By Kevin P. LeCompte

Before I entered the staffing world 25 years ago, I served as an officer in the Army National Guard. The lessons I began learning in the Army about cultivating successful team environments, I refined during my years as an executive at Aerotek, Staffmark, and Global Employment Solutions.

I became right at home in the world of corporate deal-making, founding businesses, and riding the growth curve through more acquisitions, integrations, re-orgs, pivots, shifts, market adaptations, re-brandings, and exits than I can remember! While the last year is certainly one I won’t soon forget, it has reinforced my belief that organizations must be nimble and stay curious in order to adapt to rapidly changing circumstances. The person with the courage to ask the right questions is often the most valuable in an organization.

In my current role as an Operating Partner at Georgia Oak Partners (where our portfolio includes three staffing businesses), we begin new dialogues with staffing company founders with that same passionate curiosity. We have questions we like to ask of any staffing business owner we have the good fortune to meet, and we think they’re essential to building the kind of partnership that helps write major chapters in all of our life stories. After all, we make equity investments in founder and family-owned companies, so our partnership is usually a pivotal moment.

As the economy revs back up, companies are looking for assistance in adapting to a fast-evolving labor market and workplace expectations shifted by Covid-19. Many are in desperate need of staffing support to fill gaps and execute essential change. They also have lots of important questions that a great staffing partner can help them answer.

This dynamic, along with potential impending tax changes, has led many owners to contemplate strategic alternatives and liquidity options. (Again, there’s that curiosity!) If you’re preparing to have meaningful conversations with potential investment partners, it’s critical to think about what you would like to ask the folks on the other side of the table. Backing strong management teams is in Georgia Oak’s DNA, so we would expect you to be just as curious about our approach as we would be about your business. But asking yourself the right questions is also essential. Below are some questions you might ask yourself before engaging in a partnership dialogue.

Question 1: What’s your transaction objective?

Knowing what you want from a transaction will help guide any conversations you may have with potential partners.

Are you looking to remain in control of the business but take on a minority investor?

• If so, are you looking simply for growth capital, or do you want a partner who will bring industry expertise, serve as an active board member and help with growth opportunities?

If you would prefer to exit the business, have you considered who would step into your shoes?

• If you’d like to step back, the conversation with potential investors becomes focused on your desired timeline and the strength of your leadership team. Every staffing business needs strong executive leadership, so talking through a plan for who’s going to lead the company, whether from within or from outside, is essential.


• If you’re a founder, are you confident you have two or three strong players on the senior leadership team who will remain in the business post-transaction? Would an investor be able to work alongside you and them to run a succession playbook that the rest of your organization would enthusiastically back? Would they need to bring in reinforcements?

Is your business a logical tuck-in to an existing business, where you bring a niche focus or expertise in a specific area that would significantly strengthen an acquiring company?

• In that scenario, an investor will emphasize your people, management team, and depth. They’re likely to ask about your ability to maintain strategic advantage and leadership in your niche.


• They will also want to better understand your company’s culture. For example, how do we think your people will respond to being integrated into a larger platform? Is your firm’s culture one of flexibility and adaptation? Looking at how the business has evolved over the last five to 10 years will likely help everyone understand how the company’s employees may respond to future changes.

If you believe your business is a logical platform from which to grow and expand into other niches—and you’re committed to leading that charge—your conversations will likely be about your leadership style and vision.

• What is your vision for growth?


• How do you interact with your team?


• How open are you to input and feedback?


• Are you and your management team willing to roll equity into a new platform? Are you willing to bet on yourselves as the leaders?

If an investor is going to acquire your business as a platform and you’re going to stay on and run it, they’re primarily investing in you and your team. Likewise, you’re selecting a partner for growth with whom you will work alongside for the next several years.

Question 2: What’s your financial story?

Post-Covid, it’s more important than ever to have an answer for this particular question. Three years’ worth of financial reports (audited to the generally accepted standards for private companies) that tell a clear growth story about your business are ideal. If you made acquisitions during that period, it’s important to communicate how you accomplished those integrations and how they’ve been additive to the business’s bottom line.

The strongest performers in the staffing industry have gross profit margins in the 25-30% range. If you have a story to tell about your 2020 results, it is helpful for a potential partner to understand how it aligns with the pandemic’s impacts on your company’s sector focus areas. Businesses that pivoted to serve the unique needs of their sectors and come out of the pandemic stronger are especially appealing.

 

Question 3: What’s your operational story?

You’ve heard all the metaphors and catchphrases: What’s your secret sauce? What’s your Unique Value Proposition? How have you built a better mousetrap?

When you’re contemplating a partnership or transaction, this translates into the story you can share about your business’s operational advantages.

• What technology stack do you use to identify customers and temporary staffers/consultants?


• How are you finding people and placing them faster than competitors?


• How do you create a uniquely better experience for your team, your consultants, and your clients?

Question 4: What’s your vision for the next chapter of your life?

Regardless of your desired transaction type, knowing what you want in your life and being honest with yourself and potential partners is key. For example, do you plan to retire, or do you want to keep working in the business? What does the transaction mean for your day-to-day life? How do you want to spend your time? Ensuring a transaction fulfills your personal goals and life vision is just as critical as fulfilling your company goals and business vision.

For our team, a successful investment begins with alignment with the founder or owner. Do you ooze with passion for the business, your people, and your clients—bringing the energy that will help spark growth? Do you offer a compelling narrative about how your team does it better than other people in the industry and how they can carry on as rock stars, even after your retirement? If so, there’s a high likelihood we will be excited about a continued conversation because these statements would align with what you truly want from a partner and believe is best for yourself and your company.

 

Question 5: Who else is on your team?

While we deeply understand the need for discretion when a business is in the market or considering a transaction, success in the staffing industry is uniquely predicated on the effective collaboration of leadership team members. It is always head-scratching to learn when an investor completes a transaction after meeting only the CEO during management meetings. That signals to us that a lot of important questions may have gone unanswered!

For our team to commit to a partnership, we need to understand the culture and the people you’re already working alongside. So, there’s one final question to ask yourself—would you want to partner with an investor who doesn’t really know the team they’re investing in?

 

Kevin LeCompte is the former CEO of Global Employment Solutions (GES), serving with that company from 2006 through its 2020 acquisition by Ettain Group. During his time with GES, Kevin served in multiple roles, including as the company’s COO and President, responsible for nationwide sales and recruiting operations, as well as performance management across all divisions. He now serves as an Operating Partner at Georgia Oak and sits on the board of Aditi Consulting, a Georgia Oak partner company.

ANY QUESTIONS FOR US?

We’re always happy to answer them. Feel free to email me at Kevin@GeorgiaOakPartners.com.