How To Create A Profitable Recruitment Company (Sold Business for £24Million)

Hey guys, welcome back to yet another episode of Top Billers Toolkit, where me and my twin brother interview top billers from all around the globe to unlock the secrets to their success. Today's guest is Mike Ames. Mike sold his recruitment company for £24 million, but getting there nearly broke him. He was working 80-hour weeks, drowning in constant tasks, and unable to remove himself from the business. And then one evening, he had a complete nervous breakdown in front of his wife, and it was in that moment that he knew something needed to change. In today's episode, we're going to be talking about the steps Mike took to create a profitable recruitment company. We're going to be talking about the biggest game changes he made in his business that catapulted him into success, and we're going to be talking about a BD sequence that Mike uses in order to close dozens and dozens of high-value clients. Buckle up, guys, because this is going to be a good one. As usual, grab a cuppa or a glass of wine depending on when you're listening to this, and let's get into it, shall we?

Mike, thank you so much for joining us today. We're really excited to speak with you.

Absolute pleasure to be here. Genuinely, it is. Been looking forward to this all week. So come on, let's do this thing.

Awesome. So I guess let's just start off with the very first question, which is what is the number one tool in your toolkit, whether it be a mindset, strategy, or software?

Wow. That's a big question to start with, isn't it? I think there's about a million things you need. But if I narrowed it down a little bit and said, As a business owner, as opposed to a recruiter necessarily, as a business owner, it is definitely mindset. Definitely. Because the skills and attitude and approach that you need to make you a very good recruiter, that immediacy that you have to get things done now, that short-term return on your investment to make sure you're not working vacancies you're not going to get paid for or whatever, I think is absolutely crucial. But they work against you when you run a business. And your biggest job as a business owner is to convert your mindset from a recruiter that owns a recruitment business to being a business owner that just happens to do recruitment, because there is a world of difference between those two. And in fact, I'd say the mentalities are opposite, and it's a big, big thing. And I think that's one of the reasons why so few recruitment companies grow to any kind of size, is because the people running them Good people, mind, basically still have that recruiter mentality and it works against them in business.

That's really interesting. And so just following on from that, what mindset and mentality do you think they should be adopting if they want to either sell their business or build a business that's more profitable?

Okay, well, the first thing is a much, much, much longer view of business. In recruitment, the end of the month is a long way away, 3 months if you're lucky after that, we're not really interested. We write plans, but we don't care about them. Because we only really care about making money in the short term. A business owner mentality is much, much longer term. Someone told me that, um, Singapore, which isn't really a business, but Singapore has a 50, 5-0, year business plan. I don't know whether that's true or not, but— and probably that's too much for a recruitment company owner, I would think. But, but you— the longer it is and you constantly buy into this concept planning for the long term. Second thing is the more you work on your business today, the less you work in your business tomorrow. Recruiters just think that's a waste of time. It's like, no, I could make money by doing this, that, and the other. Business owners see the value of working on the business, which by the way, I mean planning, strategy, uh, research, investing in yourself, those kind of things. Really important things to grow you and therefore grow your business. Massively important. Another thing around mentality is that recruiters don't tend to care too much about values. They're like on their website perhaps, or on the tea room wall perhaps, but they don't really have an impact on day-to-day. Business owners totally get the power of values, and really all recruitment companies should have the same values, quite frankly. You know, it's not— they're not marketing tools, they're not USPs. They're not external tools, they're internal tools to make sure that everybody is on board. The closest that you can get to that, I think, if you're not a recruiter, is what Alex Ferguson did when he turned up at United from Aberdeen. I'm not really a football fan, but he came along and he said, right, these are our values. We are, we are going to win. Not come here to come second. I've come here to get silverware. Secondly, this is about work rate. You don't work, you don't stay here. Thirdly, it's about your team. If you don't work with the team, you're gone. And finally, the reputation of the club is everything. If you damage that reputation, you're gone. And then you look at the people he sacked, right? David Beckham, gone. Uh, Ruud van Nistelrooy, gone. Even the captain, you know, what's his face, Roy Keane, gone. Because they, they broke those values, if you will. So business owners get that because he brings a company together and holds it together. Recruiters, not so much. So I could go on, actually. We could have the whole program on that. One question, honestly. But, but actually, it's that it took me, uh, a near nervous breakdown. Not even joking, not using that as a turn of phrase. It was a near nervous breakdown. And I hired a coach in the early years after that because I was a mess. And, and she was the one that converted me into a business owner. And it took about 20 months to achieve. I mean, it took a long time because knowing it is one thing, but actually acting on that is something else again. So hopefully there's enough detail there for people to—

yeah. Really interesting. And just off piece, Mike, the— you said you had a near-nose breakdown. Was that after you sold your business, or was that before?

No.

Oh wow. So you had— okay, interesting.

I had a problem after I'd sold the business because I can deal with that one real quick because very quickly my purpose in life had gone. So I'd never had more money. I mean, we sold it for £24 million or something, so I'd never had so much money. But I was depressed and I had to have a counselor to help me because I'd lost my purpose in life, really. And so I started a second business, and I was fine then. But the first time around, what happened was— and I see this in a lot of recruitment company owners— I built a business around me. So from when I started, and what I should have done was build a business that didn't need me. Again, a big difference between those two things. So I was involved in all the decision-making. I was the one that brought in most of the big clients. I was the one that made the big decisions, really, um, which is great when you're small, but you get to a size, usually kind of 8 to 12 people, and you can't manage like that. And a number of things— well, 3 things happened in 3 weeks, really. The first thing was my business partner told me we were flatlining revenue-wise, which I knew anyway, but he said, look, I don't know what you're going to do about this. Well, I'm working 80-hour weeks, I can't do any more, there's nothing else I can do. Right, so that's a stress. Then the next thing was I had a really bad week, came home on a Friday, and, and I parked the car down the road and I waited until my children had gone to bed before I went in because I didn't want them to leap all over me. I wanted a pint of wine, some trashy TV is what I wanted. And so I was like wired at this point, and they came downstairs anyway, and we had our stories, and they came downstairs after they'd gone to bed, broke down in tears. And I can't remember that weekend at all. I can't remember. And my wife said, look, this has got to stop. If you don't fix this, I'm going to fix this. And she was very clear what that meant. And then on the Monday, I went into work. I was going to talk to my partner, but my business partner, he came to me and said, look, we've been invited to this seminar at Warwick University. We should go, you know. And he told me afterwards the biggest surprise in his life was when I said yes, because I was Mr. Billy Big Bollocks. I didn't need any help. I didn't need any support. I can do all of this, you know, naught to 5 million quid in 5 years. Man, I can do this. I was so wrong. And, and going to that and seeing what a scalable business looked like and getting the glimpses of what a real business leader, how they thought and what they did, man, that was the turning point. And from that point onwards, we hired our consultants and off we went. And in the next 5 years, we went from 5 million to 40 million turnover. So clearly That was a big impact on the business.

That's amazing.

I'm fascinated. And so you went through that mini breakdown, Mike, and then you went to the event and you had this kind of almost eureka moment.

So yeah, epiphanal. Yeah, it was epiphanal.

What were some of the things you learned at that event that were so game-changing for other people that maybe weren't?

What did he do? I don't remember all the speakers. I do remember one of these names is Don Black, and he came on and he was describing a company He was saying, well, you know, I don't know whether this— he didn't use the word resonate because that wasn't a word in the '90s, but I'll use it now. I don't know whether this resonates with you. And he read a list of things out, like being overwhelmed, like feeling that without you nothing would work, like feeling you don't spend enough time with your family, your hourly rate is in pennies, you know, you probably get paid less than the cleaner per hour, you know. So all this stuff can stress and overwhelm and a bit frustrated that things are like this. I'm sitting there thinking, that's me, that is. I thought, that is me. And I'm looking around the room and there's a load of other people going, that's me, that is. So he really got me then. And then he went on to say that business owners don't— real business owners don't think like that. They build a business that doesn't need them. And when we hired— and he went on to talk about things like delegation, get the right team in place, all the usual sort of stuff really. But when we had Anne-Marie, our consultant, she came in And she was the one that taught me that stuff, really. You know, the delegation is really important to do it properly, not abdication and not sharing of tasks where you ask someone to do it, but you still say, oh, have you done that thing? You know, so you still kind of share in the task. To really get rid of something, to empower people in your business to do things and take responsibility for things. And we moved— the two biggest effects, really— we moved away from tactical business development, which most recruiters do, which which I think we may talk on a bit later, but where you're basically looking for vacancies. So, your effort is to look for somebody that has a vacancy right now and is prepared to give it to you. Or you can sell a candidate in, and right now they've got a need and the candidate's of interest, right? So, we moved away from that to what they call strategic BD. In those days, it was called relationship selling, where essentially you're looking to win high-value clients. That's the deal. I don't care whether you've got a vacancy now or not. That's not the point of this conversation. What I'm interested in is the way in which we do things. Do you like it? Because if you are, we'll wait. And it's a completely different narrative, but it wins different clients. It takes a fraction of the amount of time that tactical BD does. It's like a fraction of the time. Honestly, it's a tiny little amount of time and it wins higher value clients. And we switched across to that. And we also switched across, and this is one of the things that was talked about in the seminar, what we now call Apex client care, sometimes called cuckoo client care, where basically your job is to get rid of the other competitors, not like completely get rid of them, but to push them into second place. Not because it's written down in a contract or anything, but because the people you deal with like dealing with you the most. So even if there's a PSL, it doesn't matter because the way in which you treat them and the things that you do mean that you are their top choice, your apex supplier. And it was those two things added together that made the big difference to our turnover, but that was enabled by my change of mentality.

That is fascinating. You said so much there that I want to go into, but I feel like we have to touch upon it because it's probably the most popular topic. I know we were going to leave this for later, Mike, but what you said there was so interesting, which is pivoting to a different mindset with business development. I think that we've got to talk about that because I think it's really, really important and really interesting. Um, what, what was the difference? Maybe you could like— so I completely get what you're saying. So there's this transactional kind of quick vacancy, um, type of business development, and then the other which is just trying to win the best clients and doing it through a different method. Can you go into a little bit more detail?

Sure, yeah. I mean, I think everybody knows what tactical BD is, sometimes called transactional BD. I mean, it's obvious what it is, and I'd say 99% of recruitment companies do that. That's— if you talk to them about BD, that's what they're talking about. Their idea is, we'll get on the phones, get some emails out, get one of these frightful automated things to send emails out and hopefully get vacancies in. It's nonsense, really. I mean, the reason it's nonsense— I'm going to explain this because it makes sense of the strategic BD. The reason that it's nonsense is you've got to get the timing just right. I mean, there's so many conditions that have to be true before you get a piece of work. So you have to be able to get to speak to a hiring manager. They have to have a vacancy. They have to be prepared to give it to you, and they have to have the time when you ring them or call them to speak to you. I mean, any one of those things with a cross against it means that's it. So you have to kiss a lot of tactical BD frogs before you get that piece of work. It's nonsense really. Plus chances are you're not going to get retained or exclusive work. You're going to get contingency because that's the deal. And there's a very good chance it's at the arse end and everybody else has had a dib at it and not managed to do it, which is why you're getting a crack at it. Finally, and this is the killer, I've got to tell a little story. I'm coming to the strategic stuff in a minute, but this makes sense, right? So When I started out in 1988, my first job at recruitment was cold calling. And my boss said, well, I don't believe in cold calling, and I still don't. He said, but you'll learn your craft that way. You'll learn a lot. So you do it, right? So I did it for 3 months. So I was ringing, ringing and ringing and ringing. And he said, by the way, if you come across someone who's polite with you, but firm that they've got a supplier list and we're not on it, 'Send your details in and we'll keep them on file. Can you tell me who that person was, please?' I said, 'Fine,' thinking that he would say, 'Because we'll never, never speak to him.' It was the opposite. He said, 'I'm going to target them because we want clients who will push cold callers away. That's who we want. It's harder to get them, but that's who we want.' And that's what strategic BD does. Now, strategic BD, again, it comes with an ownership mentality rather than a transactional mentality, right? It's, well, okay, okay. So if you believe that 20% of your clients generate 80% of your revenue, which for a mature company, that's kind of the deal. We want more of the 20%ers. That's who we want. Now in tactical BD, it's a bum's rush, really. You've got to get out there as much as you can and speak to as many people. There's no real thought on it. You just go for the market really, or follow your nose. In this, no. First thing we're going to do is we're going to produce a list of 100 20%ers, these clients that they have the kind of vacancies that we can deliver relatively easily. They're not like really obscure things. They have a steady stream of them, whatever that means in your business. We can talk to the hiring manager and they're with us and they respect us, so they'll work with us to put a bum on a seat rather than against us. And of course, obviously, the last thing is they pay the money that we want to be paid, right? So that's a generic definition of a high-value client. Well, we want to get as many of those as we can. So you can take quite a lot of time to build that list up, but you get them and you think, right, okay, 100 companies there. If I just had 5 of those, I'd be doubling the top size of me, me business, right? If I could just get 5 of them. So the stakes are very high. Step number 2— there's 4 steps. Step number 2 is you need a conversation starter, and there are loads of these. We have on our platform, we have loads of them preset so people can just use them. We've tested them and they they work, and then you can amend them. But essentially, you need to start a conversation with somebody who ostensibly doesn't want to talk to you, doesn't think they need you. So, you know, and these conversation starters are the key to it. From the conversation starter, as the name suggests, stage 3, you have what's called a soft pitch, which is where effectively, on average, they're 8 minutes long, and it's usually on the telephone. And your job in that 8 minutes is to generate enough interest in you and the way in which you do things in your business, for them either to say, yeah, okay, I'll give you a crack at something then, or alternatively, more likely, some time to do step 4, which is a proper pitch, a full pitch as we would call it. And the full pitch is where you present your product, your solution. It's a solution system, right? So you present your solution, and the idea of the solution is to say— the modern phrase is flavor, so it's a flavor of recruitment. And you say, well, 'You know, at this stage, I just want to know whether your flavour, our flavour of recruitment matches your tastes, because if it doesn't, then we should shake hands and go our separate ways. But if it does, then we will wait 3 weeks, 3 months, 3 years, doesn't matter. We will wait until an opportunity comes up, and we will keep in touch, and we will add value where we can, and we will get to know each other a little bit better.' But basically, we're selling the solution. 'If you want it, you can have it.' And that's essentially it. There is another stage, because 45% of the people you approach Aren't yeses but aren't nos. Well, in tactical BD, they're just out the window because it's like, well, there's no work there. So we move on. In a strategic BD function, that's not the case. There's a thing called a 3-tier cultivation regime which you use to cultivate those, those not yeses but not nos. And you should be able to convert half of them really over time. Really. So your conversion rate of that 100 could be as many as 25 or 30 companies. Well, just imagine what that will do to your turnover and profits. I mean, it's amazing, really. So that's what strategic BD is in a very short space of time. But I genuinely feel you need a balance, obviously, when you start. But the more strategic BD that you do over time, the less tactical BD you need to do.

That's fascinating. Absolutely love that, Mike. You broke that down really well as well. So thank you so much.

And just because I heard— I might be mistaken, Mike, but I heard similarities between the street Strategic BD and the tactical at the beginning stages, you're still technically doing a cold call, but the difference is—

No, we don't.

We kind of, but we don't do cold calls. We don't do those anymore. So there's a thing called an— I don't know whether you've heard of AIDA. A-I-D-A. Yeah, right. So for those that haven't, it was invented in 1913, so it's 100 and some odd years old, and it just stands for attention, interest, desire, and action. So if you're doing a cold call without knowing it, you're doing AIDA. You know, you grab their attention, create a bit of interest, then you've got a bit of time then to create some desire to get them to do whatever it is that you want them to do at the end of the call. The same in an email, you're cramming it all into one thing. In AIDA campaigns, what you do is split that up. So you do something to grab their attention. I'll give you an example of this in a minute if you like. Something to grab their attention, something to build their interest, something to create desire, and then the call to action. Is a very passive call to action. It's very soft, really, but gets you in there, and then you're away. For example, if you're connected with somebody on LinkedIn and you'd like them as clients, but you haven't spoken to them, and perhaps emailed them and nothing has come back or whatever, what you do is you send a voicemail on LinkedIn. It's a very specific script that you would use for this. It has to be of a certain type. The idea of the voicemail is to flag up that you're going to send them an email and you're going to tell them what's in the subject line of the email so they recognize it. And you're going to try and begin to just build some interest. So, so that, that voicemail is the attention grabber. And in there as well, you're going to start to build the interest. And then at the beginning of the email, you've got to continue that interest building and you're going to get a line or two lines of the email to do that. And then the rest of the email is to build up the desire, and the desire is just to take a call from you. That's all. If you do it properly, it gives you a way of getting around the gatekeeper. There's a whole bunch of stuff. So it's not a cold call. It's a call, but it's not a cold call anymore. And these are later campaigns. We've got dozens of them in our portal because this is the killer. If you can get a conversation with somebody, then you can at least begin to talk about what you do and how you do it and why you do it, and you stand a chance. But if you can't get that conversation— and I think emails are a dead loss really, certainly for high-value clients. So really, you have to speak to somebody. It's a very cool way of doing BD, I have to say.

Yeah, that's amazing. That's clarified it a lot for me, Mike.

Essentially, you're warming them up with touchpoints before you go in for the conversation, and that's completely different to the pick up the phone straight away.

And you can do all sorts. Um, you basically need 7 conversation starters, right? And you try all 7 with a 2-month gap between them. So eventually either one of them works Or after 7, you ring in and they just think, who is this guy? Who is this guy? Tried these 7 completely different, completely innovative, not cheesy, and actually many of them value-added ways to get my attention. Yeah, put him through, put him through. You wear them down. And in fact, one of the AIDA campaigns you can do is 7 touchpoints over 7 weeks. Boom, boom, boom, boom, boom. And at the very end of it, well, you often don't reach the end of it, you know, because people ring you or send you an email or something. But it's the creative way of doing it. We can see why tactical business development because don't get any of that. There's no money now. And it's really important to change your mentality, I think.

Really interesting. Literally, I was listening. We've got another— I mean, it rings true, everything you're saying. And finally, just to match this to another top biller. So this chap that I spoke to who's going to be coming on our podcast, £2 million biller, like ridiculous, biggest biller I've ever spoken to. He talks a lot about your way of doing business development. Um, you know, it's a much slower process, um, listing out the best companies he wants to work with, making it non-negotiable to work with those specific companies. Yeah, and I think that's part of the— he said that's one of the most important things of why he's become so successful, because he's very intentional with who he wants to work with. Um, so that's really interesting.

Focus on less and get more.

Yeah, that's brilliant. Um, okay, so let's maybe shift the conversation, even though I could just talk about this in and of itself, Mike, but I feel like we've got to talk about the idea of selling a business? Because I've spoken to a lot of recruiters, and whenever I ask them, you know, what do you, you know, what do you want? What's the dream? What do you envisage? How do you envision things turning out in the next 10 years? A lot of them talk about selling their business, and sometimes I don't think they know why. But I'm just curious, what— where's this obsession, if there is one? I, I think there is a bit of an obsession with selling a business. Have you noticed that with recruiters?

Yeah, pretty much so. I think it's a bit like the lottery, really. We all know somebody or have seen somebody that's won the lottery, so we don't realize the odds involved. We just think, well, we'll buy a ticket and we'll win, you know, because that's how they sell lottery tickets, right? If you studied the odds, you'd think, oh, no chance, no chance of that. Well, we don't see the odds of selling a recruitment business. We just know that some people sell, you know, so, and so therefore we think, well, that's what we'll do. Plus, I think a lot of— in that, again, in that transactional mentality, in and out quick. Whereas the business owner says no. I mean, that the actual— the numbers involved— I'm going to give you some numbers now. So only 0.2% of recruitment companies ever get sold, right? So I think last year it's about 406 or something, right? So it's a tiny amount. And more than that, um, there are some— excuse me— characteristics that have to apply to your business before anyone will want to buy it. And if you can't tick those boxes, nobody will buy it. Like, you've got no chance. If you tick all of those boxes, then, uh, you are 100% going to sell for a lot of money, right? So 100%. That's why I managed to sell twice, because not because I'm clever or particularly— because by luck, and it was purely by luck really, I managed to be in a sector doing a kind of work with the clients that we had, making the money that we did, um, by accident really. It wasn't designed, I can tell you that. It's just accident. And I could do it again because the 12— I know how to tick the 12 boxes. By the way, if anyone's the slightest bit interested, we've got, um, a little ebook which has the 12 boxes in it and explains what they are and why they're important. If anybody wants it, just contact me through LinkedIn. I'm on LinkedIn all over the place, you can't miss me, and I'll very happily send it to you. And I promise as well, you won't go into one of those dreadful Email funnels, we don't do that.

So put it in the YouTube video as well, uh, Mike, so that people can access it. And we'll, yeah, we'll share with people. That sounds really interesting.

Yeah. Okay, so, so, but, but, but essentially you're either going to sell or you're not. And if you're not organized to be able to sell now, you can either see whether you can make the changes to your business or not. And I think a more measured way of selling a business is, or making your fortune is to build what's called a profit and lifestyle business. So the thing with growth is it's expensive. So you often find a lot of recruitment companies, particularly those that have grown quickly, hardly make very much profit at all, really. The profit has dropped significantly. So the idea is to build a business which becomes uber profitable. And if you go on our YouTube channel, then there's loads of examples. One in particular, a guy who trebled his profits, and they were big to start off with, Reduced his headcount by 20% at the same time, which helped with the profits, to be honest, because he stopped focusing on growth and started focusing on profit. So profit and lifestyle go hand in hand. Well, if you grow a profit lifestyle business, what you're looking at from scratch is 3 years to establish a viable recruitment business. Okay, so in other words, it's making profits, it's got some people in, it's, it's got some clients, got a bit of money in the bank, you know, it's got some systems and processes set up, right? That's fine. So it's profitable. You take another 4 years up to, to make that business not need you on a day-to-day basis, right? And then 8 years on top of that to make yourself independently wealthy by drawing the money out and investing it privately. It's called a money bus. So you're on a money bus, and whilst you're on the money bus, then you're taking the dough out. It's making loads of money. You're taking the dough out and investing it privately. My advice would be on the stock exchange personally, but you do what you want to do. And at the end of that period, you can either close it down or hand it on to the next generation. Very similar to the way in which law firms work. That's what law firms do. Partners buy into partnership, they take a loan buy-in, that puts them on the money bus, they make a load of money, and then they sell their partnership at the end and they leave. But they don't make a capital gain really very much on what they buy and sell their partnership stake for. They make their money because they make a lot of money and draw it out well. If you do, if you know what you're doing in recruitment, you can make a lot of money But many people just burn that money up by pointless growth. Don't do it. Just take the money. 15 years, done.

Interesting. A few things I want to dive straight into, Mike. There's so much. I know you said that you have an ebook that covers the 12 points of what would be an attractive business for investors to look at. Can you cover a few? I know we won't get to be able to get through all 12, but can you cover a few of those now? Like, what are the main points that people should look out for?

Sure I can. Yeah, yeah. Um, I can't remember them all. I knew you'd put me on the spot. I knew that was—

I'm sorry, Mike.

Well, you've got to be over £1 million EBITDA for a start, right? So that's the first thing. No one— I mean, you can sell less than that, but if you want a guarantee of selling, above £1 million EBITDA, right? Someone's going to want to buy that. You've got to have a really good client estate. So your client estate has to have a really good spread of large, medium, and small clients. And there has to be growth potential in that client estate. If it's maxed out when you get there, well, where's the growth coming from? You have to have a lack of dependency on named individuals, including yourself. So if you've got that whiz-bang business developer, brings all the business in, the buyers will think, well, what happens if he leaves then, or she leaves? How's that going to work? So reduction in, in that dependency is key. In fact, when we sold the first business to an American firm called Modis, Um, the guy that bought it off us came to see us because we were having— we were up for an award in January, and I said, oh, come across and we'll go to the awards dinner in London. We went, we didn't win a dickie bird, really, nothing, not a jot. Anyway, it was okay, great night. And, and I said to him, well, why did you buy us? You know, you, you came in at 100 miles an hour because we were in negotiations, quite close negotiations, with a company called Dimension Data. And it was all going tremendously well. And these guys came in, I think they offered about £6 million more or something for the business, and they just wanted it done in 8 weeks and all this sort of stuff. We didn't get it done in 8 weeks, but, but they wanted to— I said, oh, he said, oh, he said some very nice things, some very pleasant things about me and the team. But one of the things he said, he said, you were a process over people company. And I was disappointed in that because I believe I'm a people person, and I believe my success lies in the fact that I am I'm a people person. I care about people, and I, I look after people, and they stay with me. So, but what he meant was, is that if people left, it wasn't the end of the world, you know. So that's why the 360 model is so rubbish, really, that if a big one or two key 360s leave you, you've just lost a big chunk of your revenue, really. And so to be able to demonstrate to buyers that not only are you safe nothing really bad can happen. No, no single client could cause you a problem, no person leaving. If I decide to leave, it's not a big deal, you know, this is okay. But also that you've got a future revenue stream in place. So we had a software house that had support deals 2-3 years in advance, and we had— we ran the one of the first managed service provider companies in this country in 1994 called Arcam. And Arcam had got all these deals signed up with various different companies, so blue chip companies. So they could see a firm revenue stream, and we were contract, not perm. So perm is like, you know, got to be a certain size, I think, to make it valuable, because you've got to reinvent your business at the start of every month, haven't you? So the contract, you don't, it's just there, it is. So I mean, there's others as well, I can't remember what the other ones are, but, um, but I think that's the sort of theme we're looking at really. Oh, white collar as well, you know, blue collar really.

So interesting, I was going to ask you that. So with the first company, so was that mainly contractor, Mike? Yeah, interesting. So would you say nowadays that's applicable, that most contract recruiters or firms are more likely to sell?

Yeah, it's still applicable, but it's just harder because IR35— a lot of work has gone abroad, particularly in IT. But it's still plenty here, there's plenty there. But you've got to remember, you've got to remember that the, the recruitment market in this country— and it depends which figures you read— I've seen from £42 billion to £60 billion. Who knows? But that's a lot of money, even if it's $42 billion. How much of that do you want? See, how much of that do you want? You should never be frightened of the market or anything, really, so long as you're slightly better than the competition and people know that, you'll be absolutely fine. So if you want to do contract, fine, do contract. There are plenty of people making money on contract. You just got to be better than those guys and you'll be absolutely fine. You know, I think— and the contract isn't, isn't the money, the money bus that it once was, I think. Yeah.

And I'm guessing the most appealing thing was the fact that it was recurring, that it was just a more predictable stream of revenue, right?

Because in those days particularly, and in the early noughties when we started the second business at Crimson, in those days people used a lot of contractors. It was a thing, you know, so you'd find companies— we, I mean, Severn Trent was one of our biggest clients, so we had kind of 80, 90 people in there, I think, at one point. And that was just their policy to use contractors. That was the deal. It's used them, they didn't care. So it wasn't like get them in for 3 months, do something and leave. Which a lot of the contract market is very much like that now. Not all of it, but it's more like that. But in those days, no, you'd sign up contractors and they'd stay there 4 or 5 years, really. And of course, all you've got to do to extend them is make a quick phone call. It's not exactly hard, is it?

Yeah. So you are definitely the person, in fact, one of the only people that I've spoken to that's so passionately against the 360 model. And I think there's so many recruiters that swear by that. So Can we get some advice on what they should be doing that's different that can be, you know, if they're doing 360, what should they be doing instead?

So Henry Ford realized that he couldn't make enough cars because he had skilled engineers making his cars, basically. It took him 12 hours to make a car and he couldn't get the skilled engineers. And if he lost a skilled engineer, well, he's got to get another one because it's a skilled job, right? So Then he goes to see a mate of his who's got a meatpacking factory in Chicago, and they couldn't get enough butchers because all these American cities has exploded, right? Couldn't get enough butchers. So what this guy done, set this factory up, put these— if you're vegan, just stick your fingers in your ear just for a second, right? He put these carcasses on this kind of conveyor belt, and as they went past somebody, they just did one thing to it. So you just got to train somebody to do one thing, and then they move to the next person, the next, and so on and so forth. And Ford says, oh yeah, man, I'm having some of that, right? So he then went back and installed this into his business. So he didn't need skilled engineers anymore. Just needed somebody to put an engine in, needed somebody to put a wheel on or something, right? So completely deskilled the process, dropped production costs. I can't remember, I think they were quartered actually or something. It was like an enormous drop in production cost. The fastest he was producing cars was 90 minutes from 12 hours. And by 1928, sort of half the cars on the planet were made in Ford factories, right? So revolutionize it. Well, you can use the same 5 principles that he used now. You can use exactly the same things, right? And there are similarities. So you, if you can't get a really good 360, and by that I mean somebody who can genuinely be good at winning clients, getting vacancies, finding people, qualifying them, and then presenting them, which is what 360 does, obviously, um, then you're not going to work. If all of those boxes aren't ticked, the business won't make money from that person, right? So then you'll try and compensate for that from giving them work or giving them clients, whatever. If you just say, well, no, we're not, we're not doing that, let's look at the stakeholder groups out there. Well, the first stakeholder group are prospects, okay? We'll have someone focus on prospects, particularly high-value prospects that have a strategic BDR. By the way, we only had, I think, 4 3 or 4 strategic business developers that built a £40 million company in the '90s, which would be a £65, £70 million company now. So that's how efficient strategic BD is. Massive, right? So we'll have one strategic BD, yeah, we can do that. That's cool. And then we've got a second stakeholder group, which are candidates. So we'll have some people who are finding them and getting them ready, filtering them and qualifying them. And then we'll have another group focused on clients, which is the third stakeholder group. And what they'll do is get vacancies out to these clients and look after them. And be the people that present the CVs that the resources and researchers have found and qualified. And we'll do that final qualification. Are they serious and are they suitable for that role? Right? Changes everything. Changes everything. You become more profitable. In the case study that we've got on the YouTube channel, I think he lifted his top billers from £300,000 to £600,000 a year. Yeah, which is pretty cool. Um, and his attrition rates plummeted. Of course they would, because people are doing what they like. They become better and better and better at it. The attrition rates of the business dropped to like 3%, I think, in this case, which was what our attrition rates were in the '90s. Everything changes. Or you can try and find the equivalent of skilled engineers to build cars. Good luck with that then. So, um, and the Americans think we're crazy because they don't do it. The Americans are just not 360 at all. They just think we're barking mad to be doing it. And I agree with them. So don't do that. Don't go down that route. All you'll become is a yo-yo company. You'll grow and shrink and grow and shrink and you'll grow. And then one or two key billers will leave and then you'll shrink again. And it's like, oh man, you know, why would you do that?

Seriously.

Fascinating. That's the first time I've heard someone explain it in that way of de-skilling the process. And it makes so much sense.

It de-skills and speeds it up. There's a LinkedIn post I just put up actually. A couple of weeks back on this very subject. If you like, I'll give it to you and you can stick it— stick the link in, in the, in the words under the, under the video, under the podcast, because it lists out what these 5 principles that Ford used. And you can just see, yeah, if I do that in my business, right, yeah, I'm gonna get the same. And that is a turning point. Otherwise, just be a yo-yo company, you know, and good luck with that.

Very interesting. I, um, I would love to touch upon profit margins because I think most people are obsessed, including myself for a very long time, is revenue, but then they forget about profits. Oh, what is— what for people that maybe don't know, what should we be looking for, for like good profit margins, average profit margins, and bad profit margins? What, what does that look like in your opinion for a recruitment company?

Parameters involved, but I think with contract you've got to be looking at 5 to 6% of revenue. Net, about that, really roughly that. With the perm, oh man, it depends if you're doing low-end perm or up-end perm, but anywhere from 40 to 60% of revenues I think is where you should aim for. But again, too many people, I think, like I said, there are things that you can do which, which are going to boost profits. Because if you want to be very profitable, I'll tell you what you've got to do, right? You've got to lift revenues but keep costs the same. So just fix that in your minds for a minute and become obsessed. What can we do to lift revenues but keep costs the same? Because 80% of that extra revenue goes straight to the bottom line. Ooh, well, that's interesting. So what can you do? Well, you can put up your prices for a start. Well, if you can, if you've got a really strong product and you would need to productise it to produce a solution, that's the only way that you'll be able to do that. And even then it's not guaranteed. You might need to change the kind of work that you do from instead of doing 4 grand placements, which take roughly the same amount of effort as 8 grand placements, which takes roughly the same amount of effort as 12 grand placements, but you're getting different fees coming in. You see the values there. Switch away from contingent. 1 in 5 contingent roles end up in a fee. So you work all week, but you only get paid for Friday. No, I don't think so. So, so you can move across to retain. I'm not a huge fan of retained unless you really know what you're doing, because you can make yourself a whole heap of problems if you just do retained. It was okay post-COVID, everyone was doing it, but now it's different. Really got to be a professional. You would need to know what you're doing. But exclusive, which is completely different, exclusive is fine. And that will increase, massively increase, your ratios of fees— sorry, of vacancies to fees, which is one of the key ratios that you should measure in your company. The other one being, for every pound of salary and commission that you spend, how many pennies of profit that you make. Those two are absolutely crucial in your business because as they grow, those numbers tend to go in the wrong direction. So it's very important to do that. So I think all things being equal, if you can boost your profits— and there are other things, I think there's another video on there on the, on the YouTube channel actually, which gives the 10 ways that you can lift your revenues without lifting your costs. Do any of those, you're going to increase your profit margins. And it is all about profit. I don't care about how many offices you've got, I don't care how many people you've got, I don't care how long you've been going, I don't care about any of those things. Profit.

Yeah, I wonder how many recruitment companies are massive but are like, they have like 1% or like tiny, tiny—

I've got a story on that actually. One of my— we've got a couple actually. I'll only tell one because we're running out of time. And one of my clients, um, one of my private clients— I have a small cachet of private clients— is telling me a story that he started work, uh, at a company. I think he was— I think he said he was like about 7th or 8th employee in or something like that. Yeah. And, and he left when they got 36, right? He left then, kept on good terms with the MD. And people would know who this company was if I mentioned it, which I'm not going to do. And, uh, he said, um, he saw the MD a few years later, got on with him, so he had a chat and everything. And he said, what you up to? So I've got 100 people now. Oh wow, you must be coining it in. He said, to be honest with you, we make about the same amount of profit now as we did when you were with us. Is not common. It's called a scissor company. And if you're listening to this, you can't see, but I'm holding my two fingers up right on the side—wards, not in the rude way. The top one represents turnover, the bottom one represents profit. That happens tremendous amounts. Your business loses its shape as it grows, and one of the things that happens when you lose shape is your profitability plummets. Well, don't do that. Be obsessed with those ratios, particularly the ratio between salary plus commission to profit, to net profit. That is. And if it drops down, you don't hire another single person until it goes back up again, and that'll stop you from becoming a scissor company.

Wow. So is that common? Have you found that's really common? Oh God, yeah, yeah, yeah, yeah.

Well, when Modis bought us, um, uh, was it Harvey Nash? It was Harvey Nash, I think. Yes, it was Harvey Nash, actually, thinking about it. Um, we, um I got the numbers out because they were a public limited company in those days. I mean, they were listed on the AIM, I think, but they're a private company now. But, um, I got the figures out. I think if anybody from Modis is listening, please don't sue me because I'm drawing deeply on my memory, but I think they did about £650 million turnover or something, and they made about £9 million profit. Pathetic, really, on that, to be honest. Yeah, um, we turned over about £24 million and we made, I think, about 2.1 or so. I can't remember, about 2, 2.1 million. So we were at, what, a 12th of the size that they were and a third. Yeah. Wow, the profit. So, and that happened because it happens one month at a time when you take on costs without being obsessed with the effect of the costs that you're taking on. You know, there's a whole bunch of things you can do really to make sure that you maximize the revenue from the team that you have, which is what it's all about, boys. Yeah, fascinating, Mike.

Have you noticed a sweet spot in terms of headcount, Mike? Recruiting companies that stay at a certain headcount and are most profitable?

Yeah, yeah. So there are things in business growth called T-points or transition points. So the first time you take on your very first person is a T-point, obviously, because you haven't got anything, you've got no employees, but all of a sudden you need a whole bunch stuff because you've got one employee. The next T-point is around— and it varies from company to company and what they do— but around 8 to 12 people roughly. And, and that's because you can't manage in the way you did manage. So that was the point of my nervous breakdown really, because we hadn't transitioned right. So, so the things start to go a bit wrong then. So what happens? That's where the yo-yos come in mainly. They grow, they shrink, they grow, they shrink. Um, so if you transition through that, the next one is about 25 to 30. Because now you need a leadership team, not just a management group. You need a leadership team. And the next one is in the mid-50s where you need to transition again. After that, I don't know because I didn't get bigger than that, but— and none of my clients are bigger than that. But, um, but I think these transition points, it's the second one that holds most people back. They, they don't transition out of being effectively a small business, and they need to move into becoming a practice, what's called a recruitment practice, which is completely different. And then from the practice, they need to become an enterprise and then a small corporate and so on and so forth. So it's that middle ground. I did read that the average number of employees in the United Kingdom for employment companies was 7, which is about right then if you think about it.

Yeah. Interesting. Mike, thank you so much for coming on the podcast. I honestly feel like we need to have a round 2 because there was just so much that you talked about that I feel like we could have gone into so much more detail about, but I would have liked to have talked about people because I think recruitment businesses are built on people, and I don't think that they're the most valuable resource that you have.

Everyone says that, of course, but no one really acts upon that, or very few people act upon that in the way that they should. And it's probably the core thing that you need to do in your business, actually. But maybe another time.

Well, maybe, maybe we've got 10. Yeah, let's touch upon that then, man. Let's do it. Let's do a little round off with that. What is it specifically that you want to tell recruiters about people, do you think, that will be helpful? Okay, okay.

So first of all, big billers are a myth. Forget it, just forget it. Because statistically, uh, recruiters— I think there are 200,000 recruiters in this country— they follow a standard distribution curve. They have to. It just looks like that, right? Everyone does. Get a group of anybody or anything together, it's going to follow a standard distribution curve. 15% overachievers, 15% underachievers. 25% above average, 25% below average, 20% average. That's the deal. So there aren't enough high billers to go around. Just got to get used to that idea. Suck it up, right? And also with high billers, if they go, you're in trouble, right? So it's up to you, but not for me. What you have to do is build a business where average people can deliver outstanding results. And then when you get them, you look after them. Not being 360 helps obviously, because they're doing the things that they like. To attract people in the first place, I think it's a good idea to have a proper EVP. You know, we talk about having an EVP, an employee value proposition, for our clients because we know from research that 75% of candidates are as interested or more interested in the company that they're going to join as they are the job. Yeah, so, and they're interested in the culture, they're interested in a whole bunch of stuff that comes under the banner of EVP, and yet you look at a lot of recruiters and they lead on the job all the time. Can we get this job? And this is the commission scheme. No, no, no, no, no, no. That's not what the majority of people want. They're interested in that, of course they are. But what they really want to know is, well, okay, if I come and work for your company, what's the culture like? What's the management process like? What's the ability for me to develop? What's the career path? How are you going to invest in me? What's your socialization policy? Because I work from home. What are your CSR policies? What's your EDI policies? You know, what are the ways that I can contribute to this business other than just putting a bum on a seat. These are— these all come under EVP, and that's what people are interested in. Well, if you can't deliver that in a succinct and authentic way, you're not going to attract a whole lot of really good people, to be honest. You need the 20% average and the 25% above average. That's who you need, those people. They'll build your business for you, right? So, so a strong EVP, well publicized, a really good join us page on your website, because we know certainly with millennials and Gen Zs 87% is something we'll research you online before they'll even bother to, to apply for a job or go for an interview. So you need to give them what they want to see. And I'll tell you, if you're interested, guys, listeners, go to the Michael Page Join Us page on their website in the UK. It's brilliant. I mean, they've really nailed it. Absolutely interesting. They've nailed the EVP. I mean, whether they're a great place to work or not, I really couldn't say. I genuinely couldn't. But I can say they've nailed the EVP in a really big way. And I think also that once you've got somebody, then you have to deliver the promises that you made. You have to have systems and processes in place to deliver all the promises you made in the EVP. And if you do that and you give them something more important to turn up at work for than just the money, if you give them a mission they can get behind, if you genuinely are creating this adventure and you want people to come and work— was it— I can't remember the guy's name now. He went to join Apple. Steve Jobs hired him as the CEO. And he said to him, he's— could— this guy wouldn't come. And he said, look, do you want to make sugared water for the rest of your life? You work for Pepsi. Would you want to come with me and change the world? Yeah, yeah, I'm up for that. Yeah. So when, when I used to recruit people in the '90s, I used to recruit everybody in the pub. Everybody. Agencies, we never did any of that. There weren't RecDirects in those days really anyway. So, so I would start with my, my current consultants, and they were supposed to ask the candidates and the contractors who they dealt with at other agencies that they liked. And if we saw the same name coming up a couple of times, I'd just ring them up. My name's MD of Software Knowledge. Fancy a pint? I haven't got a job right now, just interested to see what you're about. If they said no, they clearly didn't understand how relationships work, so they're no good for me. If they said yes, then I might meet them 2 or 3, sometimes more times. And then by the time— just talk about the work, not the job, because there is no job. Just talk about what we were going to do and what they wanted to do. And gradually it brings you together, which is why our attrition rate was so low, I think. We treated very well, and I was very careful who I hired. You know, we didn't sack very many people, and, and people— hardly anyone left. We had people queuing up to come into the business. And so you've got this, this idea that you become what they call a sticky employer. They come to you and they stay with you, because stable teams are massively more profitable than teams that are changing all the time, because you don't get that level of efficiency that you need to make a lot of profits, you know. So So, and I think people don't put enough effort into their teams, anywhere near enough. The values are the things that hold it together. As we said earlier, the values, I could tell you what my values are even now after all these years, they haven't changed because it's not like, well, let's just sit down and work out our values. No, no, you're the MD. What are your bloody values? Because that's going to be the values of the company. And if they're shit, companies can have shit values. Yeah, it's interesting.

I mean, that's, that's the key for me is it's really interesting because I think the idea is people build these kind of fictitious values just to look good. And it's just like they have to be based on truth, right? Because, which is really interesting.

They try and choose them as USPs really and make them external, stick them on the website. These are our values. I'll tell you right now, clients do not give a flying fig to your values at all. The only thing that matters is the values. And underneath each value are the behaviors that you expect to support that value.

Yeah. Fascinating. That's the deal. Really interesting and such great advice. Thank you, Mike. I'm glad that we touched upon that because I think that's a really important topic. Um, and yeah, thank you so much for joining us. I absolutely love this podcast, and I'm sure our guests are going to love listening to this. And Mike, if you were open to it, we would love to have you on again in the future because I just feel like there's so much to talk about. Um, but thank you so much for joining us.

I think it's important to try and give something back to the generation coming up. I think someone said send the elevator down for the next generation. I'll try and do that. So yeah, anytime you like. It's been a real pleasure, boys. Thank you.

Thank you, Mike. Cheers, mate. Hey guys, thanks for tuning in to this episode. If you enjoyed it, please don't forget to subscribe on YouTube and Spotify. Tune in for another episode next week, and we look forward to seeing you again very soon.

Peace and love.