Video - The Growth and EOT Sale Story of NOVOS with Sam Hurley
VIDEO: 47:22 mins
AUTHOR: Robert Craven and Sam Hurley
In this GYDA Talks, Robert talks to Sam Hurley. Sam is Co-Founder and Chief Strategy Officer at NOVOS. He previously headed up SEO for Made.com across all major European markets. His achievements include growing Made's non-brand SEO traffic by over £10.4million. NOVOS has grown from 0 to 45 people in 3 years. They've won numerous search & drum awards and were most recently voted 5th Best place to work in the UK.
Robert and Sam discuss the growth and sale story of NOVOS, the highs, the lows and the journey to an Employee Ownership Trust.
THE GROWTH STORY
False starts
Doing what others don't do
create a structure/framework from day one
write it all down and share it
Specific niches are a good thing
Think Tank model
THE EMPLOYEE OWNERSHIP STORY
Employee Ownership Trust
Standard sale destroys the culture
Did EMI first then EOT
How it all worked
All the pros (and a bit of downside)
Transcription:
Robert Craven 00:07
Hello, welcome to guide talks and today I am absolutely delighted to have Sam Hurley with me, Sam Hurley and we only have 40 minutes but we have about five days with a bottle of red wine or two conversation to talk about how the heck do you grow an agency? How the heck do you niche down and employee ownerships? I don't quite know where to start. Absolute pleasure to have you with us, Sam. How are you?
Sam Hurley 00:35
I'm good. Thanks, I have a nice long weekend. And I am relaxed and a bit covered ready for the chat.
Robert Craven 00:42
Brilliant. Fantastic. I love that. So would you just like for people who don't know who you are? Just kind of give us a bit of background what you're known for what you've done? That'd be great.
Sam Hurley 00:54
Yeah, sounds good. So originally from the Welsh Valleys, deep, deep in the Welsh Valleys a long, long way from where I am now in Wales, in London, and straight out of university. So I worked for a digital marketing agency. It's quite a broad agency. But I was his first in-house employee. That was quite a learning curve. And he kind of offered every service under the roof. And we grew that to 10 to 11 people. And then it came crashing down very, very quickly, as fast as it went up. He sold that to another agency. They specialize in SEO. That's why I learned what an SEO strategy was. And probably specialized into that channel. Worked at that agency for about a year to two years. And then that's when I went in the house to me.com. I was their SEO manager lead. SEO across all international markets made a shit tonne of money. And from that experience, it kind of evolved myself, my business partner, we set up a men's accessories website. I didn't do very well. And then that eventually evolved into the agency that I work at NASA myself, my business partner set it up about three years ago. And it's called no vos. And we just specialize in SEO and we just specialize in SEO for E commerce brands.
Robert Craven 02:19
So it's fascinating that as long as you had two or three sort of pops at the chariot before you actually got it right that it wasn't, you knew you were trying to run your own thing, do your own thing. But it's the latest incarnation of Sam that actually really worked. Is that fair to say?
Sam Hurley 02:39
Yeah, for sure. So was that made? Yeah, like I said, they made them a lot of money. And typically Hello scenarios go, I could categorically say to them, I made them over 20 million pounds in non brand growth, way more than they expected. And they were like, That's great. Here's a 2k pay rise. Okay, well, thanks. Thanks for that. Yet, the way it was operated was like, I had an infinite agency budget. So like, I could pay my agency 10k a month, I could double that 20k a month if I could prove the ROI. So it's like all the money was over there. But then they weren't rewarding me for like leading the channel essentially. So yeah, myself, my business partner is fed up with our jobs, we kind of set up a men's accessories website, love building it. But as soon as it was built, that's when you had to actually fund the growth. And that was coming straight out the paycheck. And that didn't last very long. So I started doing freelancing to support the growth of that site. And then it just very quickly became obvious that freelancing makes you a lot of money. Building a small ecommerce brand in a very competitive niche will rapidly lose you that money so I closed down that niche accessories website and then myself and my business partner went full time on the freelancing which eventually evolved into an agency.
Robert Craven 04:00
So it sounds like you've kind of got you're not your fingers burnt, you had experience of being an unappreciated member of staff, along with everything else, and I guess that that probably feeds into does that feed into why you thought that the new agencies should end up going down the EEO routes.
Sam Hurley 04:24
It's partly that but it was also the agency before that really scared myself. I swear myself, my business partner met so I hired him at university. We both worked there and people wise, it was a great agency had a lot of good friends, but cultural wise from like the top down, it was just a horrific place to work and all of the all of the bad culture, impact on mental health, just anything that you can imagine bad working at an agency that ticked all the boxes, but it was just pretty much all that blown under the rug if you go to the pub at the end of the day and just drink away, and that's kind of like how the agency operated. So it was very much if we were going to set up our agency, it needed to be the direct opposite of that one that we worked at together.
Robert Craven 05:18
But isn't that the case? I mean, doesn't everyone kind of start off with the one? The one thing I know, I'm never going to do is do it like that? Isn't that isn't quite common? That's kind of the starting point of when I was employed. The one thing I didn't like about being employed was not having enough direction, having too much direction, not having enough budget, not seeing what the way forward was. And then you start running an agency and you realize Oh, actually, it's, it's not, it's not so easy, running 10, 15, 20 peoples I thought, and lots of people end up falling down the same, the same rabbit holes of not doing stuff properly, as is that as a former employer, but how do you get around that?
Sam Hurley 06:10
Well, I mean, what we did quite early on was, so even before we went full time on it, we wrote down all of our values and our missions and what we wanted to achieve. We did that and liked two to three pieces of paper. And we kept re referencing that throughout growth. And just Yeah, everything we did we just people led and all about doing the opposite of that agency. Which Yeah, it scarred us for life. And I'm still a bit scared to be fair from that experience.
Robert Craven 06:44
So let's do the positive spin on this. So what do you want your new agency to be for someone working there?
Sam Hurley 06:56
I think, first of all, to actually set it so because of my experience at the first agency, which grew and declined very quickly, and then having that bad experience. The second one, I myself was kind of against setting up an agency. Because of that experience, I just assumed that's how agencies went, they just went up, and then they came straight back down. But when I was freelancing, my business partner was kind of persuading me to turn it into a full time agency. And it wasn't until one of his friends gave him advice like, outline why you wanted to set it up, or like what you want to what you want to achieve with it. And that's when we sat down and like, kind of came up with a structure and why we wanted to do it. And the end goal was always to sell it eventually. So have that timeframe of roughly about five years to sell the agency. And, again, when I was in house and made, we had this ridiculous agency budget, got all of the leading agencies to pitch me. And they basically all said the same thing. So we needed to come up with a very, very specific niche. And for my interest, it was ecommerce, I wasn't very, wasn't very interested in any other industry within SEO. And again, from that experience, it was like there is a definite need in the industry for this. So getting behind that USB was a massive motivation to get the ball rolling and set this up.
Robert Craven 08:28
So what I'm struggling with lately, is, so far, you've said what everyone says, Do you know, which is hey, you know, we're gonna be different, we're gonna be better. We're gonna be friendly, we're gonna be nicer. We've got a strategy, we've got a niche, or either in terms of, you know, a functional niche, or in terms of a specific industry niche. We're gonna press the button. And in three years time we're gonna sell and we had this conversation the other day, and people always come up with these ridiculous numbers, which bear no. Nothing, no semblance of reality. So there must have been something different about the fact that you said all that stuff, but you went and actually did it. So what do you think that difference is? And isn't it isn't knocking other people? I'm just saying that a lot of people have some reason they don't get the traction from a better word.
Sam Hurley 09:35
Yeah, so yeah, I think the niche definitely helped with like, we knew we wanted to do e-commerce, we knew where the need was, it was very much this. This kind of like not not quite the startup, but like somebody who's got the investment and wanted to prove the concept and wanted to scale to the next level. But they didn't really want to invest such a high retainer with some other agencies. they'd been burned with other SEO agencies that had neglected SEO for five years. So just thinking they've made neglect of Fiverr. There's so many other smaller e-commerce brands that are doing exactly the same. So it's very much like knowing exactly who our target market was doubling down on them. And it just massively helped with our marketing just to be like.
Robert Craven 10:32
Yeah, so that's a lot about saying, No, it's like that wonderful Dilbert thing, where it's like, the first picture is it's a business with no strategy, or in your case, no niche. And until that's gonna, yes, we can do that. We can do that. And then in the second second picture, it's a business with a strategy, and he's going no, we can't do that. There's that kind of sense of saying no to stuff. And being really clear about what you can do and who you can do it for, rather than what most agencies do, they end up lowering their offering, because they're so keen to keep their clients happy.
Sam Hurley 11:15
Yeah, that's exactly why we're, yeah, we're very hard on like, not moving into other channels. So like, we would never ever set a paid channel as a channel. And also, yeah, not taking on ecommerce brands. If we, if we take on any client that's outside the e-commerce niche, there's kind of still a way that their websites set up that they are ecommerce, for example to like selling tickets online or selling concert, gigs online, they're all still an angle for e-commerce, but 98% of all of our clients, e-commerce, we know their needs, they all have the same needs. So it makes our work way more efficient, it makes our processes way more efficient, we probably turn away. For every lead, we get in, we probably turn away like five to take on the one. And we even turn away some ecommerce brands that just don't really fit with our niche, like if they're like, either they're too small, or they're just way too big in terms of like, not being able to achieve anything. There's very, very focused on who we target and who we want to work with.
Robert Craven 12:25
And did that kind of make people want to work even more, because you're sort of saying, Sorry, we can't work with you. You don't quite fit within our ideal, perfect plan. Did you find people to come back saying, oh, yeah, we are closer than you think we'd really like to work with your audit. People just walk away and think that you're up yourself. And what was the kind of view of people to that?
Sam Hurley 12:51
It depends on the niche. But some, some, like the gambling clients, for example, and finance clients, like they have massive, massive budgets. So they were just like, they didn't really care. They just knew that another agency would just take them on straightaway. Some of the like, I know. I remember speaking like an American art brand. Yeah. And the way he was talking to us was just a bit off and like the way he presented himself as a thought this guy's because going to be a nightmare. Clients have turned him away. And he's he was sending a lot of emails, not quite understanding and like apologizing, but the way he come across an email, but as soon as you as soon as you get those red flags, just like there's just no need to take that money from someone that just damage your reputation down the line anyway. That's pretty much like, we know our niche. We know our specialism. And we definitely just did not want to dilute that.
Robert Craven 13:48
It's just the power of no, isn't it? And I think I think it's, I think it sends really clear messages within the agency. You know, as in you know, we're not we're not tarts and prostitutes. We won't do anything. Actually, we know, we're really good. And we are really good at it. We should be proud of what we do. And we should just just kind of do. Do even more of it. So if you had this plan, we're going to sell this agency in three to five years. If I've heard that once I've heard it a million times. But most people don't do it. So is there. Is there a secret of this success beyond? Beyond we had a niche? And we really thought carefully about our people, or I mean, I'm not, I'm not being mean to be facetious. I was wondering if, if there's layers and layers and layers or we just you just started with that and that and everything fell out of that
Sam Hurley 14:45
Show there's many, many layers to it all, but we are yeah, like I said we had all of that written down from the start. Before we even started the agency. We knew exactly what we wanted it to represent, like where the niche was in the industry. But were ridiculously process driven. So having that mindset of wanting to sell, that meant that the agency couldn't be built around myself and my business partners like background or knowledge or like experience. So we had to like, before we even had employees, we essentially downloaded all knowledge into a notion, which is what we use essentially like an internal intranet. And those processes are, they're very much for the existing team to like, keep building on. And there's just like, it's almost just like a spiderweb of processes about how to do blah, blah, and certain CMS is or like how to communicate with certain e-commerce managers, etc, etc. So yeah, incredibly process driven. And then we've even from day one with staff, we always adopted a lot of likes, getting their buy in and giving them a voice in the company. We do like a model called Think Tank. And essentially, every single month, we give employees a theme or a topic, then they go off in groups and pairs. And they bring their ideas together, give them back to the senior leadership team, then the senior senior leadership team, they go through them, and then assign them back to the staff via their KPIs. So that's why like, we've always essentially lost when we, once we become an EO company, a lot of the way that we operate shouldn't really change that much anyway, because we've always wanted to get people and like, give them a voice in the agency. And getting them involved in things like pitching and sales from an early stage.
Robert Craven 16:34
I love it. I love the sense of process. So it's not philosophy, the book, it presumably is not fluffy, the bookkeeper app, but it's finance app. So we're looking at processes and desks rather than, you know, the people in terms of line. Yeah, I love and you've said it a half dozen times already. We wrote it down, we wrote down what we wanted to be, we wrote down, you know, what it would look like, and we kept going back to it. So there's lots of arguments to say, you know, yeah, on even on your weekly meeting, at the top of the meeting, purpose, Vision volume in three years time this year, what are we doing this quarter? What are we doing, just to push it through people's heads? Oh, yeah, this quarter, what we're all about is sales, or this quarter, we're all about efficiency, or the big thing we got to do this quarter is get a new website up on disk. And I just, I just love that simple approach, because I think what happens to so many people is because they haven't got it written down. It becomes a bit fluffy in a bit of a so they go, Oh, this client wants us to do some email marketing. Well, we shouldn't do it. But we've got a bit of capacity. Well, we'll do it and then that client will do the dangerous part. And it turns into some kind of amoeba that does lots and lots of different things, and you've lost and and of course, um, the other thing that goes on what's really interesting is, nearly every agency conversation we have is either we want to become more niche, because we're too generalist. Yeah, that's a really good performance. Or we feel we're too niche. We think maybe we should get nearer being a full service agency and start doing coloring in. And it's, it's, it's like a perennial problem of, of, you know, where is the sweet spot between a pure service niche, because what happens if your performance agency, what happens if Google changes their model? Or if you're an SEO agency, what happens if what happens if? And yet, it sounds like you pretty much stuck to the knitting, you just said, Okay, this is what we do. We're good at it. And we're going to be known for doing it. And that's what people are going to know us for. And if they won't ask, plus several other services, were good enough that they should respect us as being experts in our field.
Sam Hurley 19:04
Yeah, I think two things on that as well, like mentioned, like writing it down. But then also sharing that back to the employees. The first few we hired, they knew we wanted to sell. After that we kind of kept it and didn't really tell people, but we gave them full access to everything else. So like, values, targets, we've set ourselves, our target customers, like everything we wrote down early on, we've given it to every new employee, when they start, they go through a rigorous onboarding process. And I still do that now. So when a new employee comes on board, I take them through basically that Word doc, myself and Antonio did very early on. We've turned that into presentation decks, we'd go through that and literally nothing's changed apart from our targets because we're way above the sales targets that we originally set. And then yeah, just goes back to that thing I mentioned where I got all those leading agencies to pitch me And then I don't know, like when you when you when you work at an agency and look up to them, you know, are these huge, hugely respected agencies, but then when you get them, like pitching to you, there's a snow like USP or anything behind what they were saying. And it's like business 1 to 1 that I learned. GCSE was just like, yeah, having a USB to compete against competitors
Robert Craven 20:20
Page one day one hour one, I know, I ran a workshop for 50 of the UK's top agency sales directors. And I got them to do elevator pitch, I got them to actually phone, phone their own phone and leave a message saying Hi, my name I work for. And I also then got them to video each other doing their doing their, you know, who we are and what we do think. And it was, I was absolutely shocked at how they went off with words. I didn't understand, never mind a client not understanding. Or alternatively, you know, ends up with, but what makes a real difference is we do what everyone else does. But we do it a bit cheaper. If I Yeah, that's really not a proposition, you know, that's really not, you're not selling it to me. And, I was amazed at how low the bar was. And I think the bar is because what most people do is they take the presentation deck or the sales deck from the last place they worked and change the logo. It's continued. We were founded in and what we do is and we invest in and our founders are, you know, is? What do they not realize that nobody cares? You know, you've got a website, I know all that stuff. Why don't you tell me what you can do for me and how much it'll cost and what the return will be. That's why I'm interested in EDA. And yet people fail, fail to do that. So, so the
Sam Hurley 21:54
So on the other point you mentioned, but the niching down benefit that people forget about is the partnerships that come with it too. So like, if we just partner in SEO, then you can partner up with somebody else who just does something in PVC, so and then if you start diluting your proposition, then you start stepping on toes with some of your like leading partners, whereas you essentially build this bigger agency within your network and you're like referrals between each other, and it's just so powerful for marketing and sales.
Robert Craven 22:28
So you end up with with kind of like almost as a consortium in a way if someone comes to you, and then says Are we want something that's outside your your skill set, you've got someone who's a trusted partner of yours, you can you can bring in
Sam Hurley 22:46
Exactly. Under that very similar agencies like one just do e-commerce, but for email one just does it for paid search and paid social. One just does it for EECOM consultancy, one does it for affiliates, etc. So yeah, it's just sort of like referring to each other. This is so powerful.
Robert Craven 23:04
And just out of interest, because it's always it's always a an area of fascination, there referrals between the different agencies, would they be paid or unpaid,
Sam Hurley 23:15
No commissions between we don't do anything like that. The only time we ever do Commission's is when I mentioned the non e-commerce brands. So when they come to us, and we refer them away, that's the only time we take commissions. So we refer them essentially to another SEO agency, which is a competitor. So we refer them to them. But any of our like, core clients, we don't take any referrals from other partners.
Robert Craven 23:40
Because of the first ones, you're not gonna see them again, you're just hand you've done all the hard work, marketing them, bringing them in, and then you're not going to see them again, because you're just giving them to giving them I totally get that. So just in a couple of sentences, what was the agency growth? Story? What sort of what, how did the headcount go one year after the other year after the other year?
Sam Hurley 24:04
So yeah, January 2019. That's when we started the agency. So myself, my business partner went full time in January there. We hired our first employees in March. They were two graduates. I mentioned this in the last call we had but that is like one of my feedbacks to other agency owners to talk to is like your first hire, try and go as senior as you can go and avoid hiring the graduates. as awesome as our grads have been, during that period that first year, that is when it's just the agency just Carnage and you just don't have time to sit down and train them. So it's like, it's just not found either. I just like not getting the training and the hand holding that they need as graduates. But one of them is still with us now and she's like, amazing and like one of the best in the agency, but I always recommend that going as senior as possible. From there. We kind of kept it as my business plan. Nando's graduates for about five or six months. And during this time, we're essentially just like building the cash in the bank. Because we hadn't met, we didn't have any intention of getting investors for the reasons we just mentioned, but like, we just knew an investor would come in and just see how quickly we could get paid media to just dilute the proposition. So we just were never interested in doing that. Because we essentially built up a lot of cash in the bank. And once we have that cash, we essentially like to invest in ourselves, right at the end of 2019. That's why we hired the leadership team, super senior people from other agencies, and another mid senior. By the end of that year, I think there were six of us. And then it was the next year where That's where it expanded to that we closed that year on 20. And then it was the year after where we essentially did the same thing. So, to build up even more cash in the bank, we knew we needed to expand into digital PR. So we took a lot of that cash in the bank and invested heavily into building a digital PR team, which was essentially a loss maker for three to four months until the concept was proven. We sold enough clients. And now that client team makes up about 50% of the agency. And closing last year, we were about 35 people. And we're on 43 Now with another five job ads out.
Robert Craven 26:34
Right, okay, fine. So that growth Great, that's a lovely story. And it's lovely, how you almost plugged and played digital PR into it and recognised it would take some time, but you knew that you could cross sell and upsell and, and I loved the way that actually benefits. What fascinates me about your story?
Robert Craven 27:03
It sounded like from day one? She has a question. Did you know from day one, you'd end up going through employee ownership? Or? Or when did employee ownership become something that you kind of understood? And when did you kind of what was the actual journey to end up actually going through the EEO.
Sam Hurley 27:23
So 100% didn't know about the model at all. When we first started, we knew we wanted to sell. And we went down the traditional route, I think it was the end of year one. That's when we engaged in a way point, like an M & A advisor. At that time, we were only less than a million turnover, but they liked the growth aspect of it. So like they were their whole thing was like they'd help us to grow and then sell us eventually. Straight away, that was just a red flag of just that this is not us, they just didn't understand our niche and how niche we were within digital marketing. That didn't work out. And then we also made a big mistake going down. It wasn't a mistake, because we got out of it. But we spent a lot of time wasting with almost like a model that I don't really know how to describe. But they would essentially group up a bunch of agencies together, take shares, and they want the asset to be big enough with China, and then try to float in the stock market. Yeah, I wasted a lot of time with that. So and then we pulled out of it and the best thing we've ever done. And then from there, we just like a heads down, we got a growth advisor and he helped for a while as well. And then it wasn't until my wife's agency. They'd been running for about 10 years, I think 14 years. And then they did employee ownership. And that sounds pretty cool. Got a bit more information from them. And then we were actually the agency they used to do EEO. We were actually engaging with them to do EMI at the same time. They do EMI and they do EEO. So it's just like, perfect, just had a call with them. And they run us through the whole model. And we just like yeah, this just takes all of our values and like what we've done and like what we want to achieve. And it wasn't until hiring a lot of like mid senior people and hearing stories from them from the other side of like, they'd been working at agencies similar to our supply. Yeah, people first everybody loves the people growing really fast. And then the next day the founders like alright, well, we're getting bought out by this French Corporation. I've just got my millions. Yeah, I'm gone. Yeah. And then hearing the story from their side of dislike. They felt a little bit like yeah backstabbed and then they had to pick up the mess of like this small awesome called To being destroyed by this French Corporation. And then this was I think about five different people finding different agencies all told the same story. So that was a big eye opener for us. And then even just researching a bit more like a lot of agencies that I used to, like really looking up to absolute juggernauts in the industry is like periscopic books. When I was leaving the university interview, they're, like, hugely well respected. Then they got bought by Merkel, and now their website is just gone. They don't exist anymore, that just redirects to Merkel. And he just like, all of that hard work is just, it's just gone. The agency is just dead. The holy ER model just ticks the box rustling perfectly.
Robert Craven 30:45
So for those who don't know what yo is, what is it? And how do you do it?
Sam Hurley 30:53
Yeah, to call it employee ownership. And to do it, we engage in an agency called possible threat, they do EMI, and employee ownership. But essentially what it is, is myself, my business partner, it was a 5050 Holding, we sold 90% of our shares to an employee trust. And the trust essentially, represents the employees. So the individual employees don't get shares. The trust represents the employees. That makes sense. Yeah, the part that some people find confusing is the difference between EMI and the EEO. So we give people EMI first, so they are like the senior leadership team and some of our first employees, and then they just hold shares individually, the CEO then is actually the sale, so then they benefit from the sale as well as us. And then the trust that essentially owns the company now. So the company used to be statement Group Limited. It's now a statement group trust limited, and that represents the employees. And that's it from a legal perspective, from like, the benefits to like from a commercial standpoint. So the obvious difference from an agency founder perspective is that if we became an EO about four weeks ago, right now, myself, my business partner would be sat on like a huge wedge of cash if we'd assault the traditional route, but then we'd be put on these massive sale targets that we probably wouldn't achieve to get the rest of the earn out. The difference is that now we just take a small amount out, and it's more like a long period of time. So then we're more bought into the longevity of the company. So our own out might take six to seven years plus, and it's just like much smaller, longer periods of payouts, directly from the profits, rather than coming from like, a massive company. That makes sense.
Robert Craven 32:56
Yeah. So so. So the company pays you, in this instance, the company pays you out of profits.
Sam Hurley 33:06
Yeah, there is a route where you can, you can take out a loan. So if you wanted to get the cash upfront, as a business owner, you can take out a loan, and essentially the business is then in debt. But yeah, we just didn't want to do that route, we are only still like three years old. So we're very confident that we're just so much more growth that we can get so much more efficiency.
Robert Craven 33:29
But if you do the math, I totally agree with you that you're now in a state stage where the efficiencies really start kicking in. And if you do the math one can see that over six years, the money can come out of the profit of the business.
Sam Hurley 33:50
Rather than profits there.
Robert Craven 33:53
While the alternative is that people want five times EBIT, isn't off, we go on, on that, that little rabbit hole of what our business is worth and so on and so forth. So this way your legacy is left intact, the business that you created doesn't get bothered about the reward for the risk that you put into the business in the first place. And there's a relatively gentle tapered transition as you become as the business becomes less and less about you and more and more about the people that run it unless of course you choose to be one of those people. So everybody wins if there is no, there's no downside to this. Apart from the fact you don't have a huge chunk of money so you can vote.
Sam Hurley 34:48
Yeah, it just depends on what your goals are, doesn't it? I think it was like the nitty gritty so you get valued by an external agency. So we got like an external by ration accountant to give us our valuation. So we're not dictating the word worth 20 million pound or whatever it's like done by an independent. And then the additional perks are, it's tax free as well. So that's always a nice incentive. And then for the staff, they do each year. So like, for example, at the end of this is the first year as the profit share, we're going to allocate a certain percentage to the staff as profit share. And every single year, that percentage just increases and increases as we get paid off. And they'll benefit with I think it's about these 3.7k tax free profit share bonuses each year, as an individual. And then we've Yeah, so once were paid off, in the long run, if it's still like a 50 person agency, then some of those bonuses that people would be getting would be huge, like, the equivalent of an annual salary, but as a one off bonus,
Robert Craven 36:00
And the trust comes presumably, if the trust elects to they're able to sell their business, and everyone capped out.
Sam Hurley 36:11
Yeah, it's just whether I can't imagine a scenario in my head where another company would want to buy an employee owned company.
Robert Craven 36:19
So it's not a Frankenstein's monster is better, because it's, it's self sustaining. And, and, and I have to ask you a moment. I regularly interview people who sold businesses, and it's probably the most stressful thing. After probably slightly more stressful than divorce and moving house in terms of his arm is off, it's off, it's on, they want to see this, they want to do that. I've got to be a New Yorker, or, yes, I've got the money. No, I've not got the money. I don't know, many people really enjoyed the sale process. Was it a stressful process?
Sam Hurley 37:02
I wouldn't say it's stressful. Now, it's a lot of admin, as you can imagine. I don't know why he did it. But my business partner at the start was like, I'll sort the legal documents out and do all of that. And he just did a lot of the admin work. So it's just a lot, a lot of paperwork, getting all of our historical documents in place, a lot of back and forth between the accountant agencies and the legal agencies. But the overall process wasn't like a stressful thing that you mentioned like, a third party buying you.
Robert Craven 37:34
Because of you, because of your choice and you go your speed. And if you fail to deliver on a deadline, it just moves the finish line slightly further on, it doesn't actually, it's not like the deals are going to be off. And I think what happens is it's Yeah, everyone in a deal is looking after number one. So the buyer is looking to screw you down in some shape way or form 3d.
Sam Hurley 38:03
The whole process is just terrible. It's like, and then even the term burnout is just terrible work. You have to like, earn yourself out of your own company that you built and are proud of. Yeah. Again.
Robert Craven 38:19
I know several people who went back for the urn out and one particular guy and date because what he always used to do was he used to go to Starbucks, 730 until nine and go into the office at nine on a Monday morning. So after he sold the business and had a three year run out, he had some cash and he had a third in cash, and then you can get the rest over the next three years. And when he went back, he did what he normally did. I know he used to go into the Starbucks at 830 and go into the office at 10. That's it. He went to Starbucks on the first day back 830 dropped into the office at 10 o'clock, and the new MD appeared and said, What are you doing coming in at 10 o'clock?' And he said, This is what I do is how I do this. When at 10 o'clock on Monday, he said you don't do that here. Here. We weren't Monday to Friday nine to five. And by the end of the day, he said you know what? You can keep the rest of the money. I've got enough. Just no way. There's no way I can do what you want me to do to actually make this happen. Forget it does not worth
Sam Hurley 39:18
It is such a small, obvious representation of how the culture changes. Imagine how different like bigger decision making would be in that scenario. I think on top of the thing with the iOS, like if you are doing like the actual running now and operating of it isn't that much different to what we were doing before because like we had that thing in place where I mentioned the think tank model where employees would get a voice anyway. So as long as you genuinely care about your employees and want them to give input into your company and not just doing it for like external USP then the overall scenario and running of the company doesn't really change like The trust there's, there's almost like a little board. So like, like I mentioned earlier about, we did that huge investment into the digital PR team, that kind of investment would need to be run by the board now, because it would have a massive impact on our profits. So it took our profit margins from like 20, down to like 5% or something. So that would need to be run by the trust. And we'd have to essentially put like a business case to the trust to let us do that kind of investment, because it's definitely impacting
Robert Craven 40:32
because the trust is the shareholders. So the inverted commas. So the trust appoints the board. Yeah, and the board has to report back to the shareholders. So it's
Sam Hurley 40:43
So it's essentially like, Yeah, anything that directly impacts our profits significantly, the trust needs to sign off on it, because then that impacts the profit share of all of the staff. And then we've also set up a people Committee, which sits below the trust. And then the role of the people committee is like five different people. Two of them were nominated for historical reasons. And then three other people essentially, like, pitched themselves forward, to be on the trust, and then their goal is to like give all of the staff a voice and like their opinions to then feed into the trust that way. And then the trust is made up of a buying party, an employee and an external person. So to start with, it's my business partner, he's going to rotate every two to three years, and then I'll go on and switch with him. There's Laura, who's been with us since year one, so she knows the culture inside out, she'll rotate every two to three years. And then we've got an external person who used to be our growth advisor. But then once we did the EEO, we stopped working with him, but now he's back on the trust. So he understands the business. And again, he'll flip out every two to three years.
Robert Craven 41:53
Brilliant, I love it. I love it.
Sam Hurley 41:56
It's cool model.
Robert Craven 41:57
It's more than cool. It changes how people see how they can grow and develop their agency. Because suddenly, you're not obsessively thinking about how to increase EBIT da hat, we make ourselves sexy. Do you know who's buying? You know, we don't see you don't know what we're really buying? No, we don't know what they're really buying. But if they're a bigger agency, they're going to want but if they're, you know, and the number of board conversations about, about musical people who might be buying and what might they want, if they were who they were. And, you know, it just feels a far more pleasant, pleasant way of running the business.
Sam Hurley 42:48
There's a moment when you're like, essentially, when you're signing all the documents with the lawyers. And there's a moment where like, there's literally literally a piece of paper that says, you are saying that you will give up all of your shares and give them to an on our document, it says like to the employee trust. But when I signed out, I just couldn't fathom that document saying something like, media calm or something. I mean, just like giving your company over to essentially people that just don't have a clue what SEO is, and they're just, they've just got a department of like, oh, that agency looks cool.
Robert Craven 43:22
And it ties straight into I've mentioned the Clif Bar story quite often, where after three years, he was offered $105 million between the two of them. And he's just kind of really macho. I've climbed Everest without oxygen, I've deep dive 200 meters without oxygen type, adrenaline guy, and he's going to the lawyers to sell the business, I think to craft or somewhere like that $105 million after three years. And he just starts throwing up in the carpark and realizes that by signing the document, he's turning his back on his staff, on his stakeholders, on his family, on his suppliers, on everyone and his values. And he marches in and says, you know, the deal's off? Everyone goes, What the bloody hell are you doing? He said, Don't get it done, it's like, this is not what I wanted. Under, there's a book called Small Giants by Bo Burlingham, where he takes 10 case studies of businesses, all of them do exactly the same thing, because he didn't exist 10 years ago, in that sense, and all 10 alternate businesses turn their back on the big money, because they realize they'd rather run their own thing in its own way and do their own thing for their own people. And take the big check, because we know what happens when you take the big check. You know, what happens to the business?
Sam Hurley 44:44
Exactly, yeah. And that's why I do these podcasts because it's not a very well known model. And just just to make sure people get aware of it before they potentially go down a route that they might end up regretting. Yeah,
Robert Craven 45:00
Brilliant, that is a perfect place to stop. Thank you so much for your time. Thank you so much for explaining the outside piece, I kind of feel that we should have part two in part three and part four, to see kind of how it went and what happened. What happened?
Sam Hurley 45:16
That's the thing, like the big benefits of it around like staff retention, acquisition, and engagement, like how we use it in like sales decks, etc. Like, we haven't only just explored that now because we're only four weeks into it. Yeah, but those are like so many additional benefits of the model.
Robert Craven 45:35
But the worry is that people use peep, some people are kind of using it for greenwashing for want of a better phrase just as a marketing ploy rather than because this is what we're about and what we care about. We're gonna have to stop. It's been great talking to you, Sam, people can get ahold of you via the links at the end of the video. And amazing story, real food for thought. And I think this is one of those interviews which people will revisit and go, Oh, maybe we don't need to do it the way we're going to do it. I love it. Hopefully. Just a very big thank you for being very honest with us and kind of sharing your story. Thank you so much.
Sam Hurley 46:18
No worries at all. Thanks for having me.