436: Your Tech Stack Increases Valuation by 6-7x, with James Ciuffetelli
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This week an A-List transformational leader joins us, James Ciuffetelli. Our host George Leith and James discuss the importance of adopting new technology and investing in your tech stack backed by real-world examples of great success and undisputed numbers, how the baby boomer generation is approaching an exit in 2021 with their long-established businesses, and how prepping your business for exit is strikingly similar to prepping your house for sale.
Establishing show notes for this week’s guest was a pick-and-choose from a long list of incredibly large numbers and tremendous accomplishments. James Ciuffetelli is a transformational leader with 30+ years of experience. He is the Co-Founder and CEO of Whiteark, a consulting firm based in Melbourne, Australia. James was a digital transformation lead for a $1Billion Telco/Marketing Services business, a member of the carve-out of an $800Million turnover business from an ASX Top 50 to Private Equity, and has led teams of 1000+. James also generated >$1.8Billion of cumulative free cash flow for a global shareholder post-acquisition of an SMB Marketing Services business which resulted in value creation of >$1.2b to investors, has 2 Bachelor’s Degrees (Industrial Design & International Business) and a Master’s in Marketing. The list goes on.
James Ciuffetelli’s education and accomplishments are quickly prevalent as you tune in to another fantastic conversation on the Conquer Local Podcast.
If you want to hear more from James, check out The Chiefs podcast where he and his Co-Founder of Whiteark, Jo hands discuss what makes leaders tick.
Join the conversation in the Conquer Local Community and keep the learning going in the Conquer Local Academy.
George: This week, the “Conquer Local” podcast travels to Melbourne, Australia, the home of James Ciuffetelli, Co-Founder and hands-on Director of Whiteark. And James has a long-standing career working with private equity companies in enterprise business. When I met him, he was the CEO of Sensis and running an organization of over a thousand employees, Sensis was the Yellow Page business owned by the telecommunications company, Telstra in Australia. And then it was bought by private equity and James started to learn the private equity space even deeper. So we are very privileged to have James on the show. I was on his podcast here a couple of months back. We’re gonna get James on the show today to talk about how adding technology to your business’s valuation is one of the things that we need to be thinking about as sales professionals, and talking about that value proposition to our clients. I think you’re really gonna enjoy this episode. James Ciuffetelli, coming up next here on the “Conquer Local” podcast. Joining us this week on the “Conquer Local” podcast, as promised, all the way from Melbourne Australia, James Ciuffetelli. James, welcome to the show.
James: Thanks for having me on George. It’s always a pleasure talking to you.
George: It was a real privilege to speak to you a couple of months back. I enjoyed being on your podcast called “The Chiefs.” You co-host that with Jo Hands and you’ve continued to release, see, you got me because I subscribed, but I see that you’re releasing other episodes. So congratulations on bringing that podcast to light.
James: Well, we’re really pleased to A, get you, and I’m gonna tell you, I think you’re ranked in the top three of our… We’ve had 40 plus podcasts. You’re in the top three. So, you’re famous down under, George.
George: Well, I really enjoy your country, that’s for sure. We had some great trips down there and appreciate getting some of your time. And you know, James, you and I met a number of years back when you were at the Sensis organization, and I’d love for you to give our listeners just a big of your background. I gave them a bit in the intro, but I’d love to hear it from you, a little bit of your background, and what you’ve been involved in over the years in your career.
James: Sure, so George, I’ve got about 30 years experience across, predominantly sales, I’ll say that’s my sweet spot, my area of forte, but running businesses, taking businesses to market, running product teams, right across the gamut, across a variety of industries from manufacturing, automotive, telecommunications, retail, and education. But my real passion has been, as you mentioned, I spent 20 plus years working with small to medium-sized businesses, SMBs, I absolutely love and still to this day love. Spent 20 plus years working with them in the Sensis business. And spent really, I’ve spent my entire life in small business. My father and mother had their own small business. Italian immigrants to Australia, so I feel like I’ve been immersed in that SMB space forever. And I still find myself today in my consulting or in our advisory business, really working with those mid-tier small businesses who are trying to get to a private equity sale or what have you. So, I’ve got an interesting story. But I think a lot of it revolves around small business.
Creation Of Whiteark: Helping SMBs Work Digital Transformation Plans To Get To A Private Equity Sale
George: And you had a connection with private equity because that was the ownership group of Sensis. Recently, Sensis has been acquired. And you know, with your departure from that organization, explain to us what you’re doing now with the consulting work that you’re doing. It’s very interesting to me.
James: Yeah, so George in 2014, a Los Angeles-based private equity firm, Platinum Equity, bought 70% stake in, then, the telecommunications-owned Sensis business in Australia. So, you know, they came in and I had the good fortune of being on the executive leadership team, and I was actually running what was formerly Yellow Pages business in Australia at that point. And I worked then for six years for the private equity owner and loved every minute of that period. The industry had certainly moved on from Yellow Pages being the champion product of the day, you know, with new digital players coming in. But the private equity firm really brought forward an opportunity for me, I had to work under a different sort of guiding principle. They really got us to focus on optimizing the core, simplifying the business, and really centering in around the customer value. And then when Platinum Equity sold that business, I moved on and Jo and I, as you described earlier, had started the Whiteark Advisory or consulting business. And the truth is, you know, we try and sort of work in a transformational sense, helping a lot of small to medium size businesses work digital transformation plans to get to a private equity sale. So, a lot of small businesses don’t have the fortune of having lots of consultants, and what have you. We come in and help them with efficiencies and strategies and what have you. So really, Whiteark was born as a result of me working in private equity and having that good fortune for six years and being surrounded by small business for so long that I thought there was an opportunity to really provide a level of transformational consulting to them to help them get to their next level of growth.
George: Well, it’s interesting. And I’d love to understand that a little bit more because when I hear that, I know that, you know, we have an entire generation that is looking to get the equity out of their business or some sort of a transfer, you know? Am I going to sell? Am I going to pass it onto my kids? Am I going to, and is this what we’re referring to where you’re seeing an opportunity to work with those businesses and help them move to an eventual event?
James: Yeah, absolutely. I mean, as you and I have had many a discussion, but I’m really proud. I’m an Italian immigrant son, you know, my father migrated to Australia 40 plus years ago and started his own business. And you know, 35, 40 years on, he got to retirement. He didn’t have a son who wanted to take over his business, but he had a business that was doing tens of millions of dollars and really had no idea how to get to a sale or how to really move that to the next generation. He managed to figure that out. But that problem is called, that opportunity, problem, however you wanna define it, it’s common right around the world, it’s certainly common in Australia, so now we see an opportunity here, especially post-COVID or as you sort of move to the other side of COVID, you’ve got a lot of amazing mid-tier or mid-market businesses that are really looking for the opportunity to hand the bat to the next generation, because they haven’t all necessarily got a transition plan or transformation plan. And all of them have got opportunities ’cause they’re great businesses that are really leveraging off the founders still, but they just need the opportunity to actually work on that handover plan. And that’s where we see the weak spot, that’s where we’ve been focusing. And we’ve been really proud of the support that we’ve been given by that community, and the private equity markets really dialed up its interest in that mid-market type business. So that’s what we’re trying to apply.
The Tech Stack’s Role In The “New Normal”
George: Well, and there definitely is that generational issue of we’ve got all these businesses that were long-lived. They were built coming out of the baby boom, and well, you know, what do we do? There are people sitting around kitchen tables going, we have this 20, 30-year business, well, what’s next? And without an internal plan or without a plan at all, I’d seen an enormous opportunity for you there. One of the things I love about having guests like you from other jurisdictions on the show is we talk about the business climate, and I’d love to get your, I know you’re very plugged into the business market. I’d love to get your view of what’s happening in the Australian small and medium business market as we look at the “new normal”, if I, you know, I use air quotes for a reason because everybody’s talking about that term, but what do you see in that space?
James: It’s really interesting, George, because you’ve got two tails, you’ve got small businesses that are thriving through the pandemic as we move out the other side to this new normal as you correctly describe it. And then you’ve got other businesses that have, maybe haven’t thrived because they were in a sector that was significantly impacted. Restaurants were impacted heavily in Australia, travel and tourism were heavily impacted as they would have been around the world. But a lot of other businesses, what we’re saying is actually a resilience to pivot and actually obviously try and create new revenue opportunities or new markets. And on the whole, I’ve got to tell you that business is buoyed, but you know what’s interesting is that they’re all struggling with the same things that they were actually struggling pre the pandemic, now there’s the spotlight on them. So, you know, many of them, obviously cash flow and management, has been something that’s been a challenge. There’s been some government stimulus here in Australia to help them for a period of time. And now they’ve come out of that. They’ve all had to pivot around their sales and service approach. And some, as I described earlier, have created new proprietary products for themselves, so there’s been a pivot at that level. You’ve had technology, I won’t say issues, but technology acceleration or need for acceleration for almost all of them, so whilst yeah, many large corporates and what have you were running digital transformation programs through the 2000s and into current day, a lot of small businesses have really been pulling it together pretty well. They didn’t have the digital foundations that they may or may not have needed. So we’ve seen a lot of them on the fly, really trying to digitize and really established processes or reengineer processes for their business that helped them protect the core and grow. So it’s pretty positive, I’ve gotta be honest with you, a year on, if you woulda ask me a year ago, I might not have thought it would have been this positive for that sector, but they’re certainly buoyant.
George: We hear that from numerous jurisdictions that, you know, there are these core groups of businesses that were really impacted and you touched on them, hospitality, restaurants, but then we have these other businesses that have either been able to accelerate plans that they had to digitize their business, or actually benefited from the change in spending patterns or, and I’m specifically talking about home services. Did you see in the Australian market, this massive uptick of renovations and upgrades to your homes and that type of thing?
James: Absolutely, it’s actually been quite amazing to observe from a third-party perspective. If you wanted to renovate your home here in Australia, you got a year waiting list, right? Like it’s kind of amazing, I’ve got two brothers-in-law who’re both builders, one’s larger scale than the other, but both of them are taking bookings 12 to 18 months out, and pre the pandemic, they might’ve been working three months out. Yeah, both with good businesses, so yeah, now their challenge is they’re having to think about because they can’t get materials unless they sort of, you know, work their backward planning and what have you. So they both upgraded technology and what have you, but it’s quite amazing.
George: And on that idea of transformation, and I chuckle a little bit because you and I have been talking about transformation since we met. And you had teams of people that were going into Australian businesses saying, okay, here are the things that you need to do to create a digitized customer experience. And then we have COVID, which, you know, we’ve called on this broadcast a number of times a forcing function. And I’m hearing from you that that acceleration is across your markets as well, where it’s just, yeah, we’re all in now, let’s go.
Big Business vs. Small Business: Data Is Important Regardless
James: Yeah, no, absolutely right. It’s no longer this chasm between big business, small business. You’ve got small businesses now talking about data because data is important to them understanding their personas of their customers and what have you. You’ve got small businesses talking about ERP systems. They may not be using that language, but they’re using the language in terms of how can I integrate process and what have you, and you’ve got small business that are trying to integrate every level of their organization with their supply chain. They’re seeking out technology partners that have got SMB experience. So, you know, that’s why, and I’m on your podcast, George, that’s why I always loved the Vendasta platform and what you guys were doing ’cause you really were championing the cause of small business. And today I actually think it’s never been more relevant. I’m glad you’re there to support them.
George: Well, we appreciate those kind words. You know, the thing that I love is talking to an SMB that, you know, maybe a year ago, two years ago, three years ago, wanted to move to have an e-commerce website and sell things online. And then they did it ’cause they had to do it and then hear them say, well, this is the best thing that I ever did. And we’re hearing that across numerous categories where first it was, “You could book your appointments online.” “Well, why the hell would I wanna do that? People just phone me to book.” And then they had to do it. And now they’re finding that it actually is a competitive advantage. Are you seeing that as well as that, you know, they adopt it because they had to, but now they’re doubling down on that competitive advantage.
James: Absolutely, I mean, it’s interesting, when we decided we were gonna start Whiteark, we were selling the Sensis business, and Jo and I were in the background, she had already started the company, and we were doing just some research and what have you. And we had a fairly decent sample size. Jo came back and said that there was a stat around 41, 42% of small businesses in that mid-tier market that we were talking to in Australia were looking at doing some sort of digital transformation, and what was amazing, we did a similar type survey in December last year. And you had more 80 businesses that were actually, in that same sector, that were actually doing, implementing some sort of digital technology or transformation. So it’s fascinating to see how quickly it can pivot and how quickly people can embrace.
George: In the work that I do on a daily basis, we think about valuation a lot in the software business. And it’s a narrative that I’ve started taking into our channel partner training programs in the Conquer Local Academy. And what we’re trying to do here is something that I learned a number of years ago. I like to say that I probably could sell anything to anybody once. You and I both know that that’s not actually the win, the win is being able to continue to sell and solve their problems. But having that conversation around, you’re going to work every day to build a valuable company, to build something that will live longer and have something to it when you’re done. And we found that people love that, and they love learning about that and understanding that. What I would like to know from you, James, and the work that you and Joe have been doing in helping these businesses that are trying to figure out what the next step is. Do you believe that there’s an incremental increase in valuation if they were adopting a digital plan, if they had some sort of digital customer experience, or you mentioned ERP or inventory assist, do you find that you can get a higher multiple for that exit if they do have that digital adoption?
James: That’s a great question and it’s actually probably something that’s really misunderstood in that SMB community in particular. And I think if they sort of took a step back and understood how important that investment in technology is in the context of the private equity or the buyer or the VC, wherever it is that they’re looking to sell to, how important that is on as part of their playbook and looking at that business as a prospect. So one of the multiple factors that equity firms look at when they’re buying businesses is the type of investments in technology, in applying that technology investment into processes, to the type of topic connection that that technology and the process actually gives them in terms of access to their customers and their consumers, and understanding that the personas, and there’s, you know, there are a whole host of caveats that they look at, but that investment in technology is right up there at the top of the list. So really investing in that from a small business owner’s perspective or from the entrepreneur’s perspective is so critical because it actually will set them up for multiple which is so much greater than what they, still might achieve, but what they could achieve.
George: Well, and I wanna make sure that people, you do it so much better because your accent is way better than mine, but I wanna make sure that people understand what we’re saying here. We’re finding this in various markets, when a business adopts a technology stack, and they may get it from a number of different providers and then it leads to an outcome, either an efficiency outcome, a revenue growth multiple, or maybe it’s an investment that a buyer won’t have to make. They’re like, I don’t have to spend money on that. They already have that solution in place. That’s where you’re seeing those higher multiples, or the flip side, because there’s always a flip side, you might not be able to get the dollars that you expect out of your organization by not having that investment.
James: No, absolutely. So I mean, what we’re seeing is, the buyer always, you know, it’s like any industry, if I’m buying a house, I’m looking for one that I can buy at a valuation that suits me, and then I might want to put the paint on and do the renovation and what have you, and I’ll add value to it. My advice would be that, you know, if you invest as a small business owner, you can invest in the right technology stack and it doesn’t need to be complex, right? Like you can think about what proprietary product in the business, how can I actually simplify serving that proprietary product by having the right website, the right platforms to talk to my ratings and reviews, the right social media connections, all locked in together. If you’ve got that right and you’ve got a closer connection through that technology to actually be able to get to your customers, you’re actually going to get a greater multiple. And sometimes it can be four, five, six times greater in the multiple just by the way you’ve actually stacked and aligned your technology, and it doesn’t need to cost you heaven and earth.
George: Well, and those are big numbers. So five, six, seven times greater multiple for your business by adopting digital technology stacks that are needed to make you competitive in the space. I also, James, I’m sure there’ve been cases where you’re working with clients and they didn’t have that propensity to make the investment, or it wasn’t on their roadmap. And you just weren’t able to get them the number that they expected, like not even close.
James: Yeah, look, it’s really hard, right? I mean, I take great pride when we go into customers, we recently helped an organization that was get to a sale, and this organization had been in existence, the founder had started the business, I think 43, 44 years ago, you know, they were a 25 to $26 million dollar a year, top of the line company with a 30% EBITDA margin, strong recurring revenue and a hundred plus employees. This was a good organization, like really, really good organization. The only challenge I had was the founder was now 83. He was looking for an opportunity to sort of move, you know, moving to the next phase of his life. And he’d built something that he had hoped he could leave for his family, his three daughters were working the business, but they weren’t necessarily that passionate about the business. So he called us in to help them build a transformational plan of sorts. Now we sold that business, but the truth is all that business, that great business was missing. You know, it had great revenues. It had great work five years out. It was really the technology layer that we couldn’t get in in time. So the compromise there was, you know, he accepted a sale, but that doesn’t matter. I mean, it was still life-changing for the next generation. He achieved what he wanted to achieve, but I can tell you that that the person who’s gonna get the multiple in that business, probably in that particular instance, three times more, will be the organization, the firm that bought it. And when I flip it in three or four years, they will have just invested in a very clear technology roadmap which we are helping them with right now, they’re simplifying the business, just working on some styles and services approaches to the industry and taking that business national ’cause it was just based in Victoria. But it’s not complex, but it’s something that I think this particular business would have thought about earlier had it been available for them to think about earlier.
George: It sounds like you’re having a lot of fun working on these projects because you get to touch all parts of the business
James: Look, I love it. You get to work as you described, George, across the entire value stream, but like you, the thing, I mean, I consider myself, I love selling when the sale that you make actually adds great value to the people that you serve. And the thing I love about working with small business, they haven’t had the good fortune of say, you and I, we’ve spent careers in organizations that we’ve been able to get the advice and the support of some of the big ticket consulting firms. These guys haven’t had that consultant support. So when I was in antitrust, when I was at Telstra, we could fund and engage a consulting firm on a dime, do a transformational project and spend tens of millions of dollars and not even blink an eyelid, right? Small businesses don’t get that opportunity to produce a roadmap and to drive transformations and going into that situation and being able to see the impact it can have by driving that roadmap for them, by building a really simple plan that’s pivot on a couple of things, by helping them simplify, it’s really, really rewarding. Like you, you guys get great reward out of seeing businesses succeed. You know, I’m now taking a different vantage point on that, but we too are getting the same sort of satisfaction.
James’ Advice To Young Entrepreneurs
George: I appreciate that. I really wanna ask this question because, you know, you were a part of the Telstra and Sensis organization for a long time. You led global teams of over a thousand people, and I’m sure there were a lot of lessons there, won’t ask you to tell us about all of them, but I’d love to understand what’s one of the top two things that you learned over those years, James, that you might share with a young entrepreneur or share with somebody that that is in business that you think would be really valuable for them?
James: Yeah look, it’s a great question. I started in the Telstra business as a product designer ’cause vocationally, I did industrial design at university. So I always wanted to be the next Leonardo DaVinci. And I remember in my first couple of weeks in the job at Telstra, someone came and said to me, “Oh, you know, we’re gonna start an internet division.” ‘Cause it wasn’t even digital then, George, it was an internet division. I remember going, “Wow, internet, what’s this thing?” All I knew was that I was coming in to help them with the Yellow Pages product design, right? Like ad sizes and things like that. And I remember in my early days, you know, the whole movement, we had a CEO who joined the business through Telstra, he said, “Ah, Google Schmoogle, Don’t worry about this internet thing.” And I remember early on in my career, you know, I was quite passionate about the work we were doing in the products that we had. We had a really profitable business. It was late 90s, thinking yeah, it might come one day, but I bought into this whole domain around, no one’s ever gonna get out and look for a car online or no one’s ever going to go and look for a home online. You’ll always need to be physical, and products like ours will always exist, so my first lesson is, you know, I’ve got my kids today talking to me about Bitcoin and what have you. So I’m scrambling to get as much information. So my first lesson to people coming up is, different equals different, but always be open to learning. So I wish I would have been embraced in those early days the real reality of this digital world that we live in, ’cause we might’ve made some choices back then that might’ve been different for that organization anyway in the long-term. The second learning I would give, as I sort of moved deeper into my career and led teams of thousands, you know, I was really humbled, if you like, so the first learning was that we probably didn’t pivot the way that we could have to digital. And then sort of 20 years on when I was leading these things, here we were with massive scale in market, we had, you know, I felt a little bit of like a leader of the Roman Empire and the empire was no longer, but what my learning there was, it’s amazing, the power of people. So even though our products were no longer getting us the deals that we needed and wanted because the digital wave was truly coming, we were on a different point of that wave, it’s amazing, the people serving those small businesses, the power they had to help educate them and focus on them. So really staying closely connected with people. You can still make a difference. If you haven’t got the best tools and what have you, you’ve still got to believe that you can make a difference and add value. So those were probably the two key learnings for two different reasons.
George: Well, and having met a number of people on your teams over the years, they definitely had a leadership that was talking about customer first, focus on the client. And I found that across the entire organization. So congratulations on having that as some of the core guiding principles for the teams that you were leading. I appreciate you making some time, James as always, I sometimes prefer when you and I are sitting in London and we’re gonna go to a nice restaurant afterwards, but maybe we can virtually do a delivery and do it on a FaceTime or something like that. But one day we will get to break bread face to face again. But in the meantime, we appreciate having you here through the power of technology. It sounds like you’re quite busy because I heard a lot of emails and notifications coming in. So we’re gonna let you go so that you can do what you do, but thanks for joining us on the show. It’s been long overdue, and we appreciate you bringing those learnings to our listeners here on the “Conquer Local” podcast.
James: George, it’s been my absolute pleasure, and you give my sincerest regards to that great crew that you’ve got over there. You’re doing a great job and really appreciate the support you’re giving to small businesses as well, so thank you.
George: Well, thanks to James for joining us, and what I was trying to get for you when you’re calling on a client and you’re talking to them about why they need to adopt technology, is you heard him say that six to seven times greater valuation from organizations that have buttoned up their tech stack. So when you’re in talking to a client and they’re trying to understand why they need to do email marketing, or they’re trying to understand why they need a dashboard to show how their marketing is performing, those are components of their tech stack. And when they eventually go to some sort of an exit or they’re trying to sell the business or they’re trying to get the value that they have in their company, what we’re finding is companies that have a tech stack and are utilizing technology get a much higher valuation. And we have an entire generation that’s trying to figure out what their next steps are going to be with their business. And that is the baby boomer generation. They’re looking for some sort of an exit. Do they pass the business onto their families? Do they sell it to their neighbor? Do they sell it to their competitor? Then what are we gonna get for our lifetime of work and sweat and tears with this business? So it’s something that we can be thinking about. And I kind of started to notice it about three years ago, when we were talking to customers, they really understand that having this technology in place, knowing that it delivers an ROI, it’s going to lead to a higher valuation for their businesses, which is something that, you know, there’s an entire group of people that are figuring out what their next steps are gonna be. Maybe not tomorrow, but maybe in the coming years. And you’re hearing from James in the work that he’s doing with firms that are looking to acquire businesses or grow their footprint, they are in there having these conversations, and companies that are digitally enabled and have that tech stack figured out are getting between six to eight times higher multiples when they move to that exit. So some really valuable components when you’re delivering those value propositions to your clients, that part of what we’re giving you here is that tech stack that people are looking for, and it’s going to help you have a higher valuation to your organization. Thanks to James for joining us on the show this week, all the way from Melbourne Australia. And we appreciate having his insights in this space. My name is George Leith. Thanks for joining me this week on the “Conquer Local” podcast. I’ll see you when I see you.