Latest / Millennial Masters / Build like the buyer is already watching 👀 Luke Tobin

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Build like the buyer is already watching 👀 Luke Tobin · Millennial Masters

0:00
SPEAKER_01: Build the right people around you.
0:01
SPEAKER_01: Build the right systems and processes.
0:03
SPEAKER_01: If you want to build an asset that's saleable, always be thinking in the mind of the buyer.
0:08
SPEAKER_01: Imagine you're going to buy your business and people don't do this enough.
0:11
SPEAKER_01: Put yourself on the other side of the table.
0:13
SPEAKER_01: What would you see?
0:15
SPEAKER_01: As soon as I started to invest in the structure and the support around me,
0:17
SPEAKER_01: so those senior leaders or those other managers, and if you
0:30
SPEAKER_01: Give them the freedom, but obviously clear expectation.
0:32
SPEAKER_01: It can just free you as a founder massively, massively.
0:36
SPEAKER_01: I actually got the bug in the end, like addicted to sacking clients.
0:39
SPEAKER_01: It sounds awful, but there is such thing as bad revenue, right?
0:42
SPEAKER_01: If your team members are stressed I used to find that team morale
0:55
SPEAKER_01: from one bad client could be completely decimated week over week, month over month.
0:59
SPEAKER_01: So if there was a client that consistently caused problems,
1:03
SPEAKER_01: regardless of revenue,
1:04
SPEAKER_01: I would allow a kind of three strike rule and then we would sack them.
1:08
SPEAKER_00: This week's Millennial Master is Luke Tobin,
1:11
SPEAKER_00: who's built and sold multiple businesses, including an international agency in 2022.
1:18
SPEAKER_00: His experience showed him what makes a company valuable before a buyer appears,
1:24
SPEAKER_00: especially how much still depends on you and whether the team can keep moving
1:28
SPEAKER_00: without you.
1:30
SPEAKER_00: In this episode,
1:31
SPEAKER_00: we talk about what buyers really look for,
1:35
SPEAKER_00: why some clients make the business worse, and how to reduce founder dependency.
1:41
SPEAKER_00: Luke, you've built and sold businesses,
1:45
SPEAKER_00: and I'm wondering,
1:46
SPEAKER_00: when you look back at the years before that sale back in 2022,
1:52
SPEAKER_00: When did the company first look successful from the outside,
1:57
SPEAKER_00: but it was still feeling much weaker when you were inside there in the middle of
2:01
SPEAKER_00: the action?
2:02
SPEAKER_01: It's a great question.
2:03
SPEAKER_01: I actually think probably you're always holding on tight inside.
2:07
SPEAKER_01: So there was probably never a moment where I didn't feel like there was more work
2:11
SPEAKER_01: to do or there was some risk.
2:14
SPEAKER_01: Certainly,
2:15
SPEAKER_01: as you reach a certain scale and you have more senior leaders
2:18
SPEAKER_01: and team members around you, you do have some stability.
2:21
SPEAKER_01: I can remember it was a short growth from zero to 100 staff nearly in five years.
2:28
SPEAKER_01: For a service-based business, it was pretty rapid.
2:30
SPEAKER_01: And we were doubling in size every year.
2:32
SPEAKER_01: And with that comes lots of vulnerability as well, right?
2:35
SPEAKER_01: Because you don't have the systems or the processes to look after it.
2:38
SPEAKER_01: So honestly, it was always a bit unstable.
2:41
SPEAKER_01: I would say definitely a year before the sale was probably the time
2:46
SPEAKER_01: that I remember going, okay,
2:47
SPEAKER_01: we really got to get our systems right
2:50
SPEAKER_01: and make sure we're supporting our team members better because we were kind
2:53
SPEAKER_01: of winning more work than we could do.
2:56
SPEAKER_01: Support basically internally at that time.
2:57
SPEAKER_00: So just before the sale, what was growing the most?
3:02
SPEAKER_00: Was it revenues?
3:03
SPEAKER_00: Was it headcount, client numbers or all three?
3:07
SPEAKER_00: It was all three.
3:09
SPEAKER_01: Actually,
3:09
SPEAKER_01: we'd had this quite unique way of approaching agency and it allowed us
3:14
SPEAKER_01: to hold clients for longer than the average.
3:16
SPEAKER_01: So the typical agency relationship with a client lasts about 12 months, 12 to 18 months.
3:22
SPEAKER_01: We were holding our lifetime value of customers for three years on average, if not longer.
3:27
SPEAKER_01: So we were doubling it.
3:28
SPEAKER_01: And the reason for that is we built really key relationships who went and spent
3:32
SPEAKER_01: a lot of time in their businesses,
3:34
SPEAKER_01: not just a few hours, but a few days, if not weeks, often in business.
3:38
SPEAKER_01: So it was a very unique model.
3:41
SPEAKER_01: There's still not many agencies that do that now because it's not always cost effective.
3:45
SPEAKER_01: But the way that we saw it was,
3:46
SPEAKER_01: if we could double the length of the relationship,
3:49
SPEAKER_01: it was worth spending those couple of weeks up front to have that longevity.
3:52
SPEAKER_01: So that's how we approached it.
3:55
SPEAKER_00: So were you doing those contracts from two to three years ahead at the signing time
4:02
SPEAKER_00: or were the clients renewing after a year or a year and a half?
4:07
SPEAKER_01: So we did two things on the contract side.
4:09
SPEAKER_01: We knew that going back and forth trying to get renewals is one of the ways
4:13
SPEAKER_01: that you often put yourself back on the meat block.
4:16
SPEAKER_01: So we created contracts that allowed us to auto renew,
4:20
SPEAKER_01: but we also,
4:21
SPEAKER_01: we did So we'd set a 12-month plan,
4:28
SPEAKER_01: we'd have quarterly reviews,
4:29
SPEAKER_01: and then we would have an automatic trigger where the contract would just continue.
4:33
SPEAKER_01: So our average client stayed with us three years.
4:36
SPEAKER_01: I mean, at the time of sale,
4:38
SPEAKER_01: there was quite a few that had been there the whole time as well,
4:40
SPEAKER_01: which is great, you know.
4:41
SPEAKER_01: You said five years.
4:43
SPEAKER_01: Exactly.
4:44
SPEAKER_01: I think it was about five and a half by the time we actually sold.
4:47
SPEAKER_01: And then I was there for another two and a half before I left.
4:50
SPEAKER_01: So the whole journey for me was about eight years in total.
4:53
SPEAKER_00: So you stayed on with the business after the sale,
4:56
SPEAKER_00: which means that like a lot of the founders who have sold their businesses,
5:00
SPEAKER_00: you had a deal which meant that you had to continue growing
5:05
SPEAKER_00: or reaching certain thresholds or points.
5:08
SPEAKER_00: And by the time you complete the sale?
5:11
SPEAKER_01: Yeah, exactly.
5:12
SPEAKER_01: So it's very typical in service-based businesses to have what's called an earn out.
5:15
SPEAKER_01: So it's a period of acceleration of your capital or often you can earn a bit more
5:20
SPEAKER_01: than the headline figure of the deal if you hit certain numbers,
5:23
SPEAKER_01: but also you can earn less if you don't hit them.
5:26
SPEAKER_01: It's a bit of a caveat.
5:27
SPEAKER_01: Now, I negotiated something a little bit different.
5:30
SPEAKER_01: It wasn't my first rodeo.
5:31
SPEAKER_01: I've sold two other businesses prior to that business.
5:34
SPEAKER_01: So I negotiated that I would get some group-based stock in
5:37
SPEAKER_01: the larger mothership company that acquired me.
5:40
SPEAKER_00: That's an interesting point.
5:41
SPEAKER_00: So you can look at getting some of that as well as an extra to your earn-out.
5:47
SPEAKER_01: Yeah, exactly.
5:47
SPEAKER_01: Exactly.
5:48
SPEAKER_01: But I didn't have an earn out at all.
5:49
SPEAKER_01: I just had the headline figure.
5:51
SPEAKER_01: I cleared off majority of the cash up front and then I traded the other part of
5:55
SPEAKER_01: the value into group stock knowing full well that if I wanted to exit
5:59
SPEAKER_01: the group stock would be So at the time of the sale,
6:22
SPEAKER_00: Was there a particular number which looked impressive but, say, gave you false comfort?
6:28
SPEAKER_00: Was it the overall revenue of the business versus, say, the profit?
6:33
SPEAKER_01: Yeah, we'd always had pretty strong margins, actually.
6:36
SPEAKER_01: So we were fortunate.
6:37
SPEAKER_01: And that's kind of bottom line profit.
6:39
SPEAKER_01: Our revenue was good.
6:40
SPEAKER_01: I mean, it had grown pretty well into decent figures.
6:44
SPEAKER_01: And we were adding and pretty much doubling each year.
6:47
SPEAKER_01: So the revenue part's fine.
6:48
SPEAKER_01: But I think, you know, turnover's vanity, you know, profit's sanity, as they say.
6:53
SPEAKER_01: So we always had a very healthy bottom line number,
6:57
SPEAKER_01: 25 to 30%, which again, for a service-based business is pretty good.
7:01
SPEAKER_01: The majority of agencies have about a 20% historically.
7:04
SPEAKER_01: Right now,
7:05
SPEAKER_01: I work in the space still advising agencies,
7:08
SPEAKER_01: you know, 15% is probably about average now.
7:10
SPEAKER_01: So it's dropped a lot and they're using and they're focusing on AI to try and push
7:14
SPEAKER_01: that back up now.
7:16
SPEAKER_01: And we had almost double the average of what we see today, which was great.
7:20
SPEAKER_00: And that was 2022-ish, which was just before ChatGPT became mainstream.
7:28
SPEAKER_00: So just on the cusp of the...
7:31
SPEAKER_00: General age of the AI.
7:33
SPEAKER_00: So just before that,
7:35
SPEAKER_00: I'm wondering, Luke,
7:36
SPEAKER_00: was there anything you say misunderstood about scale
7:41
SPEAKER_00: before you experienced it properly?
7:43
SPEAKER_00: You did say you'd had two businesses before,
7:46
SPEAKER_00: but this one was also your biggest one, if I'm correct?
7:51
SPEAKER_01: It was bigger by a big margin.
7:54
SPEAKER_01: So I had an exit in my early 20s,
7:56
SPEAKER_01: a five-figure exit,
7:57
SPEAKER_01: then I had a six-figure exit, and then I had this kind of eight-figure dollar deal.
8:01
SPEAKER_01: So completely different ballpark,
8:03
SPEAKER_01: although those early ones had taught me some of the principles
8:06
SPEAKER_01: of what it looked like.
8:07
SPEAKER_01: I think what I'd probably underestimated,
8:09
SPEAKER_01: and sometimes when you're just in the thing and you're growing,
8:12
SPEAKER_01: you're just learning as you go, aren't you?
8:14
SPEAKER_01: And you're kind of figuring it out and you think you've got some
8:16
SPEAKER_01: of your stuff together, but there's always stuff that you don't have figured out.
8:19
SPEAKER_01: One of the things at scale
8:21
SPEAKER_01: that I certainly hadn't anticipated was just how difficult it would be to bring in
8:26
SPEAKER_01: the team members, support them, give them the structure.
8:29
SPEAKER_01: And I always talk about the kind of journey of having like a seesaw effect.
8:33
SPEAKER_01: So if you bring In sales,
8:35
SPEAKER_01: it leans on the operational team and then they need to try and counterbalance.
8:39
SPEAKER_01: And you've got this constant seesaw of trying to bring sales, balance the internal work.
8:45
SPEAKER_01: And if one of those things doesn't do a good job, then you can have a leaky bucket over here.
8:49
SPEAKER_01: So trying to support the team.
8:51
SPEAKER_01: At that scale was difficult.
8:53
SPEAKER_01: I would say on average, we were bringing at least two team members a month.
8:56
SPEAKER_01: There was a few months where we brought five or six new team members.
8:59
SPEAKER_01: And it's hard to do a good enough job of like looking after those individuals when
9:04
SPEAKER_01: from a management team structure, we didn't always have it together either.
9:07
SPEAKER_01: So it was a lot of firefighting.
9:09
SPEAKER_01: I would say that was probably the hardest thing.
9:11
SPEAKER_01: And it was exciting.
9:12
SPEAKER_01: The growth was great.
9:14
SPEAKER_01: But it was, yeah,
9:16
SPEAKER_01: it was a lot of firefighting and trying to backfill processes that probably
9:21
SPEAKER_01: If we had longer or more of a mature business or if we'd operated at a similar size
9:25
SPEAKER_01: for a while, we would have been able to establish.
9:28
SPEAKER_00: So how did you manage to get those bits out of your head and in a process or
9:33
SPEAKER_00: on paper, especially when you
9:38
SPEAKER_00: As you said,
9:38
SPEAKER_00: and in my experience as well,
9:40
SPEAKER_00: a lot of the time you make it up as you go along and use your best judgment
9:44
SPEAKER_00: and adapt it to each client and situation.
9:47
SPEAKER_00: But otherwise, to a staff member, you'd have to present it as a manual.
9:52
SPEAKER_01: Yeah, exactly.
9:53
SPEAKER_01: Exactly.
9:54
SPEAKER_01: The key with doing this well is about delegation.
9:57
SPEAKER_01: It's about Spreading across your team responsibility and having really clear,
10:03
SPEAKER_01: clearly defined roles and clearly defined functions.
10:06
SPEAKER_01: And then basically creating operational manuals or SOPs or whatever you want
10:10
SPEAKER_01: to call them to back up all of those things.
10:12
SPEAKER_01: So it's like, we do this in this way.
10:15
SPEAKER_01: Now let's go and build out the architecture of why we do it that way
10:19
SPEAKER_01: and how we do it and make sure that's something that's trainable, that is scalable.
10:23
SPEAKER_01: And then from that, you can create a system.
10:25
SPEAKER_01: And if you can create a system that's then supported through technology and people,
10:29
SPEAKER_01: You can repeat it.
10:30
SPEAKER_01: And if you can repeat things in a business that work,
10:32
SPEAKER_01: over time, you're going to create more success.
10:35
SPEAKER_01: It's as simple as that.
10:36
SPEAKER_00: Now, Luke,
10:37
SPEAKER_00: you've written on your LinkedIn,
10:39
SPEAKER_00: I was looking up a bit before this interview,
10:42
SPEAKER_00: that revenue on its own is a poor measure of business health.
10:47
SPEAKER_01: Yes.
10:47
SPEAKER_00: So are there any particular numbers you eventually learn to watch alongside the revenue?
10:55
SPEAKER_01: An agency business is quite different to a product business where you would look
10:59
SPEAKER_01: at slightly different metrics,
11:00
SPEAKER_01: but in an agency or service based business,
11:03
SPEAKER_01: one of the key things you should look at is rather than top line revenue,
11:07
SPEAKER_01: it's like revenue per head.
11:09
SPEAKER_01: Your employees,
11:11
SPEAKER_01: if you think about your billable employees,
11:13
SPEAKER_01: have to counterbalance for your non-billable employees.
11:16
SPEAKER_01: And they might be senior team members that don't do billable work.
11:20
SPEAKER_01: They might be salespeople, which aren't billable.
11:23
SPEAKER_01: They might be a HR admin.
11:25
SPEAKER_01: Any of those functions become jobs that are a complete cost that must be carried
11:29
SPEAKER_01: by your deliverable team members.
11:31
SPEAKER_01: So that delivery team becomes,
11:34
SPEAKER_01: it's a really key metric to look at how much are they actually billing,
11:38
SPEAKER_01: Per head and accrued way of looking at it.
11:39
SPEAKER_01: Say you're doing a million in revenue and you've got,
11:42
SPEAKER_01: you know, five people in delivery, you know, they're ahead in order to carry that.
11:47
SPEAKER_01: But is that realistic for five people to be able to do 200Ks worth of revenue
11:52
SPEAKER_01: at your hourly rate?
11:53
SPEAKER_01: And then are the team overworked?
11:55
SPEAKER_01: Are they overstretched?
11:56
SPEAKER_01: And then this is something that I constantly look at.
11:58
SPEAKER_01: So it's like, what's the revenue per head?
12:00
SPEAKER_01: How many non-billable staff members do they have?
12:02
SPEAKER_01: And if they told me that,
12:03
SPEAKER_01: regardless of understanding the key numbers,
12:05
SPEAKER_01: I would know whether they were a healthy operating business.
12:08
SPEAKER_00: So is that then where if you don't look at revenue per head,
12:12
SPEAKER_00: that you can lose margin without noticing?
12:15
SPEAKER_01: Exactly.
12:16
SPEAKER_01: And often you have department services or individuals that are seemingly busy
12:21
SPEAKER_01: or productive, but actually might not be making you any money or losing money.
12:25
SPEAKER_00: And so what would say a healthy month look like, for example, when you were doing digital ethos?
12:34
SPEAKER_01: Yeah, so digital ethos,
12:35
SPEAKER_01: you know,
12:35
SPEAKER_01: again, we would always look at Top line revenue, then we'd look at the margin.
12:39
SPEAKER_01: We'd always look at our EBITDA.
12:40
SPEAKER_01: So we want to understand how we're tracking for the year on our key kind
12:44
SPEAKER_01: of EBITDA number, which is again, how you're valued if you go out to market.
12:48
SPEAKER_01: So it gives you a valuation number.
12:50
SPEAKER_01: And you can look at that as a percentage of revenue or a percentage of profit.
12:54
SPEAKER_01: And then we would look most importantly at an individual and service line profitability.
13:00
SPEAKER_01: So like how profitable had SEO been this month versus last month?
13:04
SPEAKER_01: And is there an increase in efficiency there that's allowed us to get
13:07
SPEAKER_01: a bit more profit out of that?
13:09
SPEAKER_01: If we bought in another client,
13:10
SPEAKER_01: for example,
13:11
SPEAKER_01: that was another five grand a month account,
13:13
SPEAKER_01: but we didn't need more staff, well,
13:15
SPEAKER_01: that should be another five grand that's basically gone straight to the bottom line.
13:19
SPEAKER_00: Before AI,
13:20
SPEAKER_00: did you have a particular,
13:22
SPEAKER_00: say, number of clients per, say, head or per account manager?
13:30
SPEAKER_00: I've spoken with a couple of other agency founders in the past and that used
13:34
SPEAKER_00: to be maybe one to five and then AI maybe brought that one up now to one to ten,
13:40
SPEAKER_00: for example.
13:42
SPEAKER_01: Yeah, it has fluctuated and changed.
13:44
SPEAKER_01: I think it always comes down to the Unfortunately,
13:47
SPEAKER_01: people-based businesses always have to operate on a time basis internally.
13:51
SPEAKER_01: You might not sell that way because the way that service is like to sell is value.
13:55
SPEAKER_01: So it's like, hey, don't ask me about how much time it's taking me.
13:58
SPEAKER_01: Just worry about what I'm achieving for you.
14:00
SPEAKER_01: And that makes sense as to why you want to do that.
14:02
SPEAKER_00: Yeah, because you sell the deliverables and the outcomes rather than your time.
14:07
SPEAKER_01: Exactly.
14:07
SPEAKER_01: So it's outcome focused.
14:08
SPEAKER_01: However, internally, There's time.
14:11
SPEAKER_01: And it's how many hours can you actually do in a working week?
14:14
SPEAKER_01: You know, you've got, what, 40 hours or whatever.
14:16
SPEAKER_01: On a typical week,
14:17
SPEAKER_01: you've got to allow for lunches,
14:18
SPEAKER_01: breaks, inefficient times, like how actually productive is somebody?
14:22
SPEAKER_01: And then you've got to look at, okay, well,
14:24
SPEAKER_01: out of that,
14:24
SPEAKER_01: what does the billable hour need to be in order to get the result for that outcome
14:29
SPEAKER_01: of that client?
14:30
SPEAKER_01: So that's the way you do it.
14:31
SPEAKER_01: And I think for me, I would always try to look if they're billable team members at a 70% to 80%
14:38
SPEAKER_01: Is
14:43
SPEAKER_00: there a particular point that you can pinpoint when being helpful and let's talk
14:51
SPEAKER_00: about say scope creep starts costing you real money in the business
14:56
SPEAKER_00: or we can call it say over delivery in order to satisfy
15:00
SPEAKER_00: and get better customer service?
15:02
SPEAKER_01: Yeah, this is a really difficult one, isn't it?
15:05
SPEAKER_01: Everybody wants to keep clients happy.
15:07
SPEAKER_01: And that means that if the client that jumps up and down the loudest or makes
15:11
SPEAKER_01: the most noise is often the one that gets the most attention.
15:14
SPEAKER_01: It's not fair, but that is what happens.
15:16
SPEAKER_01: For me, there has to be a sensible buffer zone.
15:19
SPEAKER_01: And what we had at Digital Ethos was a 10% buffer.
15:22
SPEAKER_01: Well, the team were allowed to go over by 10%.
15:24
SPEAKER_01: If they felt like they needed to go further, they had to raise it to their line manager.
15:28
SPEAKER_01: And then it had to be approved by management.
15:29
SPEAKER_01: And the reason for that is Obviously,
15:32
SPEAKER_01: we know that some months you'll need a bit more
15:34
SPEAKER_01: and maybe other months you don't need as much and it should balance out.
15:36
SPEAKER_01: 10% give either way.
15:37
SPEAKER_01: It will creak, but it will balance out and the margins will rebalance.
15:41
SPEAKER_01: If it starts being every month above that line,
15:45
SPEAKER_01: before you know it,
15:46
SPEAKER_01: throughout the year,
15:47
SPEAKER_01: you're doing like another month's worth of work or two months worth of work
15:50
SPEAKER_01: for no billable.
15:51
SPEAKER_01: All of a sudden, that does hit bottom end margin.
15:54
SPEAKER_01: It's a tricky balance because, yeah,
15:57
SPEAKER_01: I hate the fact that agencies are very much driven by the ebbs and flows
16:01
SPEAKER_01: of client demand, but that is just the way it works.
16:03
SPEAKER_01: And I think being bold and brave enough to push back on clients is something
16:08
SPEAKER_01: that agencies don't do enough and they need to do more of.
16:11
SPEAKER_01: You know, I actually got the bug in the end, like addicted to sacking clients.
16:15
SPEAKER_01: It sounds awful, but, you know, there is...
16:18
SPEAKER_00: Tell me more about that.
16:19
SPEAKER_01: Yeah, there is such thing as bad revenue, right?
16:21
SPEAKER_01: You know,
16:22
SPEAKER_01: if your team members are stressed,
16:25
SPEAKER_01: under pressure,
16:26
SPEAKER_01: unhappy at work,
16:27
SPEAKER_01: it affects all of your good clients as well as that one
16:30
SPEAKER_01: or two bad clients you might have.
16:32
SPEAKER_01: So I used to find that team morale
16:35
SPEAKER_01: from one bad client could be completely decimated week over week, month over month.
16:40
SPEAKER_01: So if there was a client that consistently caused problems,
16:43
SPEAKER_01: regardless of revenue,
16:45
SPEAKER_01: I would allow a kind of three-strike rule and then we would sack them.
16:49
SPEAKER_01: So I think if I look back at Digital Ethos,
16:50
SPEAKER_01: I must have sacked 20 clients for just being bad operators and bad business people.
16:55
SPEAKER_01: They didn't fit our ethos.
16:57
SPEAKER_01: They didn't fit our mentality.
17:00
SPEAKER_01: I always remember it was 120K a year clients, a decent revenue, 10 grand a month client.
17:04
SPEAKER_01: They'd only worked with us for four months,
17:06
SPEAKER_01: but I had two team members come into my office in tears because
17:09
SPEAKER_01: the client was just not listening, was screaming down the phone, just bad business.
17:14
SPEAKER_01: So I called them and let them go.
17:15
SPEAKER_01: And it was a very liberating thing to do.
17:18
SPEAKER_01: I think it was good for the team.
17:20
SPEAKER_01: The morale went up.
17:21
SPEAKER_01: The outputs and the outcomes then for the other clients arguably increased.
17:25
SPEAKER_01: But as a business owner, I think a couple of years prior to that, I'd have never dared to do it.
17:28
SPEAKER_01: I was like, no, no, because you need the money.
17:30
SPEAKER_01: You're always chasing more retainers.
17:32
SPEAKER_01: You're chasing the,
17:33
SPEAKER_01: you want to see things spiking,
17:34
SPEAKER_01: but actually there is bad revenue and having the ability and the kind of guts and
17:39
SPEAKER_01: the bravery to make those bold decisions is the difference between leading
17:44
SPEAKER_01: or Just managing, you know.
17:46
SPEAKER_00: So besides late payments from a client and besides a client shouting down the phone
17:52
SPEAKER_00: at your staff and basically depressing them,
17:56
SPEAKER_00: are there any markers that people should pay attention to for what you would call
18:02
SPEAKER_00: a bad client?
18:03
SPEAKER_01: I think that it's difficult during the sales process because everybody puts on their best face.
18:08
SPEAKER_01: Everyone's in their kind of flirting mode.
18:10
SPEAKER_01: On both sides?
18:11
SPEAKER_01: On both sides.
18:12
SPEAKER_01: Everybody wants to see the best.
18:14
SPEAKER_01: You can stress test and there are a few warning things that come through so
18:17
SPEAKER_01: if they come in and they're complaining about their last agency or complaining about
18:21
SPEAKER_01: a prior situation normally that's a bit of a flag as to okay well let's try
18:26
SPEAKER_01: and understand why and where there might have been a gap and what the issue is.
18:30
SPEAKER_01: I think sometimes a little bit of knowledge on the client side can be dangerous as well.
18:33
SPEAKER_01: So, you know,
18:34
SPEAKER_01: if they come into the pitch presentation and they're quite demanding about the type
18:38
SPEAKER_01: of service or what they're expecting rather than being open to strategic guidance,
18:43
SPEAKER_01: that can be a red flag as well.
18:44
SPEAKER_01: But typically it's very hard to know until you're in bed.
18:47
SPEAKER_01: And that's why it's like the whole hire, slow, fire, fast principle with employees.
18:53
SPEAKER_01: It's the same with clients.
18:54
SPEAKER_01: You know, if you bring them in and it's not a fit for either party, Why stress?
19:00
SPEAKER_01: Three months before you didn't have them.
19:01
SPEAKER_01: So you can survive again.
19:03
SPEAKER_01: You can push on again.
19:05
SPEAKER_01: There is always more business.
19:07
SPEAKER_01: But should you or your team be under that amount of pressure if you can avoid it?
19:11
SPEAKER_01: And I'm not saying that just give up because we never did that either.
19:15
SPEAKER_01: And I always recommend to people to give it a fair amount of time.
19:20
SPEAKER_01: But I think is expectation setting, isn't it?
19:22
SPEAKER_01: It's like from the beginning, being very clear on this is the line.
19:26
SPEAKER_01: This is how we work.
19:28
SPEAKER_01: I think where it goes wrong in a lot of businesses is that people try to oversell
19:33
SPEAKER_01: to get the revenue in,
19:35
SPEAKER_01: but then they're going to under deliver based on what they've sold.
19:38
SPEAKER_01: So you need those two things to come together.
19:39
SPEAKER_01: You need to be very clear and very honest about what you can deliver, your capacity and
19:46
SPEAKER_01: So
19:50
SPEAKER_00: how do you know when a client sees you say as part of the business rather
19:54
SPEAKER_00: than another supplier?
19:55
SPEAKER_00: Because that will also have a key role in retention, I would guess.
20:01
SPEAKER_01: This was our, I think, superpower at Digital Ethos.
20:05
SPEAKER_01: So my background prior to Starting the agency was actually I ran
20:10
SPEAKER_01: an e-commerce business and I grew it to a thousand SKUs.
20:12
SPEAKER_01: We were selling everything from car racing to hot air balloons,
20:16
SPEAKER_01: all experience day packages in the UK.
20:19
SPEAKER_01: And I'd been the client.
20:20
SPEAKER_01: So I'd worked with agencies and I'd had some good and some bad experiences of that.
20:24
SPEAKER_01: But I'd also started to teach myself marketing.
20:27
SPEAKER_01: So I was that annoying person that started to understand some of the stuff,
20:29
SPEAKER_01: but maybe not enough to do it.
20:32
SPEAKER_01: I then went and worked in a couple of agencies
20:33
SPEAKER_01: and what I found was there was this kind of gap between expectation,
20:38
SPEAKER_01: reality, whatever.
20:39
SPEAKER_01: And I thought there's got to be a better way of bridging that
20:41
SPEAKER_01: and genuinely like understanding what the client's trying to do,
20:46
SPEAKER_01: not just in the short term.
20:47
SPEAKER_01: But in the long term as well,
20:48
SPEAKER_01: understand and ask the questions up front about, well, what are your ambitions here?
20:52
SPEAKER_01: If it's the director, are you hoping to grow a business that's sellable?
20:55
SPEAKER_01: Are you hoping to sell this business in three to five years?
20:57
SPEAKER_01: What do you need to do revenue-wise,
20:59
SPEAKER_01: sales-wise, profitability-wise in order to allow that to happen?
21:03
SPEAKER_01: I think so many agencies just take on a project and never ask the bigger picture questions.
21:08
SPEAKER_01: It's like, okay, we've got this little bit over here we need to solve.
21:11
SPEAKER_01: But they don't go deep enough into like, what's the client actually trying to do here?
21:16
SPEAKER_01: So we built a business model that allowed us to,
21:20
SPEAKER_01: and it was the only way we would work,
21:22
SPEAKER_01: is when we onboarded a client,
21:23
SPEAKER_01: we told them that we wanted to go and spend at least two or three days
21:28
SPEAKER_01: in their business.
21:29
SPEAKER_01: So initially that was just me.
21:30
SPEAKER_01: And I would go and I would sit in those businesses.
21:32
SPEAKER_01: I'd ask all the water cooler conversations.
21:34
SPEAKER_01: I'd go for lunch with the directors.
21:36
SPEAKER_01: I would meet the team.
21:38
SPEAKER_01: I'd understand who to go to for what type of question.
21:41
SPEAKER_01: I would have an onboard I had a recording process that was three or four hours
21:45
SPEAKER_01: where I would literally unpack from the directors what they wanted to do over
21:48
SPEAKER_01: the next five years.
21:49
SPEAKER_01: And I'm no longer than just a marketeer.
21:52
SPEAKER_01: I'm an aligned business operator that gets them and I'm also giving them kind of that
22:01
SPEAKER_01: We would
22:07
SPEAKER_01: then go back into our own business and into our office with
22:11
SPEAKER_01: that full understanding and with some of that relationship formed and be able to do
22:15
SPEAKER_01: a much better job for that client.
22:16
SPEAKER_01: Because even when things went a bit wrong or marketing campaigns didn't work
22:20
SPEAKER_01: the way they should,
22:20
SPEAKER_01: which is very typical as we know, things aren't always going to go to plan.
22:24
SPEAKER_01: They would give us a lot more slack because they knew us better than just a supplier
22:30
SPEAKER_01: that had had a couple of phone calls with them.
22:33
SPEAKER_01: These days, so much business gets done without even meeting.
22:36
SPEAKER_01: I would always, every quarter, make my team go and physically sit with me.
22:39
SPEAKER_01: And again, it's these little wow moments and these things that you can do.
23:07
SPEAKER_01: That separate you from the pack and the rest of the competition.
23:10
SPEAKER_01: And that's the key.
23:10
SPEAKER_01: I always say to people now,
23:12
SPEAKER_01: what can you do that genuinely makes you different to everybody else?
23:17
SPEAKER_01: And most service businesses are commoditized.
23:20
SPEAKER_01: We're in a space where it's like for like, but what you do is very similar.
23:25
SPEAKER_01: You do SEO, you do PPC, you do social media, you do design.
23:28
SPEAKER_01: Okay, great.
23:30
SPEAKER_01: Relationship and execution,
23:31
SPEAKER_01: that human element is more important than ever,
23:33
SPEAKER_01: especially in the age of AI where things can be kind of auto-generated and
23:39
SPEAKER_01: a bit kind of disconnected from the human side of the relationships.
23:43
SPEAKER_00: You said something very interesting, Luke.
23:47
SPEAKER_00: In the sales process,
23:48
SPEAKER_00: when you were talking to other founders and business operators,
23:53
SPEAKER_00: you were there speaking to them founder to founder,
23:56
SPEAKER_00: understanding their work and their aims.
23:59
SPEAKER_00: And that was one of the key differentiators, I would assume, when you went into a business.
24:05
SPEAKER_00: But say if you have salespeople who might be senior and very good at the job,
24:11
SPEAKER_00: they wouldn't necessarily have that experience or be able to have that level
24:16
SPEAKER_00: of conversation with a founder.
24:19
SPEAKER_00: How did you move that knowledge and that system of selling to other people
24:24
SPEAKER_00: who did not have your experience,
24:27
SPEAKER_00: who couldn't have a leavening up lunch with another founder?
24:31
SPEAKER_01: It's a fantastic question and observation.
24:34
SPEAKER_01: And to be honest, one that was a struggle.
24:36
SPEAKER_01: It was hard to get right.
24:37
SPEAKER_01: And actually, a lot of the work that I do now is on coaching founders to de- Daniel Ionescu.
25:06
SPEAKER_01: They probably couldn't do as much of the founder to founder stuff,
25:10
SPEAKER_01: but that didn't always matter.
25:12
SPEAKER_01: It was more about having the confidence
25:14
SPEAKER_01: to ask those more challenging strategic questions than a typical agency would.
25:18
SPEAKER_01: That was the key.
25:33
SPEAKER_00: Yeah, because I'm assuming a business or a business owner might share
25:38
SPEAKER_00: with another business owner of, say,
25:40
SPEAKER_00: a marketing agency like you were at the time,
25:43
SPEAKER_00: what are their revenue goals or their current revenue or where they want to move it.
25:48
SPEAKER_00: But they would be less inclined to do so with a salesperson.
25:52
SPEAKER_00: Absolutely.
25:53
SPEAKER_01: Absolutely.
25:54
SPEAKER_01: But if that salesperson presents well and not as a salesperson,
25:58
SPEAKER_01: more consultative, You can mitigate it and you can get around it.
26:02
SPEAKER_01: There is no perfect answer to this because the ideal obviously for sales is
26:07
SPEAKER_01: that you do founder-led sales forever, but you can't.
26:09
SPEAKER_01: And actually,
26:10
SPEAKER_01: even if I was closing 60% of the deals I sat on and
26:13
SPEAKER_01: the salesperson now only closes 30, it's still okay as long as you've got the scale.
26:19
SPEAKER_01: The thing that you have to realize as a founder quite quickly is there's lots
26:22
SPEAKER_01: of areas where you can add real value and it's the stuff probably
26:25
SPEAKER_01: that you're most passionate about and the thing that you enjoy doing.
26:28
SPEAKER_01: There's loads of areas that you should just systemize,
26:31
SPEAKER_01: get a good process in and put somebody else in to do a good enough job.
26:36
SPEAKER_01: They might not do the exact job that you would have done,
26:40
SPEAKER_01: but can they do the job well enough and execute it well enough so you can go off
26:44
SPEAKER_01: and focus on things that are more strategic?
26:46
SPEAKER_01: And if the answer is yes, Then just do it, move on.
26:49
SPEAKER_01: Even if it's 90%, not 100% of what you would have given it.
26:53
SPEAKER_01: But if it's good enough and you can get the result, get out of the way.
26:57
SPEAKER_00: 90 is a good number though.
26:58
SPEAKER_00: You initially said about like 30 to 40, didn't you?
27:02
SPEAKER_00: That's close rate.
27:03
SPEAKER_00: So I was talking about close.
27:05
SPEAKER_01: So now I'm talking about like efficiency of a job.
27:08
SPEAKER_01: So like if you're 100% efficient, you're like the best at it.
27:11
SPEAKER_01: If you're 90% at it.
27:13
SPEAKER_01: So before I was talking more about actual close rates.
27:15
SPEAKER_01: So like
27:19
SPEAKER_00: So have clients ever resisted being moved away from you to say an account manager or
27:26
SPEAKER_00: to another salesperson?
27:28
SPEAKER_00: How do you deal with that?
27:29
SPEAKER_00: Because my next question is going to be linked to this,
27:33
SPEAKER_00: which is what was the hardest part to hand over to other people from the business as
27:39
SPEAKER_00: the owner who also was leading the sales?
27:42
SPEAKER_01: Yeah, I was fortunate in the sense that I never worked on the tool.
27:47
SPEAKER_01: So I wasn't doing the delivery and I made that by design.
27:50
SPEAKER_01: So I focused very much commercially on bringing them in.
27:52
SPEAKER_01: And then there was always a natural handover anyway.
27:55
SPEAKER_01: So actually,
27:56
SPEAKER_01: the only time I got re-engaged with the client was if there was an issue or maybe
28:01
SPEAKER_01: for some of the
28:01
SPEAKER_00: complaints usually.
28:03
SPEAKER_01: Complaints, firefighting, all of those things that we have to deal with.
28:08
SPEAKER_01: Yeah, that was the crux of it.
28:10
SPEAKER_01: And I was able to mitigate and work around it because of it.
28:13
SPEAKER_01: I mean, in the end,
28:14
SPEAKER_01: actually,
28:14
SPEAKER_01: as I sold into a much larger entity and sat on the board there,
28:18
SPEAKER_01: my role became much more strategic,
28:20
SPEAKER_01: focused on acquisitions, focused on much bigger picture stuff.
28:23
SPEAKER_01: But whilst building a smaller agency,
28:25
SPEAKER_01: You're still involved in all those strategic decisions
28:28
SPEAKER_01: and operational challenges day to day.
28:31
SPEAKER_01: So yeah, it changed over time.
28:32
SPEAKER_00: So you mentioned the founder energy, and I know it from my previous experiences as well.
28:38
SPEAKER_00: And it can drive the business forward.
28:40
SPEAKER_00: You bring that energy into the office, into the business, into every call on a daily basis.
28:45
SPEAKER_00: But is there a point that you can move past so that the business doesn't depend on that energy?
28:54
SPEAKER_00: When you won't be physically there all the time.
28:57
SPEAKER_00: Say even if you go on holiday for a couple of weeks
29:00
SPEAKER_00: and things can totally slow down just because you're not there.
29:04
SPEAKER_01: Yeah, look, it's challenging.
29:06
SPEAKER_01: I think in the early stages of a business,
29:09
SPEAKER_01: if you are that kind of force, I would see it as like a whirlwind.
29:15
SPEAKER_01: You're at the center,
29:16
SPEAKER_01: the eye of the storm,
29:17
SPEAKER_01: and you build this energy around you and you kind of pull in your early adopters
29:21
SPEAKER_01: and they start building energy.
29:22
SPEAKER_01: And in the end,
29:22
SPEAKER_01: what you want is to be able to Let them go and they can
29:26
SPEAKER_01: then start creating their own energy pools.
29:27
SPEAKER_01: That's the key.
29:29
SPEAKER_01: So that really comes down to building enough I want to say not everybody can start
29:33
SPEAKER_01: with that or maybe in the first or even in the second business.
29:58
SPEAKER_01: Exactly.
29:59
SPEAKER_01: It takes time to do that.
30:00
SPEAKER_01: But I've learned that by empowering others and bringing in the right people
30:05
SPEAKER_01: in those early businesses,
30:06
SPEAKER_01: it was the same as soon as I started to invest in the structure and
30:10
SPEAKER_01: the support around me.
30:11
SPEAKER_01: So those senior leaders or those other managers,
30:14
SPEAKER_01: and if you give them the freedom,
30:15
SPEAKER_01: but obviously clear expectation, it can just free you as a founder massively.
30:20
SPEAKER_00: Freeing yourself as a founder means you have to stop doing certain things.
30:26
SPEAKER_00: And that's going to link into my next topic because I'm wondering,
30:31
SPEAKER_00: Luke, why did you have to stop doing before starting?
30:35
SPEAKER_00: Digital ethos became more valuable in the eyes of a buyer or a potential buyer.
30:41
SPEAKER_01: Yeah, the biggest risk for a buyer when they look at a business is too much founder dependency.
30:48
SPEAKER_01: It's probably the biggest turnoff.
30:51
SPEAKER_01: So the thing that you must do is have...
30:55
SPEAKER_01: Individuals, specialists for each of the functions that are core to a business.
30:59
SPEAKER_01: So you think about the core pillars,
31:00
SPEAKER_01: whether that's operational, finance, legal, compliance, those sorts of things.
31:04
SPEAKER_01: You need somebody that owns all of those things in a business that isn't the founder.
31:09
SPEAKER_01: The founder should just be the visionary and the person that those people can report into.
31:13
SPEAKER_01: That's fine.
31:14
SPEAKER_01: But you also need to create a leadership structure that allows for if
31:18
SPEAKER_01: the founder was to be hit by a bus, God forbid, the rest of the team can still.
31:22
SPEAKER_00: The typical hit by a bus scenario.
31:24
SPEAKER_00: Yes.
31:25
SPEAKER_00: Every solicitor, every accountant talks about that as well.
31:28
SPEAKER_01: Yes, exactly.
31:30
SPEAKER_01: You just need to have the cover there and a business that can survive a founder effectively.
31:35
SPEAKER_01: That's really what it comes down to.
31:37
SPEAKER_01: So for me, it was all about putting the right people in the right place.
31:40
SPEAKER_01: I didn't always get that right, by the way.
31:41
SPEAKER_01: I hired a few people that didn't work out.
31:43
SPEAKER_01: All of those things.
31:44
SPEAKER_01: It takes time.
31:46
SPEAKER_01: And I was fortunate that I started doing this two years before I was ready to sell.
31:50
SPEAKER_01: So I started bringing in the individuals.
31:52
SPEAKER_01: I had a really clear goal to have my chief operating officer effectively as the MD
31:58
SPEAKER_01: or ready to be the MD.
32:00
SPEAKER_01: And I spent a lot of time coaching and putting my Did any
32:03
SPEAKER_01: of these key staff you brought in know that your vision was ultimately to sell
32:06
SPEAKER_01: the business?
32:21
SPEAKER_01: Initially, no.
32:22
SPEAKER_01: When we started to get offers, so I never went out to try and sell the business actually.
32:26
SPEAKER_01: We were on an acquisition spree.
32:27
SPEAKER_01: We just built our own group structure and we thought, okay, we're going to keep going.
32:32
SPEAKER_01: But the opportunity and the offer that came through,
32:34
SPEAKER_01: we had four offers actually in a short period of time.
32:37
SPEAKER_01: We're too good to ignore.
32:39
SPEAKER_01: You have to be careful and you have to be balanced about how and what you say
32:43
SPEAKER_01: to those individuals.
32:44
SPEAKER_01: But I always chose to be very honest.
32:47
SPEAKER_01: And I said to them, look, if this goes through, and I was 100% shareholder, this goes through.
32:52
SPEAKER_01: So if it goes through and works the way that it should on paper,
32:55
SPEAKER_01: I'll look after you and I'll make sure,
32:56
SPEAKER_01: you know,
32:57
SPEAKER_01: you're well positioned,
32:58
SPEAKER_01: you know,
32:59
SPEAKER_01: the negotiation that we have with the buyer strengthens your place
33:02
SPEAKER_01: in this new world.
33:03
SPEAKER_01: And, you know,
33:04
SPEAKER_01: I live by that and stuck to that and made sure they all had,
33:06
SPEAKER_01: you know, a really good kind of package and opportunity as they move forward.
33:09
SPEAKER_01: So, yeah, it's about, again, that's expectation setting.
33:13
SPEAKER_01: It's about you need the support for a sale process.
33:17
SPEAKER_01: I see it happen time and time again where
33:34
SPEAKER_01: Businesses try to start selling on and up or they'll go to market and they lose
33:38
SPEAKER_01: a few key clients during the negotiation process because this stuff takes six,
33:42
SPEAKER_01: 12 months to get a deal done.
33:43
SPEAKER_01: You know, a lot can happen.
33:44
SPEAKER_01: Then you have the earn out happening typically so that gets impacted.
33:48
SPEAKER_01: Exactly, exactly.
33:49
SPEAKER_01: So all of those things are like unforeseen,
33:52
SPEAKER_01: but if you get the support around you,
33:54
SPEAKER_01: It's the same with running the business as it is with selling the business.
33:57
SPEAKER_01: You get the right people, the right support.
33:59
SPEAKER_01: It can make it a lot easier.
34:00
SPEAKER_00: So what would a buyer look at a service business and what do they see that clients don't?
34:07
SPEAKER_00: What's one key thing behind the curtain that a client doesn't usually look at,
34:12
SPEAKER_00: but the buyer wants to know?
34:15
SPEAKER_01: So the client wants to see skillset,
34:17
SPEAKER_01: proficiency,
34:18
SPEAKER_01: case studies,
34:18
SPEAKER_01: and understanding that you get them and like you can solve them, right?
34:22
SPEAKER_01: So if that's more sales, more growth, whatever it might be.
34:25
SPEAKER_01: So for a client, they're very focused on the people and the kind of how you do things.
34:31
SPEAKER_01: From a buyer point of view, they want to look behind the curtain.
34:34
SPEAKER_01: So they want to understand like, what's your operating system?
34:37
SPEAKER_01: How have you differentiated yourself from every other competitor that's down the road?
34:42
SPEAKER_01: How do you sell?
34:43
SPEAKER_01: What's your value proposition?
34:46
SPEAKER_01: Daniel Ionescu.
35:03
SPEAKER_01: If it was just to stay as it is and they're buying that business,
35:06
SPEAKER_01: when they're looking at how much money they got out,
35:08
SPEAKER_01: they're like, right,
35:08
SPEAKER_01: if it stayed as it is, I get my money back in three years or four years or whatever.
35:13
SPEAKER_01: But if we manage to grow by 10%, we get it back in three years.
35:16
SPEAKER_01: And that's how they're stacking risks.
35:18
SPEAKER_01: So they're like, actually paying this amount of money for this business.
35:21
SPEAKER_01: And if we just stayed as it is,
35:24
SPEAKER_01: We're going to get our money back in three years and then we've still got the asset.
35:28
SPEAKER_01: Well, all of a sudden that becomes a very attractive thing and that's how they do it.
35:31
SPEAKER_01: So, um, you know,
35:33
SPEAKER_01: typically buyers in and around the agency space will allow themselves up to
35:37
SPEAKER_01: a maximum of like a five year,
35:39
SPEAKER_01: sometimes it's a six year payback term that tends to be,
35:43
SPEAKER_01: it can fluctuate if there's some technology and some other IP involved,
35:46
SPEAKER_01: but typically five years is about the top end.
35:50
SPEAKER_01: They just want something that's been well systemized and well structured.
35:53
SPEAKER_00: So here's a double-edged question then, Luke.
35:56
SPEAKER_00: What do founders assume that buyers will value,
36:00
SPEAKER_00: but actually that doesn't move the needle in terms of price?
36:05
SPEAKER_00: And then on the other side,
36:07
SPEAKER_00: what gets priced out because it can't be transferred once the founder moves on?
36:13
SPEAKER_01: Okay, there's a lot of things from like, Public visibility of the brand.
36:18
SPEAKER_01: So it actually, like a lot of founders spend a lot of time on building the business brand.
36:23
SPEAKER_01: And don't get me wrong, there is a small amount of goodwill attached to a brand.
36:27
SPEAKER_01: But in the agency space, especially or in the service space, it's minute.
36:32
SPEAKER_01: And actually when it comes to It's always just going to be on the hard and fast profitability.
36:37
SPEAKER_00: An accountant can't put that on paper either,
36:41
SPEAKER_00: is my experience,
36:42
SPEAKER_00: regardless of how well you're known and how much brand recall you have.
36:48
SPEAKER_01: Exactly, exactly.
36:49
SPEAKER_01: And arguably,
36:50
SPEAKER_01: you know,
36:50
SPEAKER_01: having a personal brand from a founder perspective,
36:53
SPEAKER_01: I think is an important thing that people must do these days.
36:56
SPEAKER_01: But it's not going to, it might get you more potential buyers to the table.
37:01
SPEAKER_01: But actually, it comes with risk, right, for the buyer.
37:03
SPEAKER_01: The buyer doesn't want to be buying your personal brand.
37:05
SPEAKER_01: And that's how all the leads are coming in.
37:07
SPEAKER_01: Because when you're gone, what does that mean for the business?
37:09
SPEAKER_01: So actually, there's a careful balance there as well.
37:13
SPEAKER_00: Yeah.
37:14
SPEAKER_00: So is that the part that, say, gets priced out because it can't be transferred?
37:19
SPEAKER_00: That was my second part of the question.
37:22
SPEAKER_01: Exactly, exactly.
37:23
SPEAKER_01: So, you know,
37:24
SPEAKER_01: the company I sold to,
37:25
SPEAKER_01: there was a couple of conversations because I was building my personal brand at
37:28
SPEAKER_01: the time I started building it of like, well,
37:30
SPEAKER_01: actually, can you not focus more on promoting the business than promoting yourself?
37:36
SPEAKER_01: And it was like a difficult one.
37:37
SPEAKER_01: So I was like, well,
37:37
SPEAKER_01: I think they're one and they're connected now because the way the world is moving,
37:41
SPEAKER_01: I believe you need a personal brand in order to funnel But it was
37:46
SPEAKER_01: a difficult balance.
37:47
SPEAKER_01: And I think there are almost two conflicting areas that fight against each other.
37:52
SPEAKER_00: I want to talk about people now, Luke,
37:54
SPEAKER_00: because you told me how you started hiring key people with key skills
38:00
SPEAKER_00: in key positions in order to develop the business and be able to sell it.
38:05
SPEAKER_00: And I've also read that you used the paid five-day test before making senior hires.
38:12
SPEAKER_00: Yes.
38:14
SPEAKER_00: Walk me through, how does that work?
38:17
SPEAKER_00: Because not a lot of people would be willing to, say,
38:20
SPEAKER_00: give up their job,
38:21
SPEAKER_00: work a notice, and then do a five-day pay test for you, and maybe it doesn't work.
38:28
SPEAKER_01: We would never ask them to serve notice before doing it.
38:31
SPEAKER_01: We ask them to take holidays.
38:33
SPEAKER_01: We asked them to take holiday, but be paid.
38:35
SPEAKER_01: So they were basically getting double pay.
38:36
SPEAKER_01: So they were being paid by their employer, but also paid by us.
38:39
SPEAKER_01: And we paid them based on their salary ask as well.
38:42
SPEAKER_01: So let's say,
38:43
SPEAKER_01: for example, they're currently on 40K, but they were asking for a 50K to come to us.
38:48
SPEAKER_01: We would pay them based on their ask.
38:51
SPEAKER_01: So that was always fair and balanced.
38:53
SPEAKER_01: But we typically would do, it would be for a more junior role, it could be a day.
38:58
SPEAKER_01: For a senior role or a board seat, it would be at least five days.
39:02
SPEAKER_01: Sometimes we did two.
39:03
SPEAKER_01: And the reason for that is I genuinely believe that the recruitment process
39:08
SPEAKER_01: across most industries is completely flawed.
39:10
SPEAKER_01: You know,
39:11
SPEAKER_01: everybody,
39:11
SPEAKER_01: and it's like that same relationship piece we talk about,
39:14
SPEAKER_01: everyone's got their best face on, everyone comes across well in those first stages.
39:18
SPEAKER_01: You know, if you're articulate, you can present yourself.
39:21
SPEAKER_01: If your CV looks good on paper, chances are you're going to get a job offer.
39:25
SPEAKER_01: And then you get accepted, but then actually, okay, what does the culture feel like?
39:28
SPEAKER_01: What's the alignment?
39:29
SPEAKER_01: What's it really like to work in this place day to day?
39:31
SPEAKER_01: And I think it's important from an employee point of view,
39:34
SPEAKER_01: But also important for the employer to know that actually
39:37
SPEAKER_01: that person can back up what they've said they can do on their CV and what they say
39:41
SPEAKER_01: in an interview.
39:42
SPEAKER_01: So for us, it was a complete game changer.
39:44
SPEAKER_01: And I think it's still something that I don't see businesses doing.
39:47
SPEAKER_01: But I think it's like it's one of these things.
39:49
SPEAKER_01: If I could own the process,
39:52
SPEAKER_01: maybe I should try and come up with a name for it and try and spec it
39:54
SPEAKER_01: into businesses because it makes a massive difference.
39:57
SPEAKER_01: We went from getting it right like one in two times to getting it right every time.
40:04
SPEAKER_01: You know, it made a huge difference.
40:06
SPEAKER_00: So tell me then about a hire where this test saved you from making,
40:12
SPEAKER_00: because I'm assuming you might have had people who say changed their mind
40:17
SPEAKER_00: after they felt that it wasn't a culture fit for them in your business,
40:21
SPEAKER_00: but it was also the other way around, possibly much more.
40:25
SPEAKER_01: Yeah, it happened.
40:26
SPEAKER_01: It happened both ways a few times.
40:28
SPEAKER_01: Majority was us.
40:29
SPEAKER_01: I would say what tended to happen at the end of the first day,
40:32
SPEAKER_01: we would sit down and have an honest conversation.
40:35
SPEAKER_01: And what we tried to do as well,
40:36
SPEAKER_01: the team became really efficient at this because they were used
40:39
SPEAKER_01: to seeing these people come in for these working days.
40:42
SPEAKER_01: And some of them have been through it themselves.
40:43
SPEAKER_01: Some of the legacy team members, maybe not.
40:45
SPEAKER_01: But as we went on and more and more people were coming in the same way,
40:48
SPEAKER_01: they would stress test those people.
40:50
SPEAKER_01: They knew, okay, They would be like, hey, should we go grab lunch or should we whatever?
40:54
SPEAKER_01: Or can you help me with something?
40:55
SPEAKER_01: Or what would you do in this situation?
40:57
SPEAKER_01: And the team became really good at trying to unpack really quickly
41:00
SPEAKER_01: because they knew this person might become their colleague.
41:02
SPEAKER_01: But also some people like buckled under that.
41:05
SPEAKER_01: They didn't like it.
41:05
SPEAKER_01: Like we had some people come at the end of the day and be like,
41:07
SPEAKER_01: I don't want to come back tomorrow.
41:08
SPEAKER_01: You know, and that's fine.
41:09
SPEAKER_01: Okay, no problem.
41:10
SPEAKER_00: You know, day two or day three, they didn't even go for the whole week.
41:13
SPEAKER_00: Yeah.
41:14
SPEAKER_01: Exactly, exactly.
41:15
SPEAKER_01: Whereas others were thriving.
41:16
SPEAKER_01: They're like, this is amazing.
41:17
SPEAKER_01: Why have I not had the best job experience I've ever been through?
41:22
SPEAKER_01: So for those that really thrived and enjoyed it, it was a great experience.
41:28
SPEAKER_01: And I then had no doubt they could come in and fit in with the team and fit in with
41:32
SPEAKER_01: the culture and the structure.
41:33
SPEAKER_01: One of the most important things to us at the time as a people business was
41:38
SPEAKER_01: that people could get on and that they could collaborate and that there was
41:42
SPEAKER_01: that kind of creative nature there.
41:43
SPEAKER_01: So it was one way of really establishing that really early on.
41:46
SPEAKER_01: And it's something we still do in my businesses now.
41:49
SPEAKER_01: I coach people to try and do it.
41:51
SPEAKER_01: So many founders They still lack often the courage to try it.
41:55
SPEAKER_01: But once they try it, they never go back.
41:56
SPEAKER_01: That's what I've found.
41:57
SPEAKER_01: If you actually give it a go and you start doing it,
42:00
SPEAKER_01: I don't know anybody that's put the system in place and then undone the system.
42:04
SPEAKER_01: So I think that says a lot for it.
42:05
SPEAKER_00: Look, you mentioned legacy hires and the people who are with you from the beginning.
42:10
SPEAKER_00: And especially when you have a super fast scale up
42:14
SPEAKER_01: process in five years like you've done.
42:18
SPEAKER_00: What's your reflection on why founders would promote loyal people
42:23
SPEAKER_00: into jobs they're not ready for?
42:26
SPEAKER_00: And on the other side,
42:28
SPEAKER_00: how do you tell somebody who's been with you for years that they aren't
42:32
SPEAKER_00: the right person for the next stage?
42:34
SPEAKER_01: It's a fantastic question because agencies and service businesses fall trap
42:39
SPEAKER_01: of this all the time.
42:41
SPEAKER_00: So yeah, most businesses would do, yeah.
42:45
SPEAKER_01: Just because you've got a Somebody there that you trust or you like or
42:49
SPEAKER_01: that you've built connection with and they've been in the seat for long enough.
42:52
SPEAKER_01: Yeah, are they actually good enough to do the role?
42:54
SPEAKER_01: And more often than not,
42:56
SPEAKER_01: there's a bias there that you feel like they deserve it or you might lose them
43:01
SPEAKER_01: if you don't give them the promotion or whatever.
43:03
SPEAKER_01: And that happens a lot.
43:05
SPEAKER_00: Or you owe them a debt because they were with you during certain tough
43:10
SPEAKER_00: and trying times when otherwise nobody believed in you besides them and the business
43:17
SPEAKER_00: as you grew.
43:19
SPEAKER_01: Exactly, exactly.
43:20
SPEAKER_01: And also there's an element of Whilst you're moving at pace,
43:25
SPEAKER_01: you need a job being filled and you think, well,
43:27
SPEAKER_01: it's much easier right now to take this quick road of promoting them
43:32
SPEAKER_01: and they'll be able to fill it and I can move on to solve other problems.
43:35
SPEAKER_01: What I've found through experience is that nine times out of 10, that's not going to work.
43:39
SPEAKER_01: So when you put people into management roles that were not It's going to upset
43:46
SPEAKER_01: the apple cart somewhere,
43:47
SPEAKER_01: maybe not the first month,
43:48
SPEAKER_01: maybe not the second,
43:49
SPEAKER_01: but at some point they might not support the team members the way
43:53
SPEAKER_01: that you wanted them to, or they might not be able to hit your expectations.
43:57
SPEAKER_01: And then all of a sudden you've got what was a good employee in the previous role,
44:02
SPEAKER_01: now a disgruntled or bad employee in the current role.
44:05
SPEAKER_01: And that becomes a real issue.
44:07
SPEAKER_01: Being able to do a formal interview process around a role is as much
44:11
SPEAKER_01: about protecting them as it is about protecting you and the business.
44:14
SPEAKER_01: Because if they're a good employee right now, that's just why you want to promote them.
44:18
SPEAKER_01: Just make sure that that next step is actually what they want, need,
44:23
SPEAKER_01: or what they've got the skill sets to grow into,
44:26
SPEAKER_01: even if they don't have it right now,
44:27
SPEAKER_01: because otherwise that good employee may end up disgruntled and gone.
44:32
SPEAKER_01: I mean, it's happened to me time and time again.
44:34
SPEAKER_01: My first two years at Digital Ethos, all of our management team came from within, all of them.
44:40
SPEAKER_01: And I think by the third year, pretty much all but one had left.
44:45
SPEAKER_01: Just to give you an idea.
44:46
SPEAKER_01: So it just didn't work because they were not experienced,
44:50
SPEAKER_01: mature enough,
44:51
SPEAKER_01: able to deal with the business that all of a sudden was double the size
44:54
SPEAKER_01: the following year.
44:56
SPEAKER_01: There just wasn't enough support structure there for my side to be able
44:59
SPEAKER_01: to train them and give them what they needed.
45:01
SPEAKER_01: So it's a double edged sword.
45:03
SPEAKER_01: If I had brought in somebody that had been and done it before and dealt with
45:07
SPEAKER_01: a team maybe double the size, And they came down and helped just grow into that.
45:12
SPEAKER_01: All of a sudden,
45:12
SPEAKER_01: by the time you get to that size, they're then ready for the next level themselves.
45:16
SPEAKER_01: So, you know, it's about planning and forward thinking.
45:19
SPEAKER_00: What about on the other side?
45:20
SPEAKER_00: Somebody who was with the business from the beginning applied for a senior role,
45:26
SPEAKER_00: but you knew that they weren't the right fit.
45:29
SPEAKER_00: How do you communicate that without, again,
45:32
SPEAKER_00: upsetting a key employee which has deep,
45:35
SPEAKER_00: strong knowledge of the business from day one a lot of the time?
45:40
SPEAKER_01: Yeah, it's a challenging situation.
45:42
SPEAKER_01: I've definitely been through it a few times.
45:43
SPEAKER_01: I think the only thing you can do is just be honest,
45:46
SPEAKER_01: transparent,
45:47
SPEAKER_01: be very clear about the job spec,
45:49
SPEAKER_01: what you're looking for,
45:50
SPEAKER_01: the interview process and why,
45:51
SPEAKER_01: that they can be involved in the interview process if,
45:54
SPEAKER_01: you know, because it's Daniel Ionescu, Millennial Masters.
46:20
SPEAKER_00: And have those people then started looking at jobs elsewhere and you found
46:28
SPEAKER_00: that sooner rather than later they then left your business because they held it
46:33
SPEAKER_00: against you that they weren't promoted to that role which you found they weren't fit
46:37
SPEAKER_00: for.
46:38
SPEAKER_01: Yes, it's happened multiple times.
46:39
SPEAKER_01: I think also early on, I was scared.
46:42
SPEAKER_01: When people would come to me and say, oh, I've got a job offer, I'm going to leave.
46:46
SPEAKER_01: I used to always try to counter to keep them.
46:48
SPEAKER_01: I'd be like, oh my God, no, they're too invaluable to what we do because you become very...
46:55
SPEAKER_01: It's your team.
46:56
SPEAKER_01: You have individuals that you've got your A players, you've got all of this.
47:01
SPEAKER_01: I put it back into a sport analogy with a football team.
47:04
SPEAKER_01: You've got a few people on the bench that you can rely on as well,
47:07
SPEAKER_01: but you've still got your starting 11, right?
47:09
SPEAKER_01: You've got your main players,
47:10
SPEAKER_01: and if one of them all of a sudden is like,
47:12
SPEAKER_01: hey, I'm off, I've got a transfer, you want to try and compete to keep them.
47:17
SPEAKER_01: But what I've found is, and I never do it now, I never try to counter, actually.
47:22
SPEAKER_01: If I haven't felt like they deserved a pay rise or that conversation along the way,
47:27
SPEAKER_01: and I'm very astute to this,
47:28
SPEAKER_01: I always try and stay ahead of the curve,
47:31
SPEAKER_01: and if that hasn't And they still then get an offer and they feel like it's
47:35
SPEAKER_01: the right thing for them to do.
47:36
SPEAKER_01: I always let them go with grace now.
47:38
SPEAKER_01: I don't try to retain people because I've found every time I've tried,
47:42
SPEAKER_01: they end up still unhappy six months later and they still end up leaving.
47:48
SPEAKER_00: Some people you can never make happy even if they're not the right fit for the next role.
47:54
SPEAKER_01: Exactly.
47:54
SPEAKER_01: Sometimes people serve, it's a business, right?
47:57
SPEAKER_01: It's not a It's not a marriage.
47:59
SPEAKER_01: There will be people that come in.
48:01
SPEAKER_00: Even in a marriage, you can take those decisions.
48:03
SPEAKER_00: That's true.
48:04
SPEAKER_00: That's true.
48:04
SPEAKER_00: That's true.
48:05
SPEAKER_01: You know, nothing's permanent in life, right?
48:07
SPEAKER_01: And, you know,
48:08
SPEAKER_01: some people serve a purpose for what you need today,
48:11
SPEAKER_01: but tomorrow they're not the right fit.
48:14
SPEAKER_01: And it's just as simple as that.
48:15
SPEAKER_01: And I think holding on too tight is a mistake as a founder.
48:19
SPEAKER_00: Now, look,
48:20
SPEAKER_00: I want to move on to AI because we mentioned earlier on in our chat that by
48:26
SPEAKER_00: the time you sold Digital Ethos, AI was just about to go mainstream.
48:31
SPEAKER_00: And ever since,
48:32
SPEAKER_00: I've seen you arguing that AI has weakened the old link between time and value
48:39
SPEAKER_00: that was in an agency.
48:42
SPEAKER_00: So what changes then first for a service business that still builds by the hour
48:47
SPEAKER_00: when AI comes into play now, your reflection four years in?
48:52
SPEAKER_01: Yeah,
48:53
SPEAKER_01: I think it's an important time for service businesses to flip to value and they have
49:00
SPEAKER_01: to sell based on value,
49:01
SPEAKER_01: at least optically, at least from a sales process perspective.
49:04
SPEAKER_01: So internally, they're able to then manipulate that time to keep margins healthy.
49:10
SPEAKER_01: Let's be honest, like AI...
49:11
SPEAKER_01: And then really, from an AI native perspective.
49:30
SPEAKER_01: I speak to hundreds of agencies every month.
49:32
SPEAKER_01: I'm like, how are you using AI?
49:45
SPEAKER_01: We've got Gemini, or we've got Claude, or we've got GPT.
49:49
SPEAKER_01: Well, we let them go off and do what they want,
49:51
SPEAKER_01: but there's not many still,
49:54
SPEAKER_01: which is,
49:54
SPEAKER_01: I think it's getting better with co-work and everything else that's come out,
49:57
SPEAKER_01: but people genuinely building proper systems and agentic layers into their roles,
50:03
SPEAKER_01: and that's where you get the efficiency from.
50:05
SPEAKER_01: Yeah, there has been a shift.
50:07
SPEAKER_01: I think the smaller agencies that are always firefighting
50:11
SPEAKER_01: and have probably got localized clients right now are at risk of cannibalization
50:16
SPEAKER_01: if not being killed off.
50:17
SPEAKER_01: I see so many agents struggling and it's a time where More than ever,
50:23
SPEAKER_01: independent agencies I think need to band together,
50:25
SPEAKER_01: which is why I've launched Unusual Group.
50:27
SPEAKER_01: It's a collective of independent agencies to bring them together into an ecosystem
50:32
SPEAKER_01: where they get back office support, consulting, methodology, and structure.
50:39
SPEAKER_01: Adapt to this current world and reality.
50:42
SPEAKER_00: Speaking of adapting then,
50:44
SPEAKER_00: if AI helps you complete the work faster in an agency or some parts of the work,
50:50
SPEAKER_00: why should the client pay the same amount?
50:54
SPEAKER_00: And because the client would expect, say, efficiency gains to be passed straight back, right?
51:02
SPEAKER_01: So the key with this is the efficiency gains allow the consultant or the team to do more work.
51:09
SPEAKER_01: It doesn't mean that they should be paid less for that work
51:12
SPEAKER_01: because they're just able to do more in the time that they have or in the value
51:18
SPEAKER_01: that they've proposed.
51:19
SPEAKER_01: So does that mean we can get to outcomes faster?
51:23
SPEAKER_01: Absolutely.
51:24
SPEAKER_01: Does it mean you're getting more bang for your buck?
51:28
SPEAKER_01: It's not about Daniel Ionescu.
51:46
SPEAKER_01: So that's actually leveled the playing field.
51:49
SPEAKER_01: If it was just one or two agencies that had access to this thing,
51:54
SPEAKER_01: then all of a sudden, yeah, maybe it would drive prices in one direction or another.
51:59
SPEAKER_01: But actually,
52:00
SPEAKER_01: because everybody has the same access,
52:01
SPEAKER_01: the same playing field,
52:02
SPEAKER_01: whatever, for the most part, Some of that gain is actually wiped off.
52:07
SPEAKER_01: So you need to do more in order to compete than ever before,
52:12
SPEAKER_01: which is where AI and the efficiency piece is absolutely critical.
52:15
SPEAKER_01: So pricing shouldn't change.
52:17
SPEAKER_01: If anything,
52:17
SPEAKER_01: I think in future,
52:20
SPEAKER_01: potentially prices should rise because in order to step beyond the kind
52:25
SPEAKER_01: of base level of what everybody's doing and using and AI tools,
52:30
SPEAKER_01: you need more creative output.
52:31
SPEAKER_01: You need more human in the loop.
52:33
SPEAKER_01: So I just think what's going
52:35
SPEAKER_01: to happen is it'll be more senior level agency individuals supported by technology,
52:40
SPEAKER_01: which is nothing new, but obviously the AI agentic piece is new.
52:45
SPEAKER_01: And the results can be faster.
52:47
SPEAKER_00: Is that why you now recommend outcome based pricing?
52:53
SPEAKER_00: Exactly.
52:54
SPEAKER_00: And even though you use AI or not,
52:57
SPEAKER_00: but clearly everybody does and every agency does,
53:00
SPEAKER_00: the advantage is in how you help a client to reach their goals.
53:06
SPEAKER_00: And does that not make, say, for example, I hear a lot about revenue share deals with clients.
53:12
SPEAKER_00: Where do they become dangerous?
53:14
SPEAKER_01: Yeah, I've never been a huge fan of revenue or performance-based pricing,
53:18
SPEAKER_01: although having a component of it as a bonus or an uplift is attractive, of course.
53:23
SPEAKER_01: But I always have favored fair retainers that give you that ballast as an agency.
53:28
SPEAKER_01: I think that's really how you can build stability.
53:31
SPEAKER_01: You can hire good people.
53:32
SPEAKER_01: You can train your people, all of those things.
53:34
SPEAKER_01: But it always comes with a caveat.
53:36
SPEAKER_01: Obviously, a lot of bigger brands like to do some performance-based pricing.
53:40
SPEAKER_01: I think if you can find a blend, that's the way to do it.
53:43
SPEAKER_01: But look, value-based pricing, again, is nothing new.
53:46
SPEAKER_01: It's just how it's positioned and actually delivered that matters.
53:51
SPEAKER_01: If somebody's looking for a 10% growth in sales,
53:54
SPEAKER_01: it's like, okay,
53:55
SPEAKER_01: they probably care less now than they did before about how you're doing it,
54:01
SPEAKER_01: what channels it is.
54:03
SPEAKER_01: Historically,
54:04
SPEAKER_01: agencies would go in and they would pitch channel by channel and they'd educate
54:07
SPEAKER_01: the client.
54:08
SPEAKER_01: All of that's a bit done.
54:09
SPEAKER_01: It's like, okay, well, So actually, how do we genuinely grow your revenue?
54:13
SPEAKER_01: And what does that look like?
54:15
SPEAKER_01: And these are the parameters in order to get there.
54:17
SPEAKER_01: So yeah, it's an interesting one.
54:20
SPEAKER_01: And look, it's dynamic.
54:21
SPEAKER_01: And I have to say, There's a lot of change all the time.
54:24
SPEAKER_01: And some of the opinions on this is shifting and changing as well all the time
54:28
SPEAKER_01: because, yeah, it's a fascinating time to be alive, isn't it?
54:30
SPEAKER_00: You're allowed to change your mind as well as you go through this process.
54:34
SPEAKER_00: Yeah.
54:34
SPEAKER_00: So if we're going to be marking a point in time now in summer 2026,
54:40
SPEAKER_00: is AI making agencies more profitable or is helping clients squeeze them harder?
54:47
SPEAKER_01: So it's a double answer.
54:50
SPEAKER_01: Agencies that are genuinely agentic layers and AI native are 14% more profitable at
54:59
SPEAKER_01: the moment than agencies that aren't using or aren't yet AI native.
55:04
SPEAKER_01: So there's already a clear differentiator.
55:06
SPEAKER_00: How do you define AI native for an agency then?
55:11
SPEAKER_01: You've
55:15
SPEAKER_01: actually built agentic agents or systems into the way that you operate.
55:20
SPEAKER_01: So it's like an operating layer within your business for efficiency.
55:24
SPEAKER_01: So that makes a big difference.
55:26
SPEAKER_01: So that's agents.
55:28
SPEAKER_01: Structure across the business,
55:30
SPEAKER_01: you've probably got an agency brain in place where you've trained the agency,
55:36
SPEAKER_01: the model to understand your business, understand your clients.
55:39
SPEAKER_01: You've got projects or GPTs in place for each of your clients to understand that client.
55:45
SPEAKER_01: You've got a lot of automations running through.
55:48
SPEAKER_01: And more importantly,
55:49
SPEAKER_01: you've got The agentic layer actually sense checking the work you're doing as well.
55:54
SPEAKER_01: So you've got that, that each role has like a co-agent there helping you to be more efficient.
56:01
SPEAKER_01: That's something that we're seeing.
56:02
SPEAKER_01: And if you can do that well,
56:04
SPEAKER_01: and all the big agencies are moving towards it,
56:06
SPEAKER_01: I think Omnicom spent 1.2 billion already in building out their own I mean,
56:11
SPEAKER_01: it's unbelievable,
56:12
SPEAKER_01: but on a smaller scale as well,
56:13
SPEAKER_01: I see some agencies with 20 people doing the most incredible work with Claude.
56:17
SPEAKER_01: Like they've built in all of these amazing sub-agents,
56:20
SPEAKER_01: they've got stuff going on from this,
56:22
SPEAKER_01: like a co-CEO basically built out as an agent that's doing loads of work all
56:26
SPEAKER_01: the way down to admin-based stuff.
56:29
SPEAKER_01: Like if you can genuinely get that efficiency there,
56:32
SPEAKER_01: you can gain back So they've gone from a healthy 20 plus margin to low teens
56:36
SPEAKER_01: and that's only going to get worse and worse.
57:01
SPEAKER_00: So you said about the agencies who are creating this operating system,
57:05
SPEAKER_00: having an AI native approach to their clients,
57:11
SPEAKER_00: but when you said the same tools are available to everybody,
57:16
SPEAKER_00: I think a lot of clients are testing,
57:18
SPEAKER_00: you know, having agents in place and doing some of these things.
57:21
SPEAKER_00: You can do some good marketing outputs and some good outputs, agency-level outputs.
57:46
SPEAKER_01: What is lacking is the human in the loop experience and that strategic experience
57:53
SPEAKER_01: across multiple campaigns, sector campaigns.
57:56
SPEAKER_01: You still need, and you still need the agency depth and breadth of different skill sets.
58:02
SPEAKER_01: I think one of the beauties of agencies has always been
58:05
SPEAKER_01: that you've got multiple brains across different disciplines all in one place.
58:09
SPEAKER_01: And that creativity that that creates is really hard to replicate.
58:13
SPEAKER_01: Even if you had 50 or 100 agents all trying to do it,
58:17
SPEAKER_01: They all need prompts and they all need guides in order to work properly.
58:22
SPEAKER_01: Whereas humans can pull that stuff together and say, you know, it's about the strategic piece.
58:27
SPEAKER_01: Let's see where we are in a few years time, but a need to have that hybrid.
58:30
SPEAKER_00: In a few months time, who knows where we're going to be by the end of 2026.
58:33
SPEAKER_00: This is moving really quickly.
58:35
SPEAKER_01: It is.
58:36
SPEAKER_01: It is.
58:36
SPEAKER_01: It is.
58:37
SPEAKER_00: Now, Luke,
58:37
SPEAKER_00: I want to get a bit introspective in this final part of our chat because I want
58:43
SPEAKER_00: to hear from you what came after the sale,
58:47
SPEAKER_00: especially when it was a big headline number, eight figures, as you said.
58:53
SPEAKER_00: You spend years building a business that you're trying to make it less
58:58
SPEAKER_00: and less dependent on you.
59:00
SPEAKER_00: So did it feel the first few months,
59:04
SPEAKER_00: not after the sale,
59:06
SPEAKER_00: but during the earn-out,
59:09
SPEAKER_00: because you still had a lot of pressure on to bring the numbers up,
59:13
SPEAKER_00: and then immediately after, once you...
59:16
SPEAKER_00: You wouldn't finalize your role, and you wouldn't go into the office every day.
59:20
SPEAKER_01: Yeah, so it was multi-layered, I would say.
59:23
SPEAKER_01: So actually, the event itself, when it happened, was a complete kind of anticlimax in many ways.
59:29
SPEAKER_01: It sounds bizarre.
59:31
SPEAKER_01: I've actually just written a book,
59:33
SPEAKER_01: which will be out early next year, and I talk about it a bit in there.
59:35
SPEAKER_01: But effectively, we'd built up really good cash reserves.
59:39
SPEAKER_01: We had a couple of million quid in cash in the bank.
59:42
SPEAKER_01: And I think I already felt like I'd earned or
59:47
SPEAKER_01: The sale process took about 14-15 months as well.
59:50
SPEAKER_01: So I had a long time kind of sitting with the figure.
59:54
SPEAKER_01: And then when the figure finally came,
59:55
SPEAKER_01: it was a bit of an anticlimax and a bit weird because it was a Monday afternoon.
59:58
SPEAKER_01: I was still at work.
59:59
SPEAKER_01: I had to go straight into a big presentation with the team literally like an hour
1:00:05
SPEAKER_01: after the money hit my case.
1:00:06
SPEAKER_01: It was just the most bizarre.
1:00:07
SPEAKER_01: They didn't know.
1:00:08
SPEAKER_01: Couldn't tell them at the time.
1:00:09
SPEAKER_01: I was like, Jesus.
1:00:10
SPEAKER_00: So that's another key.
1:00:11
SPEAKER_00: While you were for 15 months, you were negotiating in the background.
1:00:16
SPEAKER_00: Maybe one or two of your key senior people knew that.
1:00:19
SPEAKER_00: And otherwise the whole team was unaware of what you were working towards.
1:00:25
SPEAKER_01: Correct.
1:00:26
SPEAKER_01: Correct.
1:00:26
SPEAKER_01: So you have to,
1:00:27
SPEAKER_01: you know,
1:00:27
SPEAKER_01: keep on a brave face and keep pushing,
1:00:29
SPEAKER_01: you know, because you don't know whether the deal is going to close or not as well.
1:00:31
SPEAKER_01: So it's important to keep the structure and keep the stability.
1:00:35
SPEAKER_01: After that, You know, the first few months were highly pressured.
1:00:39
SPEAKER_01: And I'd also had a couple of periods of quite bad burnout during the build
1:00:42
SPEAKER_01: because it was just always on.
1:00:45
SPEAKER_01: You know,
1:00:45
SPEAKER_01: I was working relentlessly seven days a week,
1:00:48
SPEAKER_01: every week for years, not just for months, but for years nonstop.
1:00:53
SPEAKER_01: Wasn't taking breaks, wasn't taking holidays, and I had some bad burnout.
1:00:56
SPEAKER_01: So I felt like if I wasn't still holding on quite tight in those first few months,
1:01:00
SPEAKER_01: like the wheels on the bus might come off and I'm like,
1:01:02
SPEAKER_01: you know, I need to justify the sale.
1:01:05
SPEAKER_01: That's how I felt, probably wrongly so in 2020.
1:01:08
SPEAKER_01: So the first few months were very pressured.
1:01:11
SPEAKER_01: And I really liked the team that I'd sold into.
1:01:14
SPEAKER_01: So I spent a lot of time, felt comfortable.
1:01:17
SPEAKER_01: I was in a co-CEO role.
1:01:18
SPEAKER_01: The other CEO was excellent, spent a lot of time getting to know him.
1:01:21
SPEAKER_01: And over time, that helped me.
1:01:22
SPEAKER_01: And then we kind of went on this fun journey of trying to grow
1:01:26
SPEAKER_01: the business together, trying to change it.
1:01:27
SPEAKER_01: The structure changed a lot.
1:01:29
SPEAKER_01: Within four months of selling, we completely rebranded.
1:01:32
SPEAKER_01: The business completely that I built disappeared from the public eye.
1:01:36
SPEAKER_01: We became this global entity.
1:01:38
SPEAKER_01: Which I'd sold into.
1:01:39
SPEAKER_01: And all that legacy,
1:01:40
SPEAKER_01: all that work kind of just dwindled away,
1:01:42
SPEAKER_01: you know, on all the social media accounts just disappeared.
1:01:45
SPEAKER_01: That side of it was quite emotionally draining and strange, bizarre.
1:01:50
SPEAKER_01: I knew it was, I think it happened quicker than I expected.
1:01:55
SPEAKER_01: And then I was in this new world with 1300 colleagues.
1:01:58
SPEAKER_01: All my team members, you know, were in this new world.
1:02:01
SPEAKER_01: They were in Brazil, you know, in South America, completely different.
1:02:05
SPEAKER_01: Kind of way of operating and doing things.
1:02:07
SPEAKER_01: And yeah, it was bizarre, but an enjoyable process, I have to say, overall.
1:02:12
SPEAKER_01: And being part of that bigger entity comes with challenges,
1:02:16
SPEAKER_01: but also I learned so much by having exposure to that structure.
1:02:19
SPEAKER_00: And the things that they did really well was Another Apprentice contestant as well,
1:02:24
SPEAKER_00: Nick Holzer also had a similar experience when he sold his startup to Samsung and
1:02:29
SPEAKER_00: then moved on into a much more bigger global company and operating teams globally
1:02:37
SPEAKER_00: and delegating it.
1:02:38
SPEAKER_00: But you touched there on a point about how the company changed name,
1:02:42
SPEAKER_00: there was a new CEO, a totally different identity.
1:02:45
SPEAKER_00: But what part of your identity, Luke, disappeared with the company sales?
1:02:51
SPEAKER_01: Yeah, a lot.
1:02:52
SPEAKER_01: It's funny, you know, as a founder, you peg yourself to your business, don't you?
1:02:57
SPEAKER_01: It becomes a big part of like... You
1:02:59
SPEAKER_00: become it.
1:02:59
SPEAKER_00: It becomes your identity, yeah.
1:03:01
SPEAKER_01: It does.
1:03:02
SPEAKER_01: It does.
1:03:02
SPEAKER_01: And actually,
1:03:03
SPEAKER_01: as an entrepreneur,
1:03:04
SPEAKER_01: it was the thing that I'd built that I'd been most successful at.
1:03:08
SPEAKER_01: And it gave me that kind of validation, internal validation, external validation.
1:03:12
SPEAKER_01: I'd won awards.
1:03:13
SPEAKER_01: I'd done all these things.
1:03:14
SPEAKER_01: And all of a sudden, the brand's dead.
1:03:16
SPEAKER_01: It's gone.
1:03:17
SPEAKER_01: So there is this kind of mourning process that you go through.
1:03:22
SPEAKER_01: Trying to re-find purpose.
1:03:24
SPEAKER_01: It is a really strange thing to go through.
1:03:25
SPEAKER_01: But you just have to keep reminding yourself that, again, nothing is permanent.
1:03:29
SPEAKER_01: It is part of the process.
1:03:31
SPEAKER_01: And I've always been entrepreneurial.
1:03:33
SPEAKER_01: I've had multiple businesses now.
1:03:35
SPEAKER_01: So I knew I would go again and I'd do something and it's just part of the story.
1:03:39
SPEAKER_01: So you just have to keep reminding yourself that.
1:03:41
SPEAKER_01: But it doesn't make it easy.
1:03:42
SPEAKER_01: It's a strange thing.
1:03:43
SPEAKER_01: You're very grateful and humble and all of those things about the fact
1:03:47
SPEAKER_01: that you've managed to achieve something that most people do not.
1:03:51
SPEAKER_01: But there is some pain through the process as well.
1:03:54
SPEAKER_00: What about the freedom afterwards?
1:03:56
SPEAKER_00: Did it feel as good as you expected with,
1:03:59
SPEAKER_00: you know, eight figures in the bank into a massive global company?
1:04:04
SPEAKER_00: Your day-to-day pressures in a way disappeared or they were still there,
1:04:08
SPEAKER_00: but they were distributed across a larger team.
1:04:13
SPEAKER_00: Was it as good as people think?
1:04:16
SPEAKER_00: You clearly didn't just go and play golf for the rest of your life or skiing,
1:04:21
SPEAKER_00: although you did move to Portugal and I'm going to ask you about that.
1:04:24
SPEAKER_01: Yes, I did certain things.
1:04:26
SPEAKER_01: So I leveled up certain aspects of my life as you would expect.
1:04:30
SPEAKER_01: You know, I had...
1:04:31
SPEAKER_01: Maybe slightly more expensive,
1:04:33
SPEAKER_01: not always better holidays,
1:04:34
SPEAKER_01: and moved house,
1:04:35
SPEAKER_01: all those things that go with it,
1:04:37
SPEAKER_01: which is great, but they're all kind of materialistic.
1:04:40
SPEAKER_01: The reality of the spiritual side of it is that I was still working really hard.
1:04:44
SPEAKER_01: The company I'd sold into expected a pound of flesh because they'd spent a lot
1:04:48
SPEAKER_01: of money and they wanted a lot of my time, hours, and attention and focus.
1:04:53
SPEAKER_01: You know, wouldn't allow me to take my foot off the gas and neither would I anyway.
1:04:58
SPEAKER_01: So it felt for three years after the exit, like still full throttle.
1:05:03
SPEAKER_01: It didn't feel,
1:05:05
SPEAKER_01: obviously I had numbers in the bank,
1:05:07
SPEAKER_01: but actually in the end,
1:05:09
SPEAKER_01: when you have that type of capital, you have to spread it across lots of accounts.
1:05:12
SPEAKER_01: You have to invest it.
1:05:13
SPEAKER_01: You have to make a lot of decisions, which again are quite heavy things to try and figure out.
1:05:18
SPEAKER_01: They're just different things you have to work out.
1:05:21
SPEAKER_01: So if anything,
1:05:22
SPEAKER_01: I felt busier than So when I came out of that I had a few months
1:05:28
SPEAKER_01: and probably only allowed myself,
1:05:29
SPEAKER_01: probably too dumb and too young to not do something again.
1:05:32
SPEAKER_01: But I should have had probably longer in hindsight.
1:05:34
SPEAKER_01: But I had a few months kind of moving to Portugal,
1:05:38
SPEAKER_01: taking in some more stuff for me and trying to slow down a little bit.
1:05:42
SPEAKER_01: And then I just get itchy feet.
1:05:44
SPEAKER_01: I'm just entrepreneur.
1:05:45
SPEAKER_01: I think, again, we talk about purpose.
1:05:46
SPEAKER_01: I think deep down, I do a lot of soul searching these days.
1:05:50
SPEAKER_01: A lot of my purpose comes from what I do.
1:05:52
SPEAKER_01: It's a big part of who I am.
1:05:54
SPEAKER_01: And if I'm not doing something, then...
1:06:01
SPEAKER_00: Would you say then that selling a business leaves you feeling less successful than building it?
1:06:09
SPEAKER_01: Yes.
1:06:09
SPEAKER_01: I think the thing that probably all founders want is an end result, right?
1:06:13
SPEAKER_01: And that's great.
1:06:14
SPEAKER_00: But like most things in life... Or you imagine the end result.
1:06:17
SPEAKER_01: Imagine it.
1:06:18
SPEAKER_01: But like most things in life,
1:06:19
SPEAKER_01: when you finally reach the top or you get to something,
1:06:23
SPEAKER_01: it's not quite what you thought it was going to be.
1:06:25
SPEAKER_01: And the grass often feels a bit greener on the other side.
1:06:28
SPEAKER_01: So enjoying the process and actually enjoying the build and the day-to-day is all
1:06:32
SPEAKER_01: that matters, right?
1:06:33
SPEAKER_01: And You know, having a bit more money or a bit more freedom and exposure.
1:06:37
SPEAKER_01: Don't get me wrong, money gives you lots of choices, which is the one great thing about it.
1:06:41
SPEAKER_01: But fundamentally as a person, It doesn't change.
1:06:45
SPEAKER_01: If you're chasing something for something about yourself, that's never going to change.
1:06:50
SPEAKER_01: I've found in my blog,
1:06:52
SPEAKER_01: I don't think it would matter how many exits or how many numbers on a bank account,
1:06:59
SPEAKER_01: how many zeros.
1:07:01
SPEAKER_01: I need to build stuff for just my own psyche and the way that I work and the way that I do.
1:07:06
SPEAKER_01: That is just what I am.
1:07:08
SPEAKER_01: That's what I've learned by myself through the process.
1:07:11
SPEAKER_01: I get a lot of my happiness from that process.
1:07:14
SPEAKER_01: I think the end result is that I'm just building again.
1:07:18
SPEAKER_01: That's unusual group.
1:07:21
SPEAKER_01: That's unusual.
1:07:23
SPEAKER_00: What are you trying to avoid repeating this time around?
1:07:27
SPEAKER_00: Which is not your first,
1:07:28
SPEAKER_00: not your second,
1:07:29
SPEAKER_00: not your third business,
1:07:31
SPEAKER_00: but your business after you had the luxury of time and money
1:07:37
SPEAKER_00: to slow down should you want.
1:07:40
SPEAKER_01: Yeah,
1:07:40
SPEAKER_01: I've been fortunate now that what the one thing with the capital allows you to do is
1:07:45
SPEAKER_01: to try and avoid some of those mistakes that you have to go through.
1:07:49
SPEAKER_01: Although certainly those Those periods of having to do things on your own.
1:07:53
SPEAKER_01: And instead with unusual,
1:07:55
SPEAKER_01: I've been able to hire really good operators and people into the business early on.
1:07:58
SPEAKER_01: So even before we launched, we had 10 staff to give you an idea.
1:08:03
SPEAKER_01: So I built the structure that I dreamed I wanted.
1:08:07
SPEAKER_01: And being able to hire these people and then we started bringing in clients.
1:08:11
SPEAKER_01: So very different to anything I've been able to do before.
1:08:13
SPEAKER_01: So that is a luxury, but it's certainly given me the freedom to then still stay strategic.
1:08:18
SPEAKER_01: Don't get me wrong, I still feel like there's days where I'm like, what am I doing?
1:08:21
SPEAKER_01: 14, 15 hour days, I should be out enjoying the Portuguese sunshine.
1:08:24
SPEAKER_01: But I'm not always doing that.
1:08:26
SPEAKER_01: But again, it's about that purpose piece.
1:08:28
SPEAKER_01: But I'm now connected to five businesses and I don't operate any of them.
1:08:33
SPEAKER_01: I own of or all of And it's a fascinating thing.
1:08:38
SPEAKER_01: I love doing that.
1:08:39
SPEAKER_01: I love working with founders.
1:08:40
SPEAKER_01: I love working, trying to solve the problems that happen in day-to-day business.
1:08:45
SPEAKER_01: And I'm able to do that now at scale and in a completely different way.
1:08:48
SPEAKER_01: I always try and remind myself it's a privilege, isn't it?
1:08:50
SPEAKER_01: To have these opportunities and these problems and these things to deal with.
1:08:55
SPEAKER_01: It's a privilege to do it.
1:08:57
SPEAKER_00: Yeah, that's where I am.
1:08:58
SPEAKER_00: Speaking of privileges then, Luke,
1:09:00
SPEAKER_00: to be able to do all this,
1:09:03
SPEAKER_00: what sacrifices you've had to make to be where you are today and be
1:09:08
SPEAKER_00: in this position, which most people would envy?
1:09:11
SPEAKER_01: I mean, yeah, it's been a ride.
1:09:14
SPEAKER_01: So I mentioned the burnout stages,
1:09:17
SPEAKER_01: which have been absolutely dreadful,
1:09:20
SPEAKER_01: you know, to the point where it genuinely was like in a deep hole of stress.
1:09:28
SPEAKER_01: I left home at 16.
1:09:30
SPEAKER_01: I've fended for myself since then.
1:09:32
SPEAKER_01: Lost my mum.
1:09:33
SPEAKER_01: There's been lots of stuff along the way.
1:09:37
SPEAKER_01: I've had the three exits,
1:09:38
SPEAKER_01: which sounds great and really impressive,
1:09:40
SPEAKER_01: but I've had four other businesses along the way that didn't work out,
1:09:44
SPEAKER_01: a couple of which landed me in quite severe debt that I then had to pay off.
1:09:48
SPEAKER_01: There's been lots of periods
1:09:51
SPEAKER_01: Probably more periods of failure or falling backwards than falling forwards.
1:09:55
SPEAKER_01: And I think it's important to note that because when you see the highlight reel,
1:10:00
SPEAKER_01: it always looks like just a linear line straight to success and earning money.
1:10:05
SPEAKER_01: But that's certainly not the case.
1:10:07
SPEAKER_01: And I think also that's why I asked this question.
1:10:10
SPEAKER_01: It's the complete opposite of that.
1:10:14
SPEAKER_01: And even now, my partner often says to me, Why are you still working like you're broke?
1:10:22
SPEAKER_01: You still work like every day.
1:10:24
SPEAKER_01: And I just don't know any other way, actually.
1:10:28
SPEAKER_01: I think it's this fear of,
1:10:30
SPEAKER_01: so I left home so young and I've had to fend for myself from a very early age,
1:10:34
SPEAKER_01: this fear of like, it could all be taken away.
1:10:37
SPEAKER_01: I still don't feel safe or completely comfortable.
1:10:41
SPEAKER_01: So I'm always chasing and always striving.
1:10:43
SPEAKER_01: And yeah, I don't know if that will ever end.
1:10:46
SPEAKER_01: But that's just part of who I am.
1:10:47
SPEAKER_01: So it feels that part of it does feel like a struggle.
1:10:50
SPEAKER_00: So if there's one lesson you want someone running a growing service business to take
1:10:56
SPEAKER_00: from this conversation today, what would that be, Luke?
1:11:00
SPEAKER_01: I think the key message would be to make sure those early adopters,
1:11:06
SPEAKER_01: early people into your business that you're hiring carefully and smartly,
1:11:10
SPEAKER_01: but also that you are definitely Successfully.
1:11:13
SPEAKER_01: And also from,
1:11:14
SPEAKER_01: we touched on all sorts in this,
1:11:16
SPEAKER_01: on this call,
1:11:16
SPEAKER_01: but like the recruitment process,
1:11:18
SPEAKER_01: like try it, like stress test people before you bring them in.
1:11:21
SPEAKER_01: Again, you can't get it right every time,
1:11:23
SPEAKER_01: but with the right model, you can certainly release a lot of risk there.
1:11:28
SPEAKER_01: And also just Having been through those burnouts,
1:11:33
SPEAKER_01: arguably a lot of people when I say that, they're like, yeah, but you got an exit.
1:11:36
SPEAKER_01: It's like, yeah, I did.
1:11:37
SPEAKER_01: But I'm lucky that I did.
1:11:38
SPEAKER_01: I'm lucky that I had the leadership team around me at the time
1:11:41
SPEAKER_01: because my burnout would have crippled the business otherwise.
1:11:44
SPEAKER_01: If it had all been on my shoulders when I had those burnout stages,
1:11:48
SPEAKER_01: the business would have no way been able to be sellable in the end.
1:11:51
SPEAKER_01: It's only because of the structure I put in place before that happened, thank God.
1:11:55
SPEAKER_01: That we're able to get there.
1:11:57
SPEAKER_01: So, you know, build the right people around you, build the right systems and processes.
1:12:01
SPEAKER_01: And one thing from a,
1:12:03
SPEAKER_01: if you want to build an asset that's saleable,
1:12:06
SPEAKER_01: always be thinking in the mind of the buyer.
1:12:09
SPEAKER_01: Imagine you're going to buy your business and people don't do this enough.
1:12:13
SPEAKER_01: Put yourself on the other side of the table.
1:12:15
SPEAKER_01: What would you see that would be a risk?
1:12:18
SPEAKER_01: And the chances are,
1:12:19
SPEAKER_01: if you're honest with yourself,
1:12:19
SPEAKER_01: you'll be able to departmentalize what you need to do in your own business
1:12:23
SPEAKER_01: to make it more attractive.
1:12:24
SPEAKER_00: That's a very interesting point to wrap up our conversation today, Luke.
1:12:30
SPEAKER_00: Because surrounding yourself with the right people and also letting go of people
1:12:36
SPEAKER_00: when the stages move on are significant.
1:12:39
SPEAKER_00: Thanks for tuning in all the way to the end of this episode.
1:13:02
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1:13:04
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1:13:05
SPEAKER_00: Catch you next week.