Video - How Smart Procurement Can Save Your Business £££ with Mike LanderMar 31, 2021
VIDEO: 52:42 mins
AUTHOR: Robert Craven and Mike Lander
In this GYDA Talks, Robert talks to Mike Lander. Mike is a successful entrepreneur and expert negotiator with a proven track record of buying, growing, and selling businesses for seven-figure sums. He’s raised over £6.5m of acquisition/growth capital in his career and grown companies to over £20m revenue and £4m EBITDA.
Mike has a uniquely valuable perspective on negotiating commercial deals, having worked on both sides of the table as a Procurement Director and an entrepreneur. In one of his roles, Mike worked as a Procurement Director for what is now one of the world’s largest RPO/MSP organisations worth in excess of $1bn, where he negotiated hundreds of deals with staffing agencies.
He launched Piscari in 2010 and leveraged his specialist knowledge and experience negotiating hundreds of deals worth over £400m in total to empower leaders and sales teams to negotiate more profitable deals, especially when procurement is involved.
Robert and Mike discuss:
- Dealing with procurement - what’s the backstory where you end up discussing this?
- When do we see procurement?
- Is everything true that they say about procurement?
- Where is the sweet spot under the shadow of procurement?
- How is it different from dealing directly with the owner-founder?
- What are the bear traps, tools, tips, techniques… What to do with an RFP?
- Negotiating and selling a business – what are the bear traps? What are the rules?
- Agency growth: are there secrets of success? What do you need to do to grow an agency?
- What would a ‘fit’ agency look like in 12 months?
Robert Craven 01:15
Hello, and welcome to the GYDA talks. Absolutely delighted today to have with me Mike Lander from Askari. Hello, Mike.
Mike Lander 01:26
Hey, Robert, how are you?
Robert Craven 01:26
Absolutely fantastic. So without further ado, Mike, tell us what are you known for? What do people know you for?
Mike Lander 01:34
So I work with agencies around helping them negotiate better deals with their clients, especially when they meet these horrible people called procurement. Ah, procurement. I couldn't resist, I couldn't resist.
Robert Craven 01:50
We were doing so well. And then you mentioned procurement. Ah, they are the devil spawn. I hope there's no procurement people listening and none of the procurement people I'm seeing in the next few months. But yeah, okay, so procurement, so let's just go straight into it. So what's the backstory with you ending up discussing procurement? What's that come from? Tell us how you ended up talking to our community of digital agency owners about procurement?
Mike Lander 02:22
So a very, very brief kind of backstory on me, kind of long term consultant. So I was trained by the likes of McKinsey, KPMG, PwC, as a management consultants back in the day, then borrowed back in the day when you could borrowed about three and a half million pound from Bank of Scotland to buy a consultancy company with a bit of my own money, and then grew that consulting company up. And that kind of entrepreneurial journey started around about 2000. And what happened was along that kind of journey, I ended up starting a procurement consultancy with a friend of mine. And the proposition was very simple. We would work with companies as a procurement and outsource procurement function. So we would act as though the human people we go out buy goods and services for them. And they were often private equity backed, so bigger companies that had a reasonable cost base, and our job was to go in and improve the bottom line. And a very simple thing. The reason that we targeted private equity, as these procurement people, was, when we went in, if we could generate a million pound of cost savings for a company, it would generate 10 to 15 million pound of value for the investor. Because they sell for x times EBITDA. So it's a very simple kind of value proposition. And we started doing that. So slowly, we were the buyers, we'd go into a company, and we would act as the buyers. And of course, a lot of spend is in marketing. So we spent or I spent many years being a buyer, a procurement director, buying goods and services, particularly around marketing agencies. So I'm the person you'd meet, Robert, when we're doing a deal. And what I learned was that I've got a certain style. I'm a very rational person, numerous, but I'm a trained negotiator. And I got pretty good at negotiating deals with agencies and all sorts of other providers as well. And that went on for many, many years. And then I ended up selling that business. And what I do now is I've got a portfolio. So I do a number of things in my life. But the prime thing that I spend four and a half days of my week doing is I now work with agencies to unlock the kind of the backstage pass to how procurement work, what do they want? And how do you negotiate with them? Because negotiation is a trained skill far more than it is an intuitive art. And that's how I got into it.
Robert Craven 05:00
Okay. So there will be people watching and listening, who have never encountered procurement because they've worked with the local business community or local businesses. And the idea of procurement and master service level agreements and kind of all that stuff hasn't happened because they've gone to work with, I don't know, a factory that's got 100 people, and they get to the boss or the head of marketing, the deals dark hands jobs job done. So for those who are truly green, about procurement, is everything I say about procurement people through.
Mike Lander 05:51
So two things. When do you meet procurement people, so it's a really great entree into that, which is if you'd like to, and this is a bit of a proxies, it's a kind of a bit of a broad brush. But when the company gets to about probably 50 million plus 100 million of turnover. Yeah. So when there are 100 million of turnover, the cost base is reasonably big. So between the kind of the direct goods and services, things that affect delivery, and the indirect stuff, all the overhead stuff, there's probably third party costs of I don't know, pick a number 6, 7 million pound. Well, if you get tempted on saving on that, that's quite a lot of money. So you tend to meet people like me, when companies get above 50 million turnover, number one. Number two, is everything you say about procurement true, Robert. Well, I don't know everything that you say, however. And the conversations we've had, I think procurements moved a long way from where it was, there are far more evolved procurement buyers now than there were 10 years ago. And I see that trend definitely improving the procurement used to be it's just about savings, bang the table, pretty adversarial negotiation, very unpleasant conversations. And it was kind of you do the deal my way or we don't do a deal at all. Now, I would say much more. Values talks about a lot more. There's quite a lot of stuff and nonsense talks about value. But procurement are starting to think more about how do you compare agencies? So you'll have been through this yourself robots, the RFP turns up on your desk. So you've been asked to bid for something. And the RFPs got all sorts of stuff in it about scope and about objectives and all sorts of stuff. And then they'll also say, by the way, there's a rate card we'd like to fill in. Could you just fill it in for us? Don't change it, whatever you do. Just fill it in. And the agencies reluctantly comply. And it's normally what kind of role? What kind of grade? What's the hourly rate? How many hours are going to be spending on this? Well, of course, what procurement is doing is they're trying to compare apples with apples. And what the realisation that marketing procurement is coming to, which has taken some time I would say is, how on earth are you going to compare marketing agencies delivering creative campaigns that deliver sales uplift, on a, you're going to compare them on an hourly rate basis. So you're going to buy on activity, but you're trying to deliver outcomes and outputs. It's bonkers. But the human mind gets trapped into this if you give me a spreadsheet, and I'm a rationalist. And you allow me to compare, I'll compare. So a simple tip for some of your watchers and listeners is, it's a hard thing to do. But I would say personally, that you don't send that rate card online or that rate card back, you're probably going to get kicked out of the process, you have to take a view, I'd recommend. Don't send the spreadsheet back, whatever you do. Take a PDF of the absolute minimum that you can by hiding columns and rows and give them a rate card. Because another tip is in procurement, we have to have a rate card for all service providers. Because our bosses say, well, what's the day rate in case we need to do some marginal work, which requires a bit of direct activity. So we have to have some kind of day rate. It's also behavioural, it's that people have got so used to day rates. I mean, it's such a bad, bad, bad way of buying anything. But it's a mindset.
Robert Craven 09:49
Everyone selling anything, everyone buying.
Mike Lander 09:53
It's about buying. It's just bad. I'm reading a very good book by an academic on the kind of tyranny But hourly based pricing. And it's just a bad model, but you need to provide it or else they're gonna go well, you don't comply. So you're out. The thing to do.
Robert Craven 10:11
When you are I buy anything, whether it be someone to paint the windows at home, or a gardener, or anything, you're grappling all the time for I told you, I just want to get a sense of whether this is 15 or 20 pound an hour, I just want to get a sense, oh, you're a consultant, I just want to get a sense of whether it's 1500 or 3000 pounds a day. So part of that is so that I know whether I'm dealing with a BMW or a Vauxhall? Yes. And part of its kind of so that we don't waste any time. You know, in other words, if my budget is only 10,000 pounds, and you turn out to be a 6000 pound a day consultant, well, you're the wrong person, which is fine. I mean, yeah, I'd rather have that conversation now than later. So there is, I mean, there is a big default of day rates. And you know, in America, they call it's horrible selling thing, which is just you just go straight in and say what, tell me what you don't right, direct to 1000 pounds a day. Whoa, that's too big for me. Excellent, fine. Now I can go and find someone who doesn't want to pay 12,000 pounds a day.
Mike Lander 11:25
Because they're gonna see 120,000 pounds of value off the back of it.
Robert Craven 11:29
Absolutely. Cool. So yeah, back to us or interrupted.
Mike Lander 11:34
So what happens is that the skill is to give the customer what they need, which is some kind of rate card. But price your job obviously around. This is a fixed price job. We understand your outcomes that you're aiming for, or your outputs that you want us to deliver. And we know we can hit and exceed your expectations. Within this fixed price envelope. We will not be reporting how many hours each person's worked on for that job. It's a fixed price piece of work.
Robert Craven 12:07
But that's the mindset of the builder, isn't it that you win the job, and then you make the money on the variances? I mentioned you wanted the front door to the house.
Mike Lander 12:21
You wanted windows, really? So this is another great topic around variation management agencies and variation management and over servicing. What happens and I would say in 95% of agencies that I've talked to, but I've talked to a lot of agencies, there's quite a few in the 5% like you do. 95% do not do variation control. So what happens is they sell a fixed price job. And you're right, ideally, every bit of work outside of the defined scope in the Esso w in the contract, you will charge a variable rate for you've asked for something extra, another campaign while a campaign price is 8000 pound. So we're going to invoice your rate 1000 pound. What happens is the marketing person says that was a great campaign we did. Could you do it in Italian for us? And the agency goes, well, we have got an Italian speaker and we might be able to do it and I say oh, it's great. Thanks. Do it as a favour for me. I'll make sure you're okay later on. They do the work. No invoice goes in. No one's charged. A marketing person changes. New person turns up, this isn't I see that you've done all this work. And you can do lots of foreign languages for free of charge. So what I'd like now is Spanish, German, and Austrian, please. So variation control is very important, because it educates the client about as an audit trail. We're happy to do the work, delighted to do the work, but it's not free. And then you get the option to say this one will do free of charge. The variation order goes in at a price of zero.
Robert Craven 14:15
Well, I mean, a story with an agency recently and, she wasn't recently now, I think about it because it's when you can travel around. A year ago. I felt recently and they were sending once a month they were sending five people to a meeting. So not only do you just want to think about what the five people are alright to have senior senior and plus, but because they're a good agency, they always arrived an hour early because they're good at their meetings. So the five, five half days in all, In order to add petrol and lunch, maybe meet for breakfast. You want to deliver a half hour meeting that they're perfectly capable of delivering via zoom. And it's not. That wasn't in the original brief. Okay, the original brief was an occasional check in and meetings and a quarterly review. And then they felt it'd be nice to meet. And then they said, we'll come back in a month's time to make sure everything's happy. Before they knew where they were, they'd added five half days per month, just in. And, you know, and you just see that happening, eager to please, eager to keep.
Mike Lander 15:35
I mean, I'm quite old, Robert. So you know, I'm 56. Now. So if I get back to the days of Tom Peters, when he was talking about, you know, total quality management and, you know, delighting your clients, and the clients always right and exceeding expectations, I think one of the problems is that we've taken that a bit too far is that we now go massively overboard over servicing our clients, when actually, the core of what they need very good point reporting is, well, if we had an online tool that you can log into, and you can see what the dashboard looks like, live, and then we'll give you a QBR for an hour on Zoom every quarter with the relevant people, most clients that go Yeah, okay. Great.
Robert Craven 16:17
Yep. It'll be interesting to see post COVID how they'll be this? Push back to meetings, because I can think of nothing nicer than buying you a beer and having something to eat and putting the world right. As opposed to this transactional thing we have. Okay, so let me just, I'm just finishing my beef with procurement.
Mike Lander 16:41
It won't finish, Robert.
Robert Craven 16:46
I have met several people who I would challenge whether they actually had hearts or souls. Who there I mean, I remember one particular event on a 6 million pound piece of work, where the guy said, that's fine. I've just got two conditions. He was two. The first one was that they paid 18 month after delivery. So I said, Well, that's not going to happen. Nice try. And I said, What's the second condition?'' He said, The second condition is that we have 33% of every single price. And I just picked up my stuff, closed it and walked out the room. And it's like, the naivety, not the naivety, birth Yiddish word of believing that I had that much margin, that I could take a 33% pay cut one. Secondly, back to rate cards, you know, you shoot video, it cost a certain amount of money plus or minus 10%. So we knew that everything was on board. And what that guy had done is he killed the relationship I had with his colleague, and to the detriment of the deal, because, as I said to them, you know, every five minutes, you don't come back to me with an answer. You're losing me working until midnight making this stuff happen. So I totally get that procurement there in order to get the best price. I've got no problem that I totally get that Mr. Procurement is on 5% or 10% of anything he saves over and above whatever the number is. Yeah, but it's the accountant gone mad in a way, you know, the account in Tality gone bonkers. Because you're not going to get the best deal for your client, for the company that you work for, if you screw people down too hard.
Mike Lander 18:50
I mean, there's this. And I concur with that. Absolutely. There's this torched Earth problem is that you end up with the lowest cost denominator, all your suppliers making tiny margins. And who wants to own that torched Earth? It's, you know, you can't grow anything on that ground. Because it's been all the valleys been taken out of it. I mean, I think, again, for your viewers, one thing to watch out for when you're researching clients, and you're first looking at, everyone's got their top 50 list on their Wall of clients, they want to target, just look at that top 50. Go through each one, find out how they're funded. Those that are funded by private equity, VC, but as you want to call it, be very cautious. possibly take them off your list. Because the great thing with P companies is growth is essential. So if you're an agency and you're focused on sales, growth, ecommerce business, you could be in a great position. The downside is that growth has to deliver very strong EBITDA. So you'll end up with a client where you can deliver them growth, but unfortunately, they're going to shave every last How they can off your price. Because that drops straight through to the bottom line.
Robert Craven 20:04
And this kind of confirms. So you're one of the things that I always get agents who say I want to work with bigger clients, I want to work with bigger clients, I say you don't want to work with bigger clients over they've got deeper pockets and bigger campaigns. And I said, Look, in your lifted top of 50 5 have some big agencies or big possible clients that are in your industry in your space. But, you know, alligators are not the same as small worms. They're entirely different, both as agencies are and as clients are. And firstly, the purchasing means to get that 6 million pound deal was three years in the making. Firstly, Come to nothing. Yeah. Secondly, as already indicated, the cash flow implications of it were just crippling. Potentially, even when we cut the deal, the original in year one, the cashflow was still, I think 160 days, and it was only in my zone in year two, I got them to pay me three months in advance, which was actually an even bigger problem was even bigger problem being paid three months in advance actually than being paid late. Because, we just had so much cash sloshing around. But the bigger organisation, you can't get traction, there's oodles of politics. There are rules and regulations for everything you can't do. Everything goes via the brand police. And they create rules and they slow everything down. And so you have your client in the business saying, hey, we want to do whatever it is the Black Friday thing we've got six months time, and six months isn't enough lead in time for the mothership to put it on. And it's not a lot of fun working with these larger organisers. I mean, it can be, don't get me wrong. It can be because they have they got Yeah, we'll do this. And we'll roll it out across 180 cities on Friday when I hit the button. That's awesome. That's awesome. But the downside is. So this whole thing about procurement is a really good reason in a way that some agencies may actually find it better to not listen to any more of this broadcast whatsoever. Never going to go into that den. And then because the great thing about working with the director, who is a director, or the is an owner, is it can be done on a handshake and an email, the general price is agreed and so on and so forth, as opposed to having to submit your health and safety procedure and you're racing.
Mike Lander 22:59
Robert Craven 23:01
Yeah, I mean, yeah.
Mike Lander 23:03
I mean, there's a sweet spot, I think, Robert, which is 20 million turnover to 100 million turnover. They're great companies to work with. They don't tend to have to kill the people involved. You do talk to the budget holder, you've got a direct route into a very senior person.
Robert Craven 23:19
And you're saying that number is 20 to 50 million?
Mike Lander 23:24
I think so, you could probably stretch it up to like maybe, you know, 60 - 70 million. But once you're over 100 million in turnover, the risks someone's bound to be involved somewhere, as a purchasing procurement buyer, something rather bound to. So I think you're right, I pick that sweet spot. I do, my clients are 10 million - 20 million turnover, those my clients, because I don't want to deal with procurement in big companies.
Robert Craven 23:51
Oh, no, no, I totally get it. But you know, there is I have to say there is you know, people who know my backstory, know that. There is still something really wonderful about big businesses. I will just push Google last year, who are client of mine and, you know, took me to 19. They took me to 19 countries last year. Yeah. And they put me in front of on average 500 people in each of those countries. So that's been a great journey. Barclays, you know, for, was it seven or eight years. I did 46 gigs a year for Barclays in front of 500 people. You know, it was like a tour. So you, you can get swept up near the training done with Google, when UK, Netherlands, Belgium, Croatia, South Africa, Singapore. So you can get handed around a big organisation. You need one big organisation and when people look at me and they say what was your strategy, it would appear it wasn't my strategy. But historically, we look back at it. I have a big sponsor who shared me round for want of a better word now. And we use that. And we always talk about, wouldn't it be nice if BMW Luton took me? Yeah. But would be if BMW Luton will take you to sort out their website doesn't actually mean that you're going to be BMW Paris, Munich and Rome. And as we know, every one of our competitors claims to have worked with Barclays and BMW. Yeah, we know that they probably polished a sign or something to happen.
Mike Lander 25:43
Exactly. So I think we've talked about this as well about the, you know, you one of your big questions is about agency growth is that, you know, what are some of the key success factors in agency growth? And I think it's a simple question underneath an awful lot of complexity. What we've just described that about big clients multinationals versus that 10 million to kind of 80 million turnover client is none of it's right. For every agency, it all depends, if you've got Google, while the chances of getting Google and then going, I work for Google, well, maybe you'll work with Spotify, and then you'll work with other big brands, because big brands have this feeling of warmth, that you've worked with Google, you must be amazing. bigger brands will work with you.
Robert Craven 26:37
A big buck with that, which is because we thought that when we got Barclays and it's like, so when you then go to NatWest, he said, Hello, we work with Barclays are in that case, when you finished working with Barclays? Come on work to us. And also there's a hidden agenda with your big client. So you haven't done an exclusivity agreement. Dress so happy that you've got the big boy fished and pulled them in and they're on. You're so happy. Of course, you haven't done an exclusivity agreement.
Mike Lander 27:13
The big red flag here.
Robert Craven 27:16
You say, Oh, I just wanted to mention to you that I'm thinking of going to talk to NatWest about the work we've been doing. And they go, Well, you can do that, but ...
Mike Lander 27:28
Be well as ever again.
Robert Craven 27:30
Not my Christmas list. Realise that. Okay. That's and you can, but nothing I'm sharing is there's no IP, there's nothing specific. Yeah.
Mike Lander 27:39
So fascinating, Robert, how so all clients, all clients want sector expertise. They want to know you understand retail financial services, really, really well. But, and yet, they don't want you working with other retail financial services clients. I mean, if they could hear themselves, it's pretty ludicrous.
Robert Craven 28:03
Yeah, of course it is. But that's the art. If you very close to two people you're copying. If you take it from 10, you're an expert. So let's just start with the procurement piece from an there's lots of stuff I'd like to talk about. What are the bear traps? So let's just say you've been, so I haven't eaten. So one, an RFP comes onto your desk? Personally. We have a score sheet for RFPs. We don't respond. We only respond to RFPs. I've written to be blunt about it. But let's just say RFP applies. Do you just accept it? How do you deal with it? What are the steps?
Mike Lander 28:54
So if we take a step back before so I'll answer the question in kind of two halves. Before the RFP gets to you. On the other side, I on the buyer side, what's happened is to get to an RFP stage, most procurement people will have taken that fairly seriously. It's quite a lot of work to build an RFP, because on the bid that you don't see before it gets to you is I've got to talk to all the internal stakeholders, I've got to confirm an outline budget, I've got a greater scope of works, I've got to work out the targets. I've got to find out my list of formulas to send it to so quite a lot of invested effort has gone in by procurement. So the first thing is if you receive it, you've received it for a reason. Now then, that may be for the wrong reason. So when I send out the RFP, I typically send it out to between five and seven agencies typically. And what I'm doing is I need to shortlist. Yeah. So I want to get a bit of a spread back from agencies to find out what the variation is. How will I have found? Let's say it's six agencies. Robert, how have I found six agencies? So the first agency, or what have them already Third, the incumbent, second agency, we work with them three years ago, we got rid of them. But let's try them again. I've now got four to pick from the third agency. I've spoken to my colleague, who's a procurement person in another sector, another company, who've used agencies and they give me a reference. I'll use them, then a third. I've now got three more. Well, Google's my best friend. So I look at like, you know, for leadership papers, and I look at all sorts of things content, LinkedIn, other search around and I find three more agencies, which three direct and get shortlisted? Well, let's not be surprised when the Google Search ones don't actually get through. So your points about qualifications are critical. Your score sheet, I would imagine one of the criteria on there would be Have we ever met this client? Do we have any relationship with them whatsoever? Do we know people that we can talk to? If that's a zero? I would instantly say you're on the verge of no bid. Second one is, so we don't know anyone there. Let's email the person or try and phone the person who sent the RFP. We'd like to have a conversation with you. What a good time, here's my calendar. If they refuse and say no one's allowed a meeting with us. It's part of the process. Definitely don't reply to it as an RFP, but send them a nice email saying why? And that you'd love to contact them in three months time when they finish that process? Because you've done some brilliant research in their sector that they might find quite insightful. That's why I'd respond.
Robert Craven 31:59
Yeah, that's pretty much my view. I mean, my view is, as I said before, unless we've written the RFP, we don't reply.
Mike Lander 32:09
You want to explain ,Robert, what you mean by that, because some of your viewers are gonna go, What do you mean, you've written the RFP?
Robert Craven 32:16
Your interview, but what I mean by that is that I should be so in bed with the client and have understood what their problems are and what their issues are and what their hurts or what their pain points are, that I've told them what I've told them how to get the benefits that they actually want, so that they end up virtually so I end up saying, you know, for instance, Robert Craven is final PC tool, and Robert Robert Craven strategy work will actually give you all the solutions, so that when they write the RFP, the RFP goes, we would like the consultant to be using Robert Craven. And you still can't go to the and guarantee that you win it. But my point, slightly different but similar, is there's incumbent, there's the MDS wife's best friend, there's best in class, there's one from three years ago. At best, you've got a one in six chance. Now I'm glad to invest 5 to 10, that person's days or more, on those odds. Unless there's something that really says to me, this is hot to trot and you've got something going on. And the other problem one has when you start talking about 6 million power contracts, is you're competing with people who are willing to invest 50k or 100k, winning the work and they've got a team who are doing sexy videos and building websites just to for the response to tend to because you're now competing with the centre, and so on and so forth who've got endlessly deep pockets compared with you and where it's like the idea of spending 50,000 pounds, preparing to sell to someone is monstrous.
Mike Lander 34:10
So this is a good opportunity to introduce the kind of the BATNA concept. Very simple concept, you know, so BATNA, best alternative to a negotiated agreement. The founder of that was Dr. William Ury. And also Roger Fisher, out of the states out of Harvard. If your viewers haven't read it, you should read Getting to Yes, brilliant book. Yeah. What a couple of hours read, Robert, probably?
Robert Craven 34:35
Yeah. What's the one liner about BATNA?
Mike Lander 34:43
You could probably tell me, what's the one line, Robert?
Robert Craven 34:47
You can walk away from it. If you answer and recognise what the value is? It's and also, I think there's also a piece about kind of good news, bad news. Who knows? I think this is going to be philosophical for a moment. Good news, bad news. Who knows? I mean, actually winning a 6 million pound contract, good news, bad news, but not going to see the wife for two years, you know, blah, blah, blah. On the other hand, it should, it should, it should. And my view is far more that, you know, these things are a bit like losses. And if you miss this bus, there'll be another one coming on later on down the line.
Mike Lander 35:22
So your one liner, I think is absolutely right, which is, and people. I think a lot of, we all do it. We read all sorts of things all day. And people say BATNA. Yeah, I know what that means best alternative to a negotiated agreement. Okay. And then you go, Well, what does it mean? And they go, Well, I've just told you, I'm like, no, no, no, no, when you're bidding for something, what does it mean? And they're like, well, I need to have an alternative. I'm like, Yeah, you do. And you need to critically with BATNA, not be wedded to the outcome. The critical thing, in any negotiation or bid process, in my view, is the moment if you're one of three suppliers, so you've been shortlisted, the moment you as an agency are wedded to the outcome of winning that piece of work, you are dead in the water. Because your points about it's a good thing, is that a bad thing? Well, I would almost guarantee you, it will be a bad thing if you win. Because you just get me as a negotiator, huge amounts of power. Because I can spot, I'm reasonably good at spotting when someone's gonna cross the threshold if they want it more than I do. If they're a viable supplier, I think they can do the work. And I'm short on my savings target. And I bought it before so I know what I'm buying. And I'm being particularly aggressive, back to where we started those nasty people that if they do behave like that, the danger is, I will negotiate away your margin. And that's a really dangerous place to be. So one of my topics, this could be an interesting little topic to discuss is this about being wedded to the outcome. You have to be able to walk away and go, there'll be another bus. The problem is, it's a 6 million pound bus. There aren't many of them. So what do you do? What are your thoughts, Robert? Because you went Oh.
Robert Craven 37:28
In my particular story, I picked up the phone and said, By the way, this is a win win or a win win for me. And I'm sorry, I don't understand. So I said, Well, if we win the work, they said, , You're blackmailing us, that's the first line for the No, I'm not really, you gave us a price. And we've stuck to the price and you want 33% off. And they said, Well, you're blackmailing us. So it's a win win. And so how do you see that? So if we win the work will work every hour God made to make this stuff. And if we lose the work, I get the summer to myself, absolutely relaxed.
Mike Lander 38:14
I'm just looking at your eyes, I can tell that you mean it. And that's a critical thing. There's a psychological thing that happens in the negotiation when I'm looking at you either on Zoom or face to face. And I'm reasonably good at this. If I spot that it's real. I'm probably going to back off a little bit, and really consider what my alternatives are. Have I got a viable alternative? That's as good as Robert. Because if I haven't, the power balance is about to shift. And this is the thing in negotiation that I don't think all agency owners get is that there's a very delicate power balance that happens. And when you say something like it's a win, win, or win win, I have to know you mean it. Because if you don't mean it, and I call your bluff, and you go well, when I said I could have the summer off. What actually meant was, you know, I'd quite like to sit at the table still. So could we and then I'm like yeah, right. Okay, so you actually really do need this work. And that's when you're in a very dangerous position.
Robert Craven 39:19
How do you translate that to because here's the thing you do is negotiating and selling a business? Are they the same bear traps? Is it the same rules?
Mike Lander 39:35
So something I've sold two businesses bought two businesses, three businesses, advised on the number of sales of businesses, what have I learned? So the negotiation? I think there are some very, very common similarities. The first thing is you have to work out at what price is it just over your threshold? while you go, that's enough for me. And when someone approaches me with that price, there's some conditions, I'll be prepared to dance. The second thing is my view, you have to leave at least as much on the table again, for the buyer. So if in your mind, your business is worth 5 million, and you can justify that for all sorts of reasons, the buyers got built to see how I could turn 5 million into 10 million, within about three to five years. Not an exact path, but you've got to lay enough kind of bird seed for them to go, I can see the trail of how we can make this double the size. Because why would I just buy a business pound for pound if I can't grow it or do something with it. So first thing is, you've got to know your price. Second thing is, you've got to be able to understand, they're gonna make double, or they're gonna double the size of the company. And that has to be okay, in your mind, too many sellers sit there and go, Oh, I could have sold it for seven. Because it looks like it's doubled in size, now I'm gutted, you will never ever be gutted, you must be very happy that they've taken it to the next stage, and you walked away with 5 million pound. The other thing I'd say that's really important is you must never frightened the buyer. And what I mean by that is in a negotiation. As you're going through the process, let's say you've got a letter of intent, some kind of non legally binding, we're going to buy you that some kind of we are serious about going through DD. And you both sign that. If as you start your DD process, all sorts of things come out of the woodwork. You didn't declare something that were in your accounts, you didn't declare the fact that a client's about to leave you and they're a third of your company. There's all sorts of things that you didn't declare, during the early stage of negotiation. The moment that happens, you scare the buyer. Because now if I'm the buyer, and I'm buying your business, Robert, unlike, okay, we just found one thing that's big. What else is in there? If I find one more thing that's concerning, that you've not revealed, and probably going to walk away. So, it might sound counterintuitive, but my view of these things is when you're selling your businesses, be as transparent as you can be commercially, at the beginning, to ensure that there's no big surprises for the buyer, when they walk through DD and it will make the transaction much smoother.
Robert Craven 42:44
It kind of sounds like you're a bit a man of several hats, you know that. And even as a buyer, you have several hats on one hand, you're on the one hand, you're saying for both buyer and seller, be reasonable, be open and honest and transparent. That's the best way of communicating, everyone gets the best one plus one equals five yada, yada. And then there's another sort of person on your shoulder, so we can screw them down, we can screw them down. Just look at what's happened there, you know, get a better price. And is it possible to hold those two conflicting contrasting viewpoints of best price? Being a good guy?
Mike Lander 43:44
Good question. So, I tend Well, in fact, I almost exclusively work now for sellers. So I work on the supply side, not on the buy side. And that helps avoid conflicts of interest as a first thing, because otherwise it can get by with Saudi working on. The second thing is when I advising people when they're negotiating with their clients, one of the things that I say is that there's two or three dynamics going on in the negotiation at any one time. There's the rational bid, which is all the negotiation variables that you're working through. And you're negotiating with whoever the Counterparty is, but there's the relationship after the negotiation is complete, assuming you win the deal. And you've got to keep the imbalance. And bad deals in my view are where you burn the relationship with the buyer procurement, the end budget holder, wherever it might be, you win the deal, but you've burnt the relationships because that will come back and bite you. Yeah, it will turn into a bad client and a bad relationship. You will live with it for a year or two. two years, three years. And so there is a point about, if you feel in the negotiation, that it's heading into a very confrontational, very aggressive negotiation. Let's say it's procurement. And you've got the marketing director sat on the side. If it's heading into that direction, I would pause the negotiation procurement. And say, until we go and talk to the marketing director, I'm not trying to do anything with you, I'm not trying to change the deal structure that I want to go and talk to them about what this will feel like, after we've negotiated a deal. Procurement, I'll say you can't do that. If you talk about marketing. The deal's off right now. And my advice would be back to your win-win-win-win is, well, if that's the way it's heading, this adversarial approach is going to continue to the end of the contract negotiation. I'm going to assume that's how it's going to work when I start delivering the work. So actually, we might not be the right agency for you. And if you've got a great relationship with your marketing director, what will happen next is this, unbeknownst to you, so you pick up the book and you walk out procurement, go to the marketing director and say, you got a bit of a problem. Roberts decided that he's actually not going to bid and the market director is gonna go You did what? Okay, so you've now decided Roberts firms not going to bed. Right? And procurement, when you pick the agency that I'm going to work with using my budget, and it goes wrong. I'll be banging at your door. And we'll go to the CFO together. And we'll see how that goes. So again, the thing that agencies don't realise is that procurement can't push it too far. Because if they do, and you really are the right agency, the internal conversation with their stakeholder who owns the money, remember, the budget sits in marketing, not in procurement. That can become a very tense conversation. And therefore, as an agency, I always say, name the game. If there's a game going on, name the game, put it out on the table, and then we'll can look at it.
Robert Craven 47:15
Love it. Right, we've only got a couple of minutes left. So I'm just gonna ask you a couple of slightly random questions or jokes from the angle which require, ideally, a one sentence answer. So let's see how we can do. So agency growth, do you think because you've seen agencies like I have, do you think there are secrets of success? Do you think there are specific things that successful agencies do differently from less successful?
Mike Lander 47:43
Yes, I think there's two big things, three big things in my view, number one, financial management. They tend to be very, very good at cash flow management, specifically. Number two, they've built a sales and marketing engine that goes beyond the founder. A number three, they have a service delivery methodology of some kind, that allows them to consistently deliver profitable work.
Robert Craven 48:15
I love that. Next question, what do you think a fit agency is going to look like in 12 months time when things calm down a bit?
Mike Lander 48:29
One view I have about what that might look like, is probably a slightly more flexible workforce, in terms of deciding on your core proposition, whatever that might be. So let's say it's no PPC or whatever it is, or influencer, marketing, whatever it might be, work out what the real differentiator is for an agency of your type, and ensure that you've got the best quality people you possibly can. For that part of the proposition, for the other stuff that you have to do, but isn't absolutely at the core, you may want to think about having a more flexible workforce that can be offshored. Remote, can be part time, whatever it might be. I think that ability to have an agile kind of workforce operating model, I think will be key.
Robert Craven 49:24
To more questions. What next for you, Mike?
Mike Lander 49:33
I was talking to my wife about this last week. And I love negotiating. I love the negotiation process and the theory. I love helping clients. I love helping organisations get better deals. So I doubt I'll ever stop working. Because I'll always be interested in and involved in helping people negotiate better deals. That's what's next. I think.
Robert Craven 50:00
Okay. And finally, before we say goodbye, as we wrap it up, I'd be fascinated to know, your kind of recommendations, your pearls of wisdom, your golden nuggets, your one liners that you like to share with agency flow, always interested in what people say?
Mike Lander 50:25
So I'd say there are three things, let's talk about this kind of negotiation topic, irrespective of who you are negotiating with procurement, marketing, people, whoever, there are probably three things. Number one, emotions got no place at the negotiating table. Remove your emotion from the negotiation, because it will probably harm you. Number two, preparation. Negotiations that go well for someone tend to be because they've prepared well, they've thought it through, they've worked it out. And number three would have a little template. So I'm writing this as a plug. I'm writing a negotiation workbook, which has got four simple templates in it that you can use for every negotiation that you do. It's in draft form, but it helps people think through what are the goals? What's the press and timings? What are the negotiation variables, what are the issues?And that will help you become a much better negotiator.
Robert Craven 51:37
Perfect, that is absolutely the perfect place to stop, links and URLs and all the good stuff is at the bottom. Can I just say, Mike, thank you very much for being a great guest. What's great is the insight from the other side, what's great, it's getting a sense of adults does why it happens because their agenda isn't just a screw down. There is actually an agenda that you can help them but also some great insight into how to manage ourselves. So thank you very, very much indeed for being a great guest.
Mike Lander 52:25
Pleasure. I really enjoyed it. I really enjoyed that. Thank you. It was great. fun and enjoyable.