# 407 Mike Ames Sold 2 Recruitment Businesses for £39 Million: Here's What He Knows That Most Don't

Look, you've sold two businesses, but I want to reverse things.

If you were to walk into a recruitment business today, but now as a buyer, what are the things that you would see that would put you off immediately?

Good question.

I don't think it would be physical things because, of course, these days we're all fragmented, people working from home or whatever.

I think as soon as you start to lift the lid on a business, though, as soon as you start... to look at the numbers and to talk to the people and to look at the client estate.

It tells the story because what you're looking for is consistency, reliability.

You're looking for something that's safe.

It's not going to fall to pieces tomorrow just because a big client left or because of one of your senior people left.

So you're looking for people dependencies and we call it the four P's.

Profits, you want to get these right.

Profit, people, patrons clients or whatever and product so we're looking for all of those we're looking for stability we're looking for a track record and we're looking to see where we can take this if we took it over how could we get more out of it and these people now are getting it so i know that's not necessarily the most detailed of answers but that really is it it's the numbers that's great almost

so what would be the what would be the the red flags where you'd look at and go wow zach

Oh, a lot of those.

Lack of consistency would be the first thing.

A yo-yo company, vast amounts of recruitment companies are yo-yos.

They grow, they shrink, they grow, they shrink.

So obviously there's something wrong there.

They don't have the foundations in place in order to construct a business which will be saleable.

There's probably too much dependence on the owners, almost certainly.

There's probably a poor client estate, not a well-balanced client estate, which um net profit is the worst of all or ebitda is the worst because people focus it seems to me way too much on gp and turnover when actual fact you should be obsessed with ebitda that's the only thing that really matters um and so i'd be very interested in in in looking at that and if i didn't see that consistent growth bb dar moving forward i don't want to see a lot of movers and shakers in terms of people coming and going i want a low churn rate i want to see a good solid product that i can talk to anybody and they can sell me that product in the room they can just sell it to me and i want that to be consistent if i don't see any of those things it's like okay well i'm not not saying it's a no but it's not a slam dunk yes either

Mike, just a quick question.

In your experience, you mentioned that one of the red flags that you look out for is sort of a yo-yo, up and down, inconsistent revenue business.

From your experience, what are some of the main causes of that? Because we speak to recruiters all the time who have that same problem.

What do you see as the main causes of that?

It's very common, Drew.

Look, you've sold two businesses, but I want to reverse things.

If you were to walk into a recruitment business today, but now as a buyer, what are the things that you would see that would put you off immediately?

Good question.

I don't think it would be physical things because, of course, these days we're all fragmented, people working from home or whatever.

I think as soon as you start to lift the lid on a business, though, as soon as you start... to look at the numbers and to talk to the people and to look at the client estate.

It tells the story because what you're looking for is consistency, reliability.

You're looking for something that's safe.

It's not going to fall to pieces tomorrow just because a big client left or because of one of your senior people left.

So you're looking for people dependencies and we call it the four P's.

Profits, you want to get these right.

Profit, people, patrons clients or whatever and product so we're looking for all of those we're looking for stability we're looking for a track record and we're looking to see where we can take this if we took it over how could we get more out of it and these people now are getting it so i know that's not necessarily the most detailed of answers but that really is it it's the numbers that's great almost

so what would be the what would be the the red flags where you'd look at and go wow zach

Oh, a lot of those.

Lack of consistency would be the first thing.

A yo-yo company, vast amounts of recruitment companies are yo-yos.

They grow, they shrink, they grow, they shrink.

So obviously there's something wrong there.

They don't have the foundations in place in order to construct a business which will be saleable.

There's probably too much dependence on the owners, almost certainly.

There's probably a poor client estate, not a well-balanced client estate, which um net profit is the worst of all or ebitda is the worst because people focus it seems to me way too much on gp and turnover when actual fact you should be obsessed with ebitda that's the only thing that really matters um and so i'd be very interested in in in looking at that and if i didn't see that consistent growth bb dar moving forward i don't want to see a lot of movers and shakers in terms of people coming and going i want a low churn rate i want to see a good solid product that i can talk to anybody and they can sell me that product in the room they can just sell it to me and i want that to be consistent if i don't see any of those things it's like okay well i'm not not saying it's a no but it's not a slam dunk yes either

Mike, just a quick question.

In your experience, you mentioned that one of the red flags that you look out for is sort of a yo-yo, up and down, inconsistent revenue business.

From your experience, what are some of the main causes of that? Because we speak to recruiters all the time who have that same problem.

What do you see as the main causes of that?

It's very common, Drew.