cases 1, 1.5 times, um, you know, depending. I know, yeah, you might get a bit more than that, but if you've got it— but to get a bit more than that, you'd probably, you know, you'd need to have long-term contracts and exclusivity, or maybe you might have a little mini RPO model in there or something, in which case you might get, you know, a bit more, um, than that because there is, you know, the guarantee of kind of future revenues to an extent. But you're never going to get multiples like you would on a, you know, on a contractor or a temp revenue-led business.

What do you think from— again, from what you've seen, obviously, as I said at the start, first attempt profit before tax around £650,000, second time £400,000. This is a £150,000 difference there. What is there almost like a number where if your profit is around this sort of number or this sort of banding, there's going to be more potential buyers versus like— is there a sort of if I get it to X amount, 250 to 500, I don't know, then there's going to be buyers versus not? I don't know. Do you— is there almost like a we've got to be at this point to even be in a chance and be in the game? No, I don't think so.

And I've I've heard a lot of different, um, opinions on this, and I think there's a lot of disinformation out there about, um, you know, appetite to buy recruitment businesses. In fact, actually, I was talking to a new client of mine, um, and that was a few months back, and he'd said, oh well, you know, we need, you know, if we want to sell, we've got to get our EBITDA to at least 750, haven't we? Well, that's why I asked it, because there are so many, there's so many different, different kind of opinions unions, but the short answer is no, you don't. There is, you know, I've heard kind of sort of stories like that banded around much more if you're talking about maybe sort of PE involvement and PE deals, because of course there probably is a, you know, a sort of a value where, you know, most PE houses will start to be interested and it will be worthwhile for them. But from a trade buyer perspective, no, No, um, providing your business is big enough that you're not the business, because I have had a couple of inquiries from, you know, solo recruiters who've said, oh, I'd like to sell, um, and actually they're on their own. It's a perm-only recruitment business. They've got all the relationships, they're doing all the billing, um, and actually when you sort of, you, you talk to them about that and it's very, it's a case of, well, we haven't really got anything to sell in that case, you know. I mean, you know, Jesus. Um, but actually, if you're— if you own a recruitment business and I don't know, you're doing, you know, 100, couple of 100K in, you know, in, in EBIT maybe, and you've got a couple of staff and, you know, you've got, you know, a few bit of temp business in there, that's sellable. There are always people, especially those that are on a buy and build model, that will always look at that and think, well, hang on a minute, there's a couple of consultants there, they're good people, maybe we've got somebody who's a bit more senior who's perhaps, you know, tied in a bit. Maybe they might have a bit of equity, perhaps, you know, again, depends who the buyer is, because it's the same as buying a house really, isn't it? You know, if I— it will be worth what somebody wants to pay for it. And if it happens that I've already got an office and it's not too far away from where these people live, and actually that could bolt in quite nicely, that's worth something to me.

How would you, how would you explain a trade deal? You mentioned that, just so people— some people might not know.

Well, different style, um, there's different ways to, to sell a recruitment business, obviously. Probably one in the SME market Probably one of the more common, um, is to go down the trade sale route, and that is basically very simply when, you know, the buyer is somebody in the trade. So it's, it's another recruitment business that, that acquires your business and then takes it and make— and sort of brings it into their group in some way. Lots of different variations of that. Some buyers will, um, you know, absorb the business into their group. They'll rebrand it, and, and, um, and that'll be that. Others don't. They will preserve the brand and they will want to run it, you know, pretty much standalone, but maybe look at some of the support functions if they've got maybe like an IT department or a finance department, HR centrally, then, you know, your business will then benefit from those functions and probably there'll be a cost-saving implication there for them as well. So that's probably one of the most common ways that SME recruitment business owners sell their businesses. But then there's MBOs as well, so management buyouts. And if you've got that second tier of management in your business, sometimes, you know, there could be a conversation around, around those people, that person, or those people buying out the ultimate owner. And that often feels like a really nice idea because as an owner, you've worked with these people for years and, you know, you, you probably like them, might even be friends, and it's probably quite a nice nice idea. Issue sometimes comes with that when we talk about how it's going to be financed.

Yeah, that's financial, you know, had some of those conversations.

Yeah, because actually it sounds like a lovely idea, doesn't it? You know, you know, I've worked for you for all of this time and actually, and you know, and I, I'd like to, I'd like to sort of to, to buy the business and I'd really like to run it and that'd be great. But then we come back to, to that whole sort of the whole sort of matter of risk, don't we? You're a risk taker because you have basically, you know, shaken the kids' piggy bank upside down, mortgaged the cat done whatever you've done to launch this business in the first place. Typically, and again, exceptions to every rule, I'm probably not that— I don't have that appetite to risk because I'm not someone who's been out there and launched a business necessarily. I quite like the idea of buying it, but then I need to get some finance, and the first thing they're going to say to me is, well, what security have you got? Then I've got to go home and sell it to my other half and say, well, actually, they want to charge on our house. Just in case, you know, things go tits up in the business. And I don't feel like that's a massive risk. He or she at home maybe has a very different idea about that, you know. So appetite for MBOs fades quite quickly as soon as you start talking about the, you know, the financing piece. But then you've also got EOTs, employee-owned trust. You know, that is, I suppose, a situation where, you know, the business is ultimately sold into a trust for the benefit of the employees. Upside to that is it's great for the, for the, for your teams, great for your staff. Downside to that is you're very unlikely to get, um, you know, any kind of sort of sizable day one lump sum payment because, you know, ultimately you're paid from the profits of the business over a period of time. Um, tax incentives for doing that, that's changed a bit lately. Um, but the other side to that is that you've got to be supremely confident that your business is bulletproof because if anything goes wrong with it or it doesn't continue to make money at the same level, then, you know, your, your payments are, um, are at high risk of disappearing, basically.

So great breakdown. Yeah. What, what would you say— because we've spoken about them a lot— but how would you categorize what makes a recruitment business more valuable? So like, what cat— what are the categories? How you would end— I think that'd be helpful. So we've got profit, obviously. How profitable is it? But then how do you, how do you see that? So like, if we, if we score really high in this category degree that could impact the multiplier positively, maybe a leadership layer, or I don't know, how do you— do you— could we categorize it like that, do you think? Like, what are the most important things that you think about that could directly influence the value of the, the business?

Well, first, first thing, top line obviously, is, is profitability. Um, it's how profitable, you know, the, the business ultimately is. But then, um, other factors that, that I would, I would be looking at— so if— let's, let's phrase this another way. If you were giving me a, um, you know, coming to me and saying, right, here's, here's my business, can you look at it and give me an idea of what you think it would be worth? Then the stuff that I would be looking at with that, yeah, is your overall accounts. But what trajectory is the business on? You know, have we got a good few years trading history where things are going in a nice, you know, nice sort of upward direction? Um, you know, or is it consistent, or has something gone wrong? You know, is it, is it in a sort of a, you know, a negative trajectory? In which case, actually, I'm going to start asking some questions about that. Management structure. Does it run itself? You know, is there somebody or are there people in that business that will run it for me once I've bought that business? Or am I going to have to put somebody in to run it because therefore there's a cost implication? Also, they're not going to be known to the staff, so I don't know how well they're potentially going to get on. Concentration. Where's all the revenue coming from? From? Um, you know, is it a small number of, um, are there a small number of clients and we're heavily reliant on each one, on a small number of them for all of our revenue? But that applies internally as well. Who's making the money? Have we got, you know, one or two massive billers, rainmakers, and then a few people that maybe don't sort of contribute an awful lot? Because again, that's high risk. I'd much rather, from a buyer's perspective, see a business with maybe, you know, a few billers who are perhaps sort of doing better than everybody else, but I want to see a nice even spread as far as revenue is concerned because that lessens my risk and it gives me a little bit more, you know, I suppose, of more baskets for the eggs in a way, and that's good. PSLs, contracts, you know, have we got long-term agreements with our clients? You know, because that's key. And who are the clients? Are they creditworthy? Are they paying on time? I'd want to be looking at revenue split as well between perm and contract for the reasons that we've discussed, because I want to see some nice recurring revenue in there. And how much of that business is contingency? Have we got retained business model in there? You know, and also what about mini RPO? Have we got any kind of sort of subscription services or other ways that we're generating revenue? Who are the people? How are we developing them? You know, are Are they trained? Are we keeping them engaged and motivated? What does the reward piece look like? And, you know, on our accounts, how much money are we paying out? Are people, are their salaries about right? Have I got 17 different commission schemes in the business because actually nobody really knew what they wanted to do when they took somebody else on who was a bit more senior, so they just bolted something in? And am I inheriting a nightmare? All sorts of different factors there that from a valuation perspective can play a part. So, you know, it's always a great idea just to kind of sort of, you know, get a bit of advice if you're thinking about what your business might be worth.

So we do all of that, we're in a pretty good position. How do we get on the radar of potential buyers? So, so you've had a few different experiences. There's actual brokers and services that will help you get on the radar of people, right, which you have to pay for. Might leverage your internal network, like your accountant. They might be, uh, they might have people in their network. Talk us through, like, what are the most common ways that— I think there's a lot of business owners might have had those letters from insurance companies saying, like, people interested in buying business. Like, there's What are the typical avenues here that people can leverage to like get on the radar of buyers?

Um, a number of methods. I think most people, when they come to want to sell a business, they're going to talk to a broker of some description. Um, yeah, I think you should talk— I think you should talk to a few before you commit to, um, commit to anyone in particular. I think that's, that's important. Um, but you're right, I mean, I did— I've had a few experiences, I suppose. You know, as we've already said, you know, I came that close to completing a deal just before COVID Um, and my God, I'd had, I'd had the most horrendous experience trying to get to that point. Um, I think, you know, most of us who run, um, you know, SME businesses will be used to the letters coming through the, um, the, the door, the mail shots from you know, I'm not going to name any, but, you know, national brokers that are quite, um, so telesales focused, shall we say. Um, you know, a lot of, a lot of marketing activity from those, those people. And there was one that had kind of sort of stuck out to me, and I'd seen the brand, so I, you know, I replied. And somebody had come down the motorway at 150 miles an hour and plonked himself straight in my office and wanted to give me this presentation about how amazing they were, and, um, quoted a sign-up fee. And I forget what it was, but it was, it was something like sort of, you know, I think it was something like 12 grand, something along those lines.

Retain the fee, mate.

Um, yeah, sign up, sign up, instruction fee, call it whatever, whatever you will. And, um, and I thought, right, okay, well, what am I going to get for that then? So, um, and I was shown this beautiful brochure and glossy brochure, and I was told all about these other deals for other recruitment companies that they'd been doing in the local area and they had lots of disappointed buyers who'd missed out on these businesses and so, you know, mine would sell like the proverbial hotcake or whatever it was. I thought, all right, okay, well, this sounds all right. Okay, take my money. And off he went with a sort of a skip in his step and they produced this brochure and basically mail-shotted it out to the world, anyone who had ever expressed an interest in buying a business. And this is generally what, what they tend to do. Problem was there was very little qualification in terms of, you know, the buyers that were, that were coming through, you know. And so it was a case of, well, they had to reply and basically sign an NDA, and then they would just send out whatever information. And so they ended up sort of, you know, just chucking some, um, some interest at me and saying, oh, can you have, you know, have a meeting with this guy, have a meeting with this guy. And I ended up probably wasting, um, I don't know, a few days of my life that I will never get back just meeting with these absolute Charlies. And these people that came, came out sort of telling me what a wonderful business I had and sort of blowing some smoke. And they'd all been to the same school, I think, that basically taught them how to buy businesses from stupid people, you know. And it was like, it was like deals where they sort of come along and they'd be like, right, okay, well, um, I, I can't even remember what they were, but it'd be like, right, we're going to give you 50 quid on day one and then we're going to use all of your money, um, to buy your own business. And it would have worked out over a period of 2 or 3 years, I probably would have been paid pretty much what I'd been paying I would no longer have had the asset. Um, yeah, ridiculous, complete waste of my time. Problem is though with that, the contract was so restrictive that you then weren't able to pretty much talk to anybody else, to go anywhere else, to look at other options or other avenues. Um, and then I sort of, I sat and I thought about it, so I thought, hang on a minute, let's, let's, let's sort of, let's assume I'm in the position, I'm, I am a national business broker, and let's say I've got a team of, you know, salespeople and I'm sending them out to follow up on these, these appointments. Let's say each one of them signs up 3 businesses a month at $12 grand, um, $15 grand, whatever it might be. Hang on a minute, I don't actually need to sell a business, do I? From a business model perspective, I'm absolutely coining it and I'm being paid for inactivity. Um, so the whole— the model is flawed in, in, in my opinion. And And so I'd got to a point where I actually, you know, the buyer that I found was somebody that I was having a conversation venting my frustration and anger at this point with my accountant. And he said, well, I was at a networking event a few weeks ago and there was a couple of guys there that were talking about, you know, going on an acquisition trail. You know, I'll set you up with a chat if you want. I was like, yeah, all right, brilliant, good. And that's where that deal had come from. So there was absolutely zero credit to go to these guys. These guys for actually assembling that deal. Now, when you start talking to recruitment business owners, as I do now, so many people have had the same experience. But the issue is, of course, when you come to sell a recruitment business, you know, it's a once-in-a-lifetime thing for most, for most people. And there's no learning curve at all. It's like an elevator, you know, and it's the— it's stepping into the Wild West. And you don't know whether these things are— whether what you're being told is, is right. As recruiters, we like to think we're be good judges of character. And you, you know, and also I've got to be honest with you, there's a bit of embarrassment there as well because no one likes admitting to the fact that they've been, you know, done up like a kipper, do they? So, you know, and, and I did feel like that to, to an extent. Um, but, um, but yeah, you know, I mean, it, it, the, the, the— so the actual deal was, you know, I'd found through the accountant, um, the first one before obviously that went, that went wrong. And then come back to the market the second time round.

So we got, so we got— really appreciate sharing that story because, yeah, like you said, if a lot of people experience that, it's good to hear it hasn't been just them. It's got the, the broker experience, and then I guess what, leveraging your network, then I guess you could also put yourself on the radar of companies if you—

yeah, of course. So, um, yeah, so, so in, in my opinion, I'm sure there are people that have had a positive story from, from national brokers, but in my opinion, that is not the one. How you can go about actually getting your business in front of, you know, of potential buyers is through, you know, through talking. There are a lot of people in the industry, obviously myself included, but who will broker businesses, who assemble deals, and who have relationships with people that buy recruitment companies, whether they're other, you know, trade, whether they're companies, whether they are high net worth individuals, you know, and also introductions into financiers as well that would look at funding deals. So you don't have to go to, you know, national specialists. Ask your networks, you know. If you're in any of the recruitment groups, a lot of them will have, you know, people that they recommend and that they work with. I'm part of APSGO, and, you know, if APSGO members were to ask around and ask questions, they'll probably end up finding their way to me, you know. And that's the same with a lot of groups.

So there'll definitely be people that have had poor experiences of brokerages, as you said, but that necessarily absolutely isn't like the only avenue, right? So as we were saying, rather than being quick to maybe hand over that money, like do what you would do— old-fashioned market mapping, network, speak to people. Um, and if you think the journey that you've been on over the last 12 months, I'm sure you've seen how willing people are to like share advice, share experiences, So I think that's absolutely an area that you want to really leverage, get information, uh, before hopefully having experience like you had.

Yeah, no, I agree with that. I do agree with that. I think it's, um, you know, the often the amount of money involved for people is— it's so important to get right, and you can't underestimate the importance of, of, um, working with the right— with the right partners. Um, I would always, just in terms of advice, I would always be quite, um, skeptical critical of anyone who was trying to charge, you know, massive upfront fees. I think, you know, a lot of the sort of independent brokers, you know, do charge an instruction fee. You have to, because otherwise you get tyre kickers, you know, people that kind of sort of are thinking, well, we'll chuck it on the market and see what happens. And that's a waste of everybody's time. But, you know, look, there are— if you can try and find a model whereby any instruction fee you pay is taken off of the completion fee at the end, then it basically means that everybody's incentivised for a win, you know. I think you're right, you can do some research and have a look at, and have a look for parties that might be acquisitive. I've done a little test on that and I've done, I've sort of done the whole sort of AI searches for stuff like that. And there was one or two people that came up that I knew were quite acquisitive, but an awful lot that, that didn't come up at all. Um, yeah, they're not on that. That may change over time because we know a lot of these things are in, are in their infancy.

I guess it may come up behind closed doors, these conversations.

A lot of time they do.

Company strategy, it's business strategy around.

And it's, and it sometimes it's, it's who you know and who you're, who you're connected to. But there is a real word of warning there, is that actually, um, yes, you might be able to find somebody yourself, but if it's the first time you've sold a business, do you really know what it's worth? And actually, are you really in a position where you can push the negotiation? Because actually, it's one of the most emotional things you'll ever do, because you've put your life into this thing, you know, into building it, into— and it's probably consumed your life for a number of years. Um, you're probably emotionally attached to it. Um, it's a bit— the only way I can liken it is it's a bit like selling a kid in a way. Um, it's quite— it's, it's a strange experience. And when things— where things are emotional, it's sometimes— it's sometimes a benefit to have somebody almost in the middle that can kind of negotiate for you in a way.

So your best interest. Yeah, I think that— I think that that's great advice. Well, look, Matt, I think there's so many— there's so many helpful things that we've covered there in terms of really getting people thinking about what it is that they want.

Yeah, it's true.

Quite a bit about, uh, really sharing like the common constraints. So some of that may resonate with people and might remind them, actually, that's something I really need to look at or improve on or take action on. And then also we really got into what makes a recruitment business valuable, because it is more than just profit. Yeah, there's a lot of things that you can do that will impact the value of a recruitment business that isn't just adding more to the bottom fine. Um, so really appreciate sharing all that. I know so many people find that helpful. Again, like, you, like, you don't need me to say this, but like, really, um, kudos to you on like what you've been able to build. And I just love getting stories like this because clearly a very humble guy and want to like help other people. Um, and this story as well, it isn't the classic scaled recruitment business to like 50, 80 people and this is the profit and I sold it. But having more stories out there to make it possible for other recruitment business owners that may think that it might be really hard to sell my business because it's— I don't know how many of us— and these things, I think that's, that's really great about the work that you're doing.

Well, do you know what, look, I think that you say sort of humble. I hope, I hope that that's how I, how I come across, because no one, no one likes an arrogant dick, do they? But, you know, look, at the same time, there'll be people in the industry that have achieved a lot more than than I have, um, you know, the people that have sold much bigger businesses than I have for a lot more money than I have. But 80— was it 80? I think, yeah, 80, whatever we said, 80% of, of people who run recruitment businesses are probably, um, the same size or smaller than the, than mine. So actually, do you know what, they're, they're hopefully, hopefully there are some things from, from the story that are relevant for, for people. And if, you know, if it helps anyone else who's thinking about going on that journey, then good.

There'll be loads of helpful stuff in there. So Matt, thanks for joining me on the pod. I've really enjoyed it. Thanks very much.