A Rembrandt in the Attic
April 16, 2021 |
About this episode
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James Prebble co-founded Palladium Digital, a consultancy helping companies think about their digital strategy.
The company experimented with various business models until they landed on helping private equity groups get a return on their investments. Private equity groups hired Palladium to perform “digital due diligence” before they invested. Along with identifying any flaws in a target company’s digital strategy, Prebble and his team were also asked to identify any untapped digital assets that, if adequately exploited, had the potential to transform the business being considered for investment. Discovering these so-called “Rembrandts in the attic” is what private equity groups often look for to jack up their return on investing in your business.
Offering their services to private equity groups allowed Palladium to crest one million pounds in annual turnover quickly. Prebble thought his consultancy could fetch 5-7 times EBITDA, which is why he was keen to engage when he received a call from Next Fifteen Communications Group, an integrated marketing services giant with more than 2,000 employees.
In this episode, you’ll discover:
- How to attract talented workers before larger competitors snap them up
- The downside of fixed price billing for a services company
- One approach to dealing with “scope creep” on a project
- What to do when you feel like your “driving your business with the hand brake on”
- When an earn-out can make sense
- How to perform reverse diligence on your acquirer
- What acquirers will consider a problem when they perform digital due diligence
Wondering if you have a Rembrandt hiding in the attic of your business? Complete the Value Builder Score questionnaire, and we’ll help you see how an acquirer will view your business across eight unique dimensions that drive the value of your business.
Check out our article on Is This Hidden Factor Driving Down The Value Of Your Business?
Show Notes & Links
(11:58) James Prebble: “ultimately you have to get to the point where the business isn’t the two founders but actually the business operates despite the two founders.”
(13:57) James Prebble: “we weren’t ready in the early stages to hire the next mid-mark, mid-level, or senior talent. One, we couldn’t afford it. Two, we were worried we wouldn’t have the work to stimulate those individuals. But instead, what we wanted was young, hungry consultants who are eager to learn.”
(16:15) James Prebble: “it wasn’t about remuneration. It wasn’t about salaries and bonus… we don’t expect them to stay forever. Use us. We’re your Launchpad. And we were really honest about it.”
(17:25) James Prebble: “You might be that launchpad to their next big thing but embrace that. Enjoy the years that you do work together.”
(17:51) James Prebble: “we started with fixed price. We drew a line in the sand…Very quickly you realize it’s not the way, because what happens is, “Can we just have a bit of this? Could you just do a bit of that? Can we have a revision here?” And very soon, you’re starting to compromise margin, because you’re way in excess of what you thought you needed.”
(18:39) James Prebble: “if there’s scope creep, if you fixed priced it, and it keeps rolling on, your capacity to take the next project reduces or another project is compromised. So we realized very quickly, you can’t fix price with these things, what you have to do is time and materials.”
(20:56) James Prebble: “If you’re an early-stage business selling, you need to be fixated on where you can get to, not where you are today, and make sure that you’re getting value for where you get that business to.”
(22:33) James Prebble: “I always felt we were operating with the handbrake slightly on because every day there was a check of the bank account. Have we got enough cash flow?”
(27:41) Next Fifteen Communications
(38:15) James Prebble: “the regulatory environment in which we work needed a lot of legal support. And they were able to provide that. The HR capability, the finance capability, the bit that allowed us to do what we do best, and not all of the stuff around the periphery. That was what they offered plus any investments we needed to make in team technology.”
(39:46) James Prebble: “a piece of advice I would offer to anybody selling their business into a group especially if you’re marketing a services business into a group. Do not sell it if you think it’s going to give you access to new clients.”
(41:34) James Prebble: “we went from being a 20, I think at the time it was actually a 12-person boutique to part of a global network of 3000 people working across the globe. And it immediately created a reassurance to clients.”
(46:10) James Prebble: “The number one thing is typically some bespoke software development that makes the business utterly dependent on a couple of developers or individuals, where they cannot find a justification for why an off the shelf solution or a more open-source solution wasn’t sought. Because that for an investor is nothing but risk.”
(47:48) James Prebble: “the other one that can be a deal killer is, I guess in a digital space, there’s marketing practices that aren’t sustainable. Where the business is over-reliant on a single channel to generate its leads or its opportunity.”
(48:59) James Prebble: “That’s why I deliberately went the bad things first because actually flip it around the other way. If you developed a piece of bespoke technology that you cannot buy in market, that has a justified need in a space, you are sitting on a goldmine.”
About Our Guest
Co-founder of the digital consultancy firm, Palladium Digital Group, James has been supporting businesses to advance their digital capabilities for the past 18 years. Prior to founding Palladium, James was strategy director at an award-winning, London-based digital agency before going on to lead large-scale digital transformation programmes at a number of globally recognized consulting firms. A true digital native, James has spent his entire career in the digital sector which has seen him work all over the world and across a huge variety of sectors.
In 2018, alongside his co-founder, James oversaw the sale of Palladium Digital Group to Next15 communications PLC. The business has continued to thrive under their leadership, recording triple-digit growth in the first year post-acquisition.
Outside of work James is a father to two girls and a keen golfer and runner.
Connect with Palladium Digital Group:
On their website – Palladium Digital Group
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