BPO Financial Benchmarking Report with Eric Crouse- Partner Kommit & Company

00:00Hi on all things call center. We'll cover it all. We'll cover it all from call center We'll cover it all from call center operations, hiring, culture, technology, and education. We're here to give you actionable items to the improve the quality of yours and your customer's

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01:05Welcome back everybody to another episode. from a call center geek the call center a contact center podcast so we, we try to give There's really two ways you can really come on the podcast. Number one is sponsor an episode, or the second way is I think that there's just so much value to bring to a lot of the listeners and viewers that are on Tik-Tok or LinkedIn or on YouTube that it's almost me asking for you to come on. So with me here is Eric Krasst, we've been talking about this episode for a really long time. Eric is a partner with Comet and Company. They are in an M&A firm that really specializes in the niche of BPOs and in contact center. He's done some really cool and unique things when it comes to benchmarking your call center. Now, when we talk about benchmarking, I'm going to let Eric here talk about this a little bit, but we're not talking about service level and handle time and your average speed of answer.

02:24Those type of metrics, while important for specifically for BPOs, our financial house needs to be in order as well. Eric has some things that they've done from a huge benchmarking survey, talking about the actual financial PPOs, what you should be looking for, for how to set your books up and really interesting things I episode today. Our firm and yours, we've been in the contact center business a long time. Matter of fact, my partner, Richard Comet, his call center ran polling for the original President Roosevelt, the first one. And Jeff Cohen, Jeff Cohen on our team was actually the finance manager., a long time and a lot of history there. In all seriousness. No, Richard I came from a background of being a contact center owner. Sold his contact center back in 99. Got into the transaction business. He and I met, I actually looked at the calendar the other day.

03:29He and I met 20 and I was working in a contact center in Maine. And he that brought me on board and here we are today. We're seven advisors have a high specialty in contact centers and BPOs. We used to be on the phones, Tom. so we know a lot about the pain and the pleasure of the contact center world. Now, I appreciate that. And I think, you know, talk about just quickly and I know there's some other things that we want to discuss as well, but, you know, again, focusing on the financial aspect of the BPO, just can, can you give just a brief kind of overview as we start this thing of what some of the things that we're going to talk about today, what you're going to present, some of the things that you guys have done. Yeah, sure. So, you know, in our industry of working on transactions, mostly sell side, we mostly represent the lower market owner and lower middle market would mean anything between four or five million and let's say 40 million of transaction value, the private, closely held company, domicile in the, we look at so many different things about those businesses that we felt like F. Felt like it was our obligation to share some of the data, uh, with the people who are out there, you know, like you practicing in the business and trying to grow the, you know, sustain and hopefully, profit profit from the industry.

04:52And you know, the last time you and I were together, we were, we were in Vegas, um, at, at call center week. And you know, you and I, we had a long discussion over. A couple of pops over, uh you know, really trying to add value, right? Add value to the industry as a whole. What were some things that, from a podcast, that's why we So putting this forecast together or this kind of benchmarking survey together and what do you see or was there anything that kind of surprised you before we get into the data? You know, a lot of this information has never been published. I mean, expressly to our knowledge, you can get industry information if you scour, you know, publicly traded companies. But as far as the privately traded companies in our particular vertical, the information is yet to be published. And I think it's important to put it out there so that, you know, the owner can understand, you know, on a benchmark perspective, how he or she are doing relative to their peers, right?

06:19If you go to buy a stock, let's say Apple, right? Any good brokerage software Apple show you what their peer groups look like. You know, for so far Apple it might be, you know, Google or Microsoft or something like that. And you can kind of compare the various analyses behind that and determine which is is the better investment. Right now, if you're Apple and you look at your peer groups, you can kind of figure out, hey, what do I need to do to improve to better my situation and hopefully, beat my competition. So with the information we're putting out there, it's fairly simplistic yet it'll be new for a lot of people to look, at and say, okay, how am I doing relative to either my peer group or industry as a whole? And I think that's ultimately what we're shooting for. Tom, years, ago when, when I first, first got out of college, I was flying, every week to a territory that eventually I got sick of flying and I, and I hated it. And my roommate at the time was a a private pilot.

07:19And he suggested that I take flying, flying lessons to get over my fear of flying. So when you learn how to fly, they teach you, VFR is the first, which are visual flight rules, and then you eventually learn I IFR, which is instrument flight rules, right? So you learn how to fly with your eyes and then through the instruments. Now, I never get this far in training because I kind of continued my fear of flying, but eventually when you, before you become a licensed private pilot, you have to fly the plane without looking through the windshield, right? Just rely on your instruments. But a pilot will never be as effective without both tools, right? You need your feel and you need your data. And I think what we're trying to do is to give people both their feel and their data at the same time and give them some best of practices on how to put in place so that they thrive, grow and prosper in what is typically the largest venture or asset of their professional careers?

08:18Yeah, and I think the other importance of this is, so many of us call center operators are really good at the other metrics, right? We're really good at making sure our service level and our workforce management and our shrinkage and staffing and all of those KPIs that we go to judge. And I kind of like what you the said,.

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09:08You're right right Metrics now both of them combined the Right, but one without the other won't give you the full picture. I think what we do is we see a lot of the under the hood financials on really what businesses, irresistibly, relatively unspoken. If you tell me the nine ways a typical contact center would drive profit, you might come up with a totally different answer than if I asked the next 15 people. We just don't study contact centers in college. No one majors in call centers, centers, and BPOs. But at the same time, it is a business, and there are CERTAIN elements of it that are us all of this data is you how to analyze your data vertically and horizontally and what that means is in one time period versus multiple time periods understand how to analyze it put it in place so run it alongside with operational efficiencies remember the days profitable call center without the aggregation of-

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11:42Let's get into it. Let's look at some of the slides. Now this benchmarking, let's just say this before I throw, I throw this first slide up there. This benchmarking report will be available tomorrow relent the next day on the website, the the common company. It will be available on gocomit.com with the download.

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12:30How do you just give a quick explanation of kind of what we're looking at? And we can have a talk on this. So this is a common sized income statement. [pricing remark omitted] from that cost of goods contact center, firms. The columns we have five six one one four two, which is the NAICS code for telemarketing or other, other contact center. that data was aggregated, aggregated from a number of different sources. It was pulled from tax returns which.... the And

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14:32, you, let's go, let's go, let's, let, let's go, let's have some pretty I think the one thing for me, Eric, that stuck out and why this data makes total sense sense to me is, again, that common contact center is, you know, and seeing that labor rate from that second, you know, Yeah, yeah, it comes surprised you that labor costs are big party business. Now here were and you can find that there are a lot of answers to those are what I mean you've got a plethora of answers number one you can be more efficient right number two you can employ technology to your costs and number, number three you can find lower cost areas to do business. Now when you're forced to to make a decision on which one of those three you want to go with, I think everybody would say, well, I'm going to try all three.

17:27Now, to get So that's something we really want people to understand is not marking but how? The other thing, though? Speaking BPO wise is these are almost like dials like sometimes BPO if I. If I dial down my labor my sales will also go down. That could correlate well for still bottom line. I think that's the cool thing about about looking at this in a kind of seeing if I can't really increase my Thank you so much for joining us today, and we'll see you next time. So the operational numbers efficiency is very symbiotic to the financial performance, right? Some of them are directly related and some of them are inversely related. [QA coverage remark omitted] Right? At some point, there's a break even there where you're not only efficient in meeting the needs of your customers, but you're profitable. And what that intersection between those items that are directly related and inversely proportional to where the performance of the firm is optimized.

19:27Does that make sense? Yeah, no, it makes total sense. And again, I don't wanna go off because I wanna keep you laser focused Because I I know we have a couple of really cool slides coming up that kind of take this to another another. But again, as a BPO owner, and I'm speaking to all BPO owners, because there's a question that just came in that I think hinting about what I was just talking about how technology, we can't fight the technology, right? There's going to be some things that maybe overall revenues may go down, profitability may go that's an operational piece that does play into this, that needs to be thought about. And I think, again, that's not a discussion for right now, but as everybody, as everybody takes this back to their, kind of looks at some of these numbers, those- those. Those are some of the conversations that do need to happen because technology may decrease your net sales, it may decrease., decrease your head count,

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20:54the Demand is coming from for AI and other technology solutions. No, I agree with that. It's really an interesting time to, to be in the space. I think, you know, this report is coming out at a really good time with this, too. Because again, with all these changes that I think, you know, we're going to have to embrace this as a B operator. One thing I do want to note in these income statements, we don't have everything broken would like it cost per manager, But those are the those are the things that we hopefully will track Let's flip to the balance sheet because theoretically fewer assets that we need to own and keep on. On the left other investments they've made and acquisitions for growth. So that's that's kind of one thing that stands out. I guess we look at this and say how can I compare myself to a publicly traded company?

24:09For the small guy to look at is just look at accounts receivable and accounts payable or current assets and current liabilities. If you look at those two formulas, that ultimately is what they call working capital. Why is working capital important? Well, it's essentially the money that a businessre needs to continue operations. It doesn't belong to the owner. along to the business. So let's I mean, accounts receivable is pretty close pretty close. And if you look at the spread, I mean, the private, the private companies have a longer in a larger working capital because you know, Frank, we don't have the leverage to demand payment sooner than the bigger companies might. Right? How does that affect the company during growth? Well, when you're growing, you're adding more working capital to your balance sheet. What does that require? Well, that requires cash. I mean, capital is in cash at some point. So where do you get the cash? Well, you can get the cash from profit, you can get the cash from debt, or you can get the cash from new equity.

25:29But either way, you're going to need the cash during growth. So that's one key, really key benchmark number that we want, want people to take away from this and really understand is how does improved performance or growth impact working capital? And what are the things that I can do, to positively impact that going forward? think one of the things that stood out for me on this too

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26:50on contact centers in the U.S. and globally. A debt perspective, there's another big glaring difference between the two companies. If you look at long-term liabilities, that's in essence commercial or private debt. The lower middle market companies really don't lean on a lot of debt. Most of the growth is through cash, through profit. If there is debt employed, it's typically either a real estate purchase or some type We don't have to buy the big, you know, on premise solutions anymore. So what do you need debt for? Well, you can have debt for growth capital, right? That's important or taking out a partner or buying some more equity, etc. But then if you look at the publicly traded companies, I mean, you can look real quickly, they're funding their growth through debt. Why is that? Well, it's cheap and readily readily available, right, commercial, private, or relent In the case is geeky on the critical explanation.

27:54They would rather fund growth through debt than equity Because debt is You know, the net 90 days, the net 40, right? Where, you know, you have that 100 agents or you have that 150 agents for a smaller. You know, under 1000 seed BPO in trying to figure out how. How to take that from most of the time from a standpoint, those types of things to try to finance- to try to finance that. That is kind of the scariest piece, I think, of this too, of these buttons to push. When you get the call says I need 100. seats and I-I need it to start next week. Right. Right. It's a good problem. The ecstasy, Tom. It's the agony and the ecstasy. I mean, I'll take it. I'll figure it out. But still, I mean, there's things, there and you got to work through with it for sure.

29:02[QA coverage remark omitted] And look, you know, strongest is the owner who has a great CFO, a great COO, Great banking relationships, a solid CPA and an understanding of the numbers Those are the pillars of growth growth. Without those, you're going to be scrambling to plug all the wires in to figure out how it's going to work. Growth is expensive, regardless of how you do it. Understanding the the implications of balance sheets and working capital to growth is really paramount to growing, responsibly. And I think the other piece that we want to convey to people is understanding your gross margin across every segment of your business. That's clients, locations, service, channel type, all of those things. That's really, really important when you come to growth or an exit. Right? If we're making, let's say 50% gross margin on all of our clients and then a new client comes to make 20% gross margin, should we really take that on and diminish our margins going forward? I think it's a difficult decision for a small contact center owner to make because everyone intrinsically in all of us, we want to grow. Without an understanding of these numbers, We might say yes when we should say no.

30:27And I think defining what growth really is, right? Growth for a lot of us is just headcount, right, right? Where growth should be profitability, growth should be probably revenue, looking at these numbers instead of just saying, hey, I have to important and something that I wrote down too is really defining what growth is and thinking that through a little bit more than just our kind of that I got this many headcount or this many seats. The two great business books that have yet to be a written are How and When to Grow and How and When to Shrink. But ultimately that comes down to a full understanding of the art and science of the business. Here's a great one for you, do you get the business first and then hire the people Or do you hire the people and, and then get the business? I don't know if there's an answer to it.

31:28And I've asked a lot of friends of mine who are in different industries and they all come up with different answers. It each, you know, each decision has to come down to the individual owner, but without a full understanding of your benchmarks, historical and projected and what your goals are. It's a coin flip to whether you're going to make the right decision, and I think we can be better than that. Can you, before we go on. To the next slide, which which I think is really... It's really... interesting as well. You and I talked for a while on and that you just kind of touched on it. But let's talk about from an exit standpoint, the importance, so just benchmarking each of your clients having, you know, not just this one pot of profitability or revenue, but really being able to discuss each client kind of in depth and maybe where there's potential to growth or not, or why this is this margin is a little bit lower. Because I mean, talking to you, I know that there's there's some BPOs that are doing that really well and some that that do not do it as much. Yeah, fully understanding what at least your gross margin is on every client, every location, every segment of your business, channel of your business, service type, is really paramount to understanding your business and whole.

32:41You've heard the old adage of the guy selling advertising, and the guy sitting across the desk says, look, son, I'm wasting half of my advertising budget every year. Now, it's essentially the same problem, if I don't know at the end of the year how much money I pay per each client or at least the gross margin, then how do I responsibly renew those contracts or bid on contracts that look similar to those? One of the, you know, sad things we see from time to time in looking at these businesses is client concentration problem, right? It's the whale problem. It's the whale problem. You've got one client that makes up 40% of your business. And you have no idea if you're making money on them or not. Ultimately, through analysis, we typically find that your largest client is likely going to be one of the lowest gross margin.

33:34So now you're in a situation where you can't live with them and you can't the without them. We like to tell some people sometimes, look, if you want a healthy call center, go fire your biggest client right now. or tell them your rates are going up 20%. I guess in the long haul, if you get everybody to pay the same freight, right, to give you the same gross margin opportunity, you're gonna have an option, you know, long-term to do a lot of different things without cash. You can reinvest it in technology. You know, you can pay your employees a little bit more. You can find, you know, more business development opportunities. You can do some things with that money, right? It's not, you know, a zero sum game here, right? Good means good long-term, Especially when you're getting adequate gross margin from each and every segment of your revenue.

34:20Does that make sense? Yeah, no, absolutely. And I think we obviously do that. We've had this discussion here at Expivia and knowing each client, but I think we could probably drill down even deeper. I know that there was a question here too, from Sean that was talking about breaking out even cost per call, you talked about supervisor, those types of things, getting that of the stuff that I think we should be doing that I think could be extremely helpful to not even, not even what we should go bid on, but then the operation of the call center and the promotion of supervisors and what those levels of pay should be as well. Yeah, no question about it. I think I'm reading Sean's question here. I think cost-per-call, cost-per-acquisition, that's probably more on the advertiser side or the the client side and the contact center side, it would be difficult through this large aggregation And I think that that just, it does go back to the, you know, we can't benchmark, and everybody on KPI's that says a year handle time should be three, two seconds when I'm 14, 15, 16, 17 different clients with all different levels of M, H.E.P.

35:54of what they need that those don't mean as much I think as what we're doing here today does to impact the business. Yeah, let me just circle back real quick. over you, cliche. You. You asked about acquisitions and gross margin, right? So a buyer is going to look at essentially the buying process when one contact center or strategic or a financial buyer is buying a contact center, you're looking at the identification of risk and the quantification of risk. Now we talked about client concentration risk, but we also want to talk about profit risk. The buyer, if they're worth their salt, is going to ask the seller, what's your gross margin per customer, you know, like we're talking about. And if they can't, you know, if the seller can't tell the buyer that or show the buyer that empirically, then the buyer it's left to basically make some assumptions, which increases the risk, which ultimately lowers the value, right, if we reduce risk, we improve the value.

36:56If we have higher risk, we have lower value. Another element of that is let's say you've got, I don't know, five or six segments of your business and you want to move on from one of them. If you can't identify profitability of one of those segments, you can't sell it. So let's say, for example, you've glared a successful outbound piece and you've got, you know, 20% is outbound and 80% is inbound and you want to get rid of the out of buyers for that. But if you can't measure profitability on that segment, it's very difficult to price it and ultimately get the value that you should from that particular segment. Yeah, I think that makes sense. If you can't quantify it, then people start thinking things and they're never positive things for you. They're negative things, for sure. Hey, again, I know I keep saying before we move on to the next slide, but just these things keep popping in my head. I know one of the biggest questions, and I probably should say this to the end, but since we are kind of talking about BPOs being acquired, and that's kind of the topic that we're on right now.

37:58Can you just give the, what you see as your quick 30,000 foot view state of the BPO space, maybe talk about the multiples that I- you're seeing now. You know, I know there's some variation in that in that, but just talk about that and then let's move on to the next slides. And I think that will even maybe add some more breadth to some of those slides. Well, I mean, the appetite for acquisition, growth through acquisition is, you know, as strong as it's ever been. you know, even though interest rates have increased, they're still pretty cheap. You know, six, 7% money when you look at, you know, some type of weighted average cost of capital, still, you know, relatively inexpensive to historical levels. Strategics want to buy, you know, smaller firms. I mean, for a number of reasons, to expand their geography, to get into better locations from a hiring perspective, to grab, you know, particular clients to look into different industries, you know, maybe buy some things and look about nearshoring offshoring them to the growth by acquisitions strategy is alive and well, and it will continue to be.

39:06, multiples really haven't changed. Our phones aren a going to stop ringing if the 8% interest rate hits us by next week. People, people need live voice, and there is no substitute in my mind for live voice and live American English speaking voice. It's the top live voice in the world for a reason, and it will continue to be that way. I guess the nature of buyers has changed somewhat, where we're seeing far more strategic buyers rather than private equity buyers. It's not a great private equity play, even though I think a friend of mine who is in private equity might be on this call today. It's difficult to grow the business, Tom, as you know, solely because where are the people. If you're in the market of Erie, Pennsylvania, it might be a different hiring environment than if you're in San Antonio, Texas. Growth is difficult, and that's traditionally what a lot of financial buyers look for, is what's the growth? What's the run rate? How can I get this? With that said, there are a lot of financial buyers who are looking for platforms to buy and and then bolt new acquisitions on.

40:14So, I don't think a lot's changed in terms of acquisitions. The multiples are all, you know, pretty healthy. You know, depending on the nature of the business, you could go anywhere from, you know, a small outbound center with concentration risks might go for three times. If you get a really shiny inbound, you know, no customer concentration, great hip hop, sock two, all of those things, you could go for, you know, But again, that's five to 50 million, you know, kind of once you get over 20, 30 million, the multiples, you know, invert a little bit. And, you know, it looks a little rosier when you get to that level, but I don,t see a whole lot of changing.. Gotcha. No, I appreciate that. I know that I got a couple of TikTok, I know you can't see that a couple of Tiktok questions on that.

41:00So I wanted to, you know, how about our Tiktok viewers here? Well, everybody wants to know. You know, how Number two is you can ask someone like us in the business, what do you think my company's worth? And we'll give you a ballpark. I mean, ultimately, until we get under the hood, and understand the and the narrative and the story and the people, we wouldn't know. And then the third thing is you go to the market and you let the market tell you what it's worth. All right, let's move on to, I guess, I think the heart of the benchmark, right? And kind of looking at some of the things that you've done here, I thought this was really interesting. This is your quiz time. All right. I'm ready. I'm ready I'm ready. Well, you listen. Listen, so Two companies common sized income statements kind of simplified the viewing here. We got company A and company B I mean you'll notice some pretty big difference in cost of sales, growth, profit, and net income Without getting complex. EBITDA is the operating statistic. We use in the and, lower middle market for valuations So everything trades trades and a multiple, multiple of adjusted to EBITDA So, if you're going to those two companies, which one's better?

42:28That's got to be the trick of this question, right? Because, you know, I think everybody does look at that, right? And there's always the saying, right? You're always kind of your eyes first go to that bottom line and then you kind of work your way up. And looking at this, I mean, if you if I just look at this really quickly, I would say, you know, with with that EBITDA, you know, I would say that company B, you know, that would be my choice, at least looking at this from a quick snapshot of not really digging deep. Yeah, so both of these are privately held companies. One transacted, one didn't. Company A and actually transaction. Company B did not transaction because they had a significant client concentration issue. right over, I think it was 70 or 60 or 70% of their revenue came over no go ahead.

43:15I'm sorry. Let me just talk to talk about that for a second. So what are the layers then? Like what are the, what is the importance? Like, I mean, obviously concentration is really important, but like, what what are the top three things that you're looking at? You know, maybe even outside of this, that can affect this. What do you mean outside of this? Well, I mean, like, you're talking about like the concentration of client, right? That's a huge piece that doesn't really show up in the numbers. Yeah. But it's like, so what are some of those other things too, that maybe not show up in the numbers that we're talking about here that kind of tag on with what you just said. Yeah, so you've got a number of different risk elements. If you're looking at this from a bankability perspective or an investment perspective, which would include acquisitions or dispositions, right?

44:00The first and foremost would be client concentration. How do you derive your revenue? If it's all from one source, it's gonna be highly risky. If it's all from one industry, in that industry, let's say mortgages, that's gonna be risky, right? because you're prone to changes in interest rates. If you're diversified, the more you're diversified in clients, in revenue base, in channels, service types, inbound, outbound, the more diversified you are, the less risk there is and the more valuable your firm will be. So that's number one. Number two would be, you've got four really important people in your organization, right? The people who have the relationship with the finances, people who have relationship with the clients, the people who have relationship with the employees, and the people who have the relationship with the technology. If those four people will follow with the sale, it reduces risk. However, if let's say the owner who wants to depart or retire has two of those relationships and the new buyer is gonna have to replace those, then again, the risk element goes up.

45:10I guess number three, looking at fluctuations in performance, either rapid growth or rapid decline, changes in gross profit, changes in net income, you know, a period of un-profitability, a period of EBITDA. There's a little bit of a glance at the balance sheet. But those are kind of the main elements of what makes a firm bankable, investable and determines risk elements. All right, do you want to move on? You want to move on to the next one? Yeah, so what was your answer? So, I would, again, you, I said at Company B, I think they're EBITDA, and then you kind of squashed that because they had a high concentration, right, of customer. And this is one thing to note about benchmarking, right, about vertical analysis. There's more to the picture, right, than just meets the eye. Just because you common-size things doesn't necessarily mean A is better than B or B is better than A, right?

46:07It's a part of the analysis. It's not the entire analysis. which will bring us to slide two. And this is where benchmarking can really throw you off. So this is the same Company A, again, kind of reduced for simplification. And then we added a Company C, which looks very similar to this. Now you notice just a couple of differences there. Company A, stronger net income and Company C has lower net income. And then EBITDA, obviously is earnings before interest, taxes, depreciation, and amortization. The theoretically, you know, the non-cash charges or similar to a free cash flow. So company C would have more free cash flow, in theory, in company, than company A. So if you were to look and compare these two, how would you analyze it? These guys are pretty, pretty close. I think I need to get under the hood a little bit with these guys, Eric.

47:02You know, I would probably say that company A looks on paper here to be. A little bit for me, especially with that net income, being there a little bit more kind of palatable at least just looking at these numbers. And I'll say that concentration risk is minimizing both and the growth rates are almost identical for the last and I'll say that concentration risk is minimizing both and the growth rates are almost identical for the last four years. Really if you look at it, these are extremely close to being the same, I mean the EBITDA obviously is something that again I think every BPO person in the world has been kind You know, all things being the same, I, you know, I think it's almost a coin flip, Eric, I mean, just this. So again, this is where a benchmarking can throw you off. Company A was a privately held company that we sold a few years ago.

47:5620 million dollars in revenue domestically domestically based. I don't know how many agents they have, but it was under a thousand. Company C is tele-tech. you see is tele, right? Okay. 2.4 billion in sales, right, multi, right around the world, quickly growing. So looking at common Kislyak, you know, what it's used for and what it's not, good things here are, you know, some of our, you know, peer groups kind of look like teletech, which is good, which means that, you know, hey, you know, they're worth X billions and we're worth 20 million, we're kind of doing similar things. And we're doing it about And the other way to look at it, company A will transact for five to six times eBITDA, but then 20 or 25 times eBIT, so understanding how to apply vertical analysis is one thing, but understanding how that fits in the whole grand scheme of analysis is certainly another.

48:56And I think for what we're talking about today for the BPO owner and operator, getting down to the, you know, I'm looking to sell tomorrow, we got to talk about all this stuff, but, to start to think this stuff through to really look at your numbers. I think that this is extremely helpful, you know, especially looking back to at least start to make you think about or take a peek deeper into kind of what's We're going to give you, you know, some of this data, and again, it's simplified for reasons. We don't want the weeds here and do a new analysis result from it. We're going to show you what the industry looks like, which to my knowledge hasn't been published before. We're going to talk to you about the reasons why you should benchmark, and then- then Jeff Cohen from our team is going to walk you through on how to get going on it, right?

50:03Ultimately, it's going to come down to a lot of your accounting policies and procedures and working in conjunction with your accounting team, your finance team, your CFO, and your CPA. Once you get that done, Tom, I think it's important to incentivize your team to maximize a combination of operational efficiencies and financial performance. And I'm not saying layer on a whole bunch of new payroll or wages. Let's get everybody rolling in the same direction, right, with a wider dashboard of metrics. You know, if I were asked you to drive your car and you've got nine dashes on your dashboard, well, which four or five can you live without? Right? Now, ultimately, something's going to fail because you can't see those metrics. And what I just want everybody to do is expand their dashboard, right? Understand that the ultimate synergy happens when you optimize operational KPIs and financial effectiveness.

51:07And that, you know, if you really think about it, all sell, Tom, right? The only, don't sell for two reasons, you know, number one, somebody dies before they can sell it or number two, they go out of business. But every other business that I know of will, sell. If you're ultimately looking at achieving the highest valuation upon exit, it's very important to marry operational efficiency with financial performance, and benchmark your results, not just historically, but projectives. All right. And guys, we have Eric again for another, you know, 10 minutes or so if you do have any questions, if you are on LinkedIn live, you know, shoot, shoot some, shoot them off to me. Obviously on TikTok, too. I'm getting a couple here as well. A question for you that's maybe a little outside the scope of this, but Eric, do you see any from a BPO standpoint, any kind of unique business setups, like obviously we know the C Corp and the S Corp and the LLC, have you seen any kind of ESOP or employee owned type things in this market?

52:10I'm from TikTok. Is there any kind of unique things that you've the actual set up of the operation? So, I can't give you great guidance there. Predominantly we see S-corps and LLCs, you know, depends on what you're wanting to do, you know, with your business, whether you set up as one or the other. We typically don't see a lot of C-corps, which, you know, involves some double taxation, but maybe better off for raising capital. You know, ESOPs are great tools, but really better off as an aquirer than a seller. For sure. I mean, just for the nature of you've got, you, you know, 200 owners, which I think is a great thing. I mean, ESOP, look, if we could represent an owner who wants to sell to an ESOP, I think that would be a wonderful transaction, right? Instantly, everybody's a shareholder and people theoretically would be more concerned about, you know, the health and vitality of that organization.

53:08Vitality of that organization right, right Just kind of a it's kind. It's kind of an interesting I it's gonna get again on tick-tock and on LinkedIn and just that I think the different type of a viewer And the different perspectives on on some of this stuff, too For everybody, you know Nathan here to Okay, just you know just a question on the report. Let me throw it up here You don't have to get those glasses. I don't want to hurt you to hurt your eyes or anything thing. Hold on. Let the me throw this one up here first. Like, will this have everything that a specific buyer wants to see? Is this more for that? Or is this more for you think us thinking about this and kind of setting up our books in a specific certain way? Yeah, so one of the rationales for buying a business is to develop synergies, right a.

53:57You've got cost synergies and revenue. So cost synergies would be, you know, I'm 100 need 200 people, we can do with 180. There's a cost energy. Revenue synergy would be, you know, hey, you're selling the bat and I sell the ball in the glove and we put them all together, we've got a ball game, right? That'd be a revenue synergy. We work with, I don't know, you know, 70, 80 strategic buyers on a given basis and up to 300 financial buyers. Each buyer will have their own set of synergies. Right. So Nathan, the short answer to your The question is, I think our report is only 14, 15 pages. If I were to have a thousand pages, I'd list all the synergies possible. But again, they're unique to each individual buyer. I mean, if you'd like, we can give you a laundry list of what the starting 20 or 25 questions are.

54:49R but we've covered a lot of them in and this, right? It's risk identification and quantification of risk, where the company's been, where it's going. And, then, a lot of it comes down to the makeup of your firm, your individual DNA, how your client roster has changed over the years and where it's going. And Eric, from Sean, have have you seen any difference between valuations of a remote call center operation versus that traditional or kind of the hybrid model? That's a really good question for, I think, where we are today. Yes, and maybe not necessarily in the valuations. It depends on a couple of things. If you've got an on-prem contact center and they're required to be on-prem, that's one thing. If you have a contact center that is on-prem, but mostly they do work from home, it kind of depends on the length of the lease that they're going to try to get out of.

55:48That could affect valuation. Again, if it's after the deal significantly into the time to where the buyer would own it, that's a synergy that the buyer would own. But if it's somewhere in the middle, the seller may be. We'll own and value that synergy. I mean, the reality is work from home is probably here to stay. I know, Tom, you love that, right? So now we really haven't seen it dramatically change valuations. Again, it kind of comes down to that cost synergy and whether, you know, the seller can realize it and include it in valuation or the buyer is going to a realize it years down the road. And hey, guys, everybody that is listening, Eric has agreed as well to, I think we've had a lot of success with a lot of you, and we've had a lot of fun as well on doing some LinkedIn audio events.

56:37You know, early next week, once Mark report comes out, and a lot of you get a chance to maybe digest it or take a peek. I'm sure there'll be some questions. Eric has agreed to come on. And we'll do whether the, you know, if there's three people there and we're done in five minutes, that's great. If there's 100 of you and we're there for a while, that's awesome as well. But I think we can answer a ton of your questions that maybe you would have if you Eric, I will put the links to everything, you know, when we publish this, you know, today, tomorrow. But can you just again, talk about or just give the URL of where they will be able I don't know what you're And then just last thing to Eric, if somebody does want to get ahold of your email, link

[Gap 58:15–58:41: no reliable transcription]

58:41open my eyes up. And also, I think validate a lot of things that we're a doing here, which made me feel really comfortable that, you know, again, I can talk with this with a lot of peers, but everybody, a lot of people are doing this so differently. So again, not, not to say one way is right, or one way is wrong, but to have kind of, I think some numbers that we can all kind of start to, I don't know that we were kind of the first first soiree to get the message out on what the that I Yes, thanks, Tom. And Eric Hamilton and Jeff Cohen and our team were really the hard drivers behind the project. and we'll continue to roll things out as we uncover them. And look, Tom, information power, right? If we all kind of share information, provide best practices, I think as a whole, the industry would be better off tomorrow than it is today.

59:41Awesome. And then just a little little shout out from Sean. Say thank you. This was excellent. Sean, I appreciate it. Thanks for the questions too, buddy. Appreciate you. All right. Thank you, guys. That's pretty good. We're an hour almost right on the nose. So thank you, Eric, so much. And then guys, I'll shoot some things out for next week. We'll bring Eric back and do glared a little audio event after the report comes out. So if you guys have any questions, we can address them then. Thank you, everyone. Thanks. Thanks, Eric. See ya.