Roderick Cameron has significant experience of business exits and has been advising businesses of all sizes. In this interview, Darryl Bates-Brownsword talks with Roderick about business exits and his advice to business owners.
An actionable business strategy is essential if you want to be clear about where you are going and how you plan to get there. Includes SWOT Analysis, Crisis Strategy Assessment, MOST Analysis, Detailed Video Guide and a Quick Reference Guide.
Darryl: So today, I’m talking to Roderick Cameron from Boardroom Advisors. Rody has been an advisor for the last 15 years working with small, medium and fast growing businesses. He’s got a background as a legal and legal expertise and he’s not your typical lawyer. He’s got a great business development history there as well. So, Roddy, over to you, great to have you with us today. Why don’t you give us a bit of background of yourself and then we’ll take it from there.
Roddy: Thanks for the invitation Darryl. Right, quickly my history was I was a lawyer in my first career. I’ve seen deals and M&A from the legal perspective. I’ve run communications campaigns for big IPOs, M&As across borders including working on the Betfair IPO, worth 1.3 billion at the time. So, read and understand at a macro level, what the dynamics are around valuations and deal processes. A mastery held in the last 10 years or so in around the SMEs space helping people as they go, my growth journey either to just to build their business for their income but typically it always makes sense to focus on how to plan for an exit, building valuations towards the exit and that’ s being of course a range of sectors achievement as you say for scaling business are what. Been FinTech’s strategy officer for the last couple of years of experience. That’s quite an experience in that piece of environment. So what a broad range of experiences.
Darryl: Great! So it tells us, as you say, broad range of experiences across multiple industries and also multiple sizes of businesses from the start up.
Darryl: So, have you found any differences? What differences have you found between the various industries and I guess, stages of the journey that the businesses are on?
Roddy: I think the similarity is that every business thinks that it’s special and unique on its own way and the frank truth is, of course you are. Of course you’re special, unique when you’re growing but you’re also in a big world, with lots of other people and businesses at the same stage and typically experiencing the same problems. The problems do tend to be always in that bucket of management, of managing human relations. Yes, it’s difficult to build a big power station and run these big capital intensive businesses but most businesses it’s all around how you manage and unlock potential of your people or indeed inhibit the potential of your people.
So, I’ll just talk through some clear, the stages of growth where it’s clear an extra layer of management comes in. Basically, just hiring your first person is really difficult — if you’re a solepreneur. Just getting that right often doesn’t work. See, you saw one income stream and suddenly you’re going to feed two mouths not one.
Darryl: When you’re one man band and you’ve got your first hire –you’ve just doubled your employees, whereas when you’ve got 10 people and hire another 1, you only increase your headcount by 10percent. So that’s first one is always a toughy.
Roddy: First one is a toughy and when you get through those first one, two, three. [3:40] Typically you got a tight little group quite efficient because you’re all within reach. Everyone knows what everyone is doing. I mean quite quickly, you get to the stage where there’s just too many conversations in the room. Always taught by that ‘seven is quite an ugly number’ for that. Can be a bit more, a bit less. But suddenly for one person to be running, in a big corporation we’re running 12 reports is slightly crazy.
I know a lot of businesses now trying to flat hire that way and ‘I can’t for the lord of me get the logic buying that.’ Because just the number of conversational loops going on becomes very difficult.
So that’s next layer of hiring the first person and grown the gene is that next point, is that real step up point which is actually ‘I need someone else to help me manage’. Someone else to take that responsibility, someone to actually take all of that off my hand and ideally be better at it than I am.
Darryl: Sure, and what is your experience as to the best time or the best number of people when you need to introduce that management person or that next layer. If you’re bringing employees in, I’m guessing the first employees are, you’re their boss effectively, you’re asking them to help you out with typically the stuff you don’t like doing, but where is that point? Is there a tipping point when you need to introduce some management layer?
Roddy: Every industry has slightly different needs and staffing and fractional ownership and all the rest. But if you’ll look into the statistics. Very few businesses get to a million pounds of turnover. Very few make it through the pyramid, if you like, is incredibly flat in terms of size of every business. And I think one of the reasons for that is, if you take a rule of thumb of so between eighteen hundred (1800) or twenty thousand (20000) per head.
So, let’s make the math really easy for me–my homeschooling math teacher. A hundred thousand a head at a million you probably got 10ish employees, so it is around that ten twelve people but those conversations start to get a little difficult unless you’ve really worked on breaking that down.
If you’ve got twelve direct reports you’re in trouble and that so people tend to run with that so the odds of fifteen (15) sixteen (16) and that’s where the ball start getting drops and growth getting a bit stuck. So around that eight (8) to fifteen (15) and there’s quite a loose parameters but there’s a physical sense in the business from knowing what everyone’s doing everyday and suddenly you just can’t cope up..
Darryl: Yeah, so that’s a really interesting point Roddy. So, are you suggesting that there’s some sort of correlation that flexible eight (8) to sixteen (16) number of people in the business and the fact that so many businesses don’t get past a million pounds in revenue?
Roddy: Yes, I think that’s, whether you think of it in terms of the number of people or thinks about the number of revenue, there’s a barrier to growth. Some Sicialian place which could simply be around the ability to communicate with that many people and hold that many thoughts in one person — the boss, the founders head. The song described it as the “Let go gap”. Because the founders, she knows everything about the business, she’s done every job and so just the ability to let that go can be quite tough and inhibiting on the business’ growth
Darryl: Yeah, There definitely agrees with what I’ve experienced with working with those business, so if a business gets past a million pounds in revenue and the owner or owners can implement a management structure to fill that gap, that let go gap and they do it with the structure rather than just, because what happened so often I was talking someone the other day, they just go ‘Hey look, I need a marketing manager. You’ve been a marketing manager before go and do it and they don’t give them any structure.
They don’t give any process they, it’s not a delegation, it’s abdication and they just walk away and 6 months later, they go ‘Well, they do a terrible job’ and get rid of them and so they go ‘well this whole delegation like doesn’t work’ you know, what’s the magic pill to be able to make this work? And they just keep going you know, bouncing between one and one and a half million revenue until they figure out how that they set up a structure and delegate but still maintain control. And to maintain control through systems and processes and the right sort of reporting.
Roddy: So far what we see delegate is dumping.
Darryl: Yeah, dumping. Exactly
Roddy: You have to get all that, goodluck! I couldn’t process it. Can feel quite heavy words at that stage in the businesses growth but it’s so essential to get things written down.Notes talking about building massive libraries or whatever the digital equivalent is of the groaning shelf. But you’ve got to start to get that stuff committed down as you know. A process is simply a list of 10 number bullet points. It’s as simple as that.
Darryl: Yeah, checklist even.
Roddy: Checklists, all those things rather than carry stuff in the head and rather making assumptions. Because your assumptions are going to always be checked. Someone can just say ‘I was thinking about doing this’ and they’ll stick their head around the door. We’ll if you got ten (10), twelve (12), fourteen (14) people, they can’t always be sticking their head on the door all the time. It just stinks. You got to work out ‘This is how we do things down here’. Get it clear, get it agreed, get it understood and they got a much better chance of making that delegation right. Well delegation has been sort of empowerment which is ‘this is what needs done’ ‘Go do it on your own special way’.
Darryl: So we’ve gone pretty quickly straight to the point that I guess it’s all about the leadership and the ability of the owners to lead and manage and delegate key factors in their ability to be able to growth business sustainably. How have you found that across industry sectors? Is that the same in all industries that you’ve worked with it?
Roddy: Yes, Listen, it varies by degree. Typically, there is a point of which man just has to let go. It’s very unusual to find employee number 1 – I’m going to make a run down, make sure it’s all organized and hand it off and be clear on division of responsibilities. It doesn’t happen that way. Things are just moving too quickly, it’s too organic bu there also comes a point where the visitor wakes up and goes ‘whoah just too much’.
So my experience is definitely the business do get stuck with a better word and that stuckness often relates to the lack of trust of the founder has on the count of the people because they’ve hired them. But their trust of their own ability to let go just recognize they can’t be everywhere all the time doing everything.
Darryl: Yeah, so it’s a bit like being apparent and allowing your kids to find their own freedoms and make their own mistakes.
Roddy: Yes, I love the similar journeys
Darryl: Easier said than done. So I guess we’ve dwelled a little bit on the leadership as one of the key things that allow businesses to get through that growth cycle and to a successful exit. What are some of the things you’ve seem in businesses that have worked really well that enabled business owners to thrive and achieve their ultimate end game which is get out of their business and maximize their value because business owners are always got this dilemma of balancing how do I maximize the value for me but at the same time I really want to look after my employees, the people that help me get there. How do I look after them and perhaps leave a legacy. What thoughts and experiences have you got around those
Roddy: Well I think if we just focus particularly on the role of the owner founder SOmething about the blessing and the curse are already strong owner founder because they will drag the business forwards and track everything with them but in terms of the value that they create to leave that legacy If an investor or a buyer or a funder comes in and looks at that business without the owner founder. If you take that resource out, what are you really left with? If the business is being dragged forward by that person and none. You know there’s a time for that. Time to go, time to knock down doors and make things happen. It’s to build sustainability to the business and this is probably, again about the stages, often think about it’s the three million revenue and up that business becomes truly sustainable because at that point there’ enough slack in the system if you’d like to withstand the loss of a single key employee or single big customer. Typically, one of those shocks in a less organized business or spread business can knock it right away backwards from 4 up to 3 million. 3 million — to get there, you’ve always had to organize yourself. You always had to say, actually I can’t be responsible for everything and so getting that scheme of delegations stay on the grounds that we’re just agreeing that those checklists and they way we do things around here. It’s the fill stuff automating bots the other day, someone was lording over the e-myth, the gerber book, which had been around forever and we see the other voice layer “And he went bust twice right?” But the bit to take from that was his thing was write it down, get it organized, get it manualized and it’s not typical nowadays. These days when were working on our word processor, whether its using a full manual or its using Evernote and Google Docs and trainuals. There’s endless solutions that just to organize your thinking and get those repeatable processes down but alot of people step in and take that responsibility
Darryl: I think it was Gerbers that said build a franchise prototype even if you have no intention of franchising it. I think it’s a great mindset to be in.
Darryl: Yeah and what do you mention that a business once they get to about 3 million revenue mark, to achieve 3 million they really have got to the stage where they’ve pushed through the stage where they just get to reach 3 million, they can’t be dependent on key people or the owner or anyone in the business. They’ve got to got through that stage where it’s not dependent upon just any one person it’s dependent on multiple people and hopefully they’re doing it the same way as opposed to a whole lot of key people which could now will be doing it their own way and you got silence in your business.
Okay, so that’s a couple of tips. Everything so far is, we’ve talked about who really fits on what I would call the cocktail side of the business in terms of the values, our leadership, our communication style. Interesting that nothings come up around you know the industry we’re in or the products we’re selling or even the database or CRM that we’re using as being key factors for success and pushing through to a successful exit. What’s your experience on unlearning what we need to have in place to boost our valuations.
Roddy: We’ll I think once we narrow that runoff, the next barrier tends to be around say 15 million pounds turnover. So we think we’re in that space, we’ve got through the 1 million and we’re pushing up that next size of business which I like to think of as being you’ve grown all the way up to being a big small business before you flip into being a small big business.And that is a lot of work.
In this phase, that repeatability of what you do is what you’re looking for, that’s why you write things down, that’s why you train and have processes and hopefully almost feedback loops of the constant improvement that you were looking for. So both systems now, from a valuation perspective and touch on tax and all that great stuff, it’s simply an investor is really looking to see is there a machine there that will predictably give me a cash flow or a return and how reliable that be and the reliability goes back to those minimal key person risk, it’s actually if someone wasn’t there could you replace these thing and get moving? Just someone to have all the knowledge in their head therefore we think systems, it’s that how to do things getting that recorded but increasingly. And we’ve seen these over the Covid period is when you don’t have the luxury of lots of bodies around and you’re all sharing an office, how does technology come into play and if you look right no, I was scouting the Tech space, what we’re starting to see is every aspect of a business now also the Tech Tacts sitting behind it.
We used to hearing about Xeros being all the great success stories. I’m on Quickbooks, don’t like it very much, that’s what my kind of like would use. That manages accounts really well. In a way. maybe in three or four years ago, it was a course I used to kind of put things in the black bag and send to your accountant. We’ll now between these accounting platforms and receipt banks where you photograph receipts and mostly your travel expenses. All that’s buttoned down. In sales, that’s all buttoned down by Salesforce or PipeDrive or whatever these systems you’re using.
Even down to email, MIx Max and Calendly, obviously all these things, actually do I need something in my diary? I’m pretty much there today. It save me time. So all the way across some technical systems that maximize that efficiency and repeatability. So as we all know , any technical system we know as good as the training that goes with it so you’re backed by a human.
So I know I tend to think of those all in that bucket, “how tech is enabling those human management systems”
Darryl: Yeah, so we need good technology backgrounds and support systems and what I’m hearing you say is that we need to be all using them the same way so I think you mentioned training a couple of times there. It’s only good if we’re trained to use it and when we’re using it the same way. So technology is absolutely a given nowadays. What about the marketing and or lets call it sales routes to market digital, social, do they make a difference?
Roddy: It’s been the only way to market for the last 3 months isn’t it? Everything’s online I was with a webinar about European retail Tech impacts and they just say that things are just moving online, they’re moving to app, everything around the phone app. In your digital natives, so you’re under 30s, of course it’s there but what we’re seeing through this process of having to educate grandparents on how to use Zoom probably on a mobile phone. The digital immigrants like my generation and I’m more comfortable with using technology in different ways. So that’s what the market is moving to and is and not having that capability in your business, not coming understood how to reach your markets digitally, having adjusted your sales processes and there’s alot going on now learning from Silicon Valley SAS businesses which on one hand you know the whole bucket of evil ran that whole unicorn chasing thing but what they have really developed is the common predictable revenue systems and they’ve really taken the pipeline extended that out, they got metrics in every way, they splits what they call outbound from inbound so they have people just owning out into their market. I’m very likely touch conversation just working out if there’s a need and qualifying, qualifying, qualifying the whole time. And that was in the IN bag, you specifically saying, if you’ve got content everyone has to on social media now, you are on Google– like it or not. Doesn’t mean that you’ve got to share pictures of what you just had for lunch but we’re building up that community on the right thing whether it’s Facebook or LInkedin or whatever the right places for you and all goes to draw your community in and draw ideally a link to your website and on some point someone want want to come to you and your need and they’re pre-sold so treat them accordingly. Help them on their journey, others are going out and need to get to know you and you also need to not waste time by getting to know ones that are never gonna buy so much process on qualification, lot going on on that, predictable sales, producing revenue system world and frankly a lot of resources available out there to understand that.
Darryl: Yeah, so the more we make our revenue predictable, the more reliable and transparent it is and effectively deep risking it from a buyer’s perspective if what they’re buying is certainty of a future income and cash flow the more we can put that in place the more valuable our business would be.
Roddy: Indeed, you know it is a piece of transition, but what it also gives you is if you’ve moved that more measured process and the clues that we’re measuring is that you’ve got these indicators, you’ve got these piece of measures so when you come to demonstrate– this is how my business makes money you can start to link that so well I know that if that number was 30 and the numbers are 60 then at the end of the month, I’m gonna have 50 and you start to build confidence in the quality of that system, the quality of your business machine.
Darryl: Yeah, so we’re talking about businesses getting them ready, gearing them up so that the business owners can maximize their life’s work and get the most from it and ultimately leave when they want and how they want. And sometimes we refer to that as “leaving on their terms” so they’re on their front foot rather than their back foot. So, a lot of number of things we see is that businesses don’t have their finances in order so given your legal background where, I’m curious to see your experience around the corporate governance side as well and just the legal documentation that so many small business owners well really don’t have in place. Any thoughts or tips you can share with us there for business owners who are thinking that they might want to get ready in the next couple of years. What’s legal sort of stuff they need to really have nailed down?
Roddy: We’ll one of the key learnings I’ve learned over the last 10 years is that investors think of risk first before the reward whereas business managers and founders/entrepreneurs — it’s all about the reward and the risk will sort of take care of themselves. It’s just a very different way of doing perspective
Darryl: So true
Roddy: So in terms of looking at how looking at how easily to demonstrate that you’ve taken steps to reduce risks in the business, simple things from regularly recording your decisions and because soon they can get into a rhythm once a month having your formal management meeting if it’s not a formal board.But making sure you’ve considered and decided what are you going to do? What have you done? What are you gonna do better?. Get that written down as a record so people can understand why those decisions were made at the time and those decisions contribute to it and they can match and cross the financial performance.
On the financials, you’ve just got to have that quality of information that demonstrates beyond the year-end accounts. Because that doesn’t really tell you much at all how good is your management numbers. What do you want? What do you run the business fine? Are you robust in demonstrating that? Can your accounting package do that? Or does your accountant need to help you deliver that? An I know using your accountant in the right way is a very interesting conversation to have and all you can do is approach the sales process . And certainly you don’t want to be doing this in the weeks off , is this something to be thinking about couple of years– 3 years ahead. When I come to that table you’re all sitting with me to support me through that and accountant is a key part of assembling that advisory team to present your business in it’s best light and ensure that the risks are being worked through and thought through.
Darryl: So part of that business history sometimes i think of it as a logbook but that business history is often, we revert to the financials, we’ve got the financial history of the business but what I hear you suggesting is “hey this provides some context around that what led to that financial history and the decisions that we’re making ahead of time that led to those financial outcomes so tracking the journey so we’re just providing context around the numbers. Love it!
Roddy: You know, this is specific to the stage a business had and of the size of it. So again, what’s appropriate? It might just be a simple one page, once a week or once a month. Right the way up actually if you’re running a 15 million pound tournament business, you probably want to have a really good rhythm of quarterly board meetings and an off-site every year just to really manage through that and have those decisions thought through clearly and the records from one to the next.
Darryl: And documented as you say to show that history. Hey Roddy that’s brilliant, so I’m gonna leave you with just one last question Clearly you could talk all day about what we need to do to make a business more valuable and that would be a fascinating conversation but I’m gonna try and nail you down to just one thing. What’s the one thing you would love people to take away from this conversation to help them on their exit journey.
Roddy: The biggest value reducer, the biggest obstacle between your valuation is the risk that people attach to the owner/founder being in the middle of everyone. If you can’t step away from your business for 3 months and that business continue happily, then the Investors are not going to pay the price you have for your business. If you look through that lens, that’ll will really help you adjust everything else around your business.
Darryl: So making sure the business doesn’t , isn’t totally reliable on you as the owner / founder or founders of the business. So step away as much as you can and I’m sure the business owners out there would love the idea of “Hey let me just take 3 months holiday every year. Brilliant! Thanks Roddy. That’s fantastic. I’ll put your details in the notes for the podcast, great talking to you today. Appreciate your time.
Roddy: Great. Fun. Thank you very much