Confessions of a Recruiter
The show is hosted by Blake Thompson and Declan Kluver who respectively own Vendito Consulting and Blended Employment. Both have been in Sales & Marketing Recruitment for over 5 years. The podcast is about opening the door to the recruitment world and creating a community of recruiters who can share funny stories, educate and have honest conversations about the industry and their experience. All episodes are powered by xrecruiter.
Confessions of a Recruiter
Josh Hill - North Star Partners | Confessions of a Recruiter #111
Are you ready to delve into the dynamic world of recruitment business sales? In this episode, we sit down with Josh Hill, the founder of North Star Partners, as he shares his unique experiences and valuable insights into navigating the complexities of the recruitment industry.
Our conversation explores pivotal moments and conversations that can shape a recruitment professional’s trajectory, particularly the strategic decisions that lead to a successful sale. Josh discusses the importance of understanding market conditions, authentic connections with clients, and how to effectively articulate value—both in oneself and in the business.
You’ll discover practical tips on preparing your recruitment business for sale, including essential metrics that every recruiter should understand to create real value. We also explore the evolving landscape of client and candidate expectations, along with methods to foster a vibrant community that supports personal and professional growth.
Are you thinking about starting your own agency? Listen closely as Josh reflects on his journey and the foundational strategies that aspiring recruitment agency owners should consider to thrive in a competitive environment.
This episode is rich with insights and encourages industry dialogue about best practices, authentic interactions, and the importance of community. Join us to ensure you’re not just staying afloat, but thriving in the exciting but challenging recruitment landscape. Don't forget to subscribe, and if you enjoy, please leave us a review!
· Our Website is: xrecruiter.io
What were some conversations that you had at the table where you're like, holy s**t, this is how it works.
Speaker 2:I was moving to Austin, which is the coming quickly the global home of tech. There were a bunch of them would come in and say how do you guys operate? What makes you different? What's the process? Give us your secret sauce. Hey guys, josh Hill here from Northstar Partners Just finished up filming the podcast. Had a great time talking about EBIT how to prepare a business for sale.
Speaker 3:Congratulations on starting your own recruitment agency.
Speaker 2:Thank you very much. It's been a while coming. How does it feel I should have done it years ago.
Speaker 3:Welcome back to another episode of Confessions of a Recruiter. We're here joined by Josh Hill from Northstar Partners Group, and that is a big reveal. Mate. It is Congratulations. It's a pleasure to do it here. Congratulations on starting your own recruitment agency. Thank you very much.
Speaker 2:It's been a while coming. How does it feel? It feels like I should have done it years ago.
Speaker 3:Really Always right.
Speaker 2:It always is, it's an opportunity if you don't do it early. But it feels right, the market's a good time. Yeah it feels good.
Speaker 3:Well, that's made. It's exciting times. This is the start of a new journey for you, but what I think might be really good is to give the audience some context who you are, what you're getting up to. We'll probably fill in a lot of the blanks moving forward with a couple of your crazy stories that we're just talking about offline, but just from a high level. Let's kind of go through your background. So you've been in recruitment what? 20 years? God? No, I'm not that old.
Speaker 2:Come on, jeez mate. Come on, do I look like that? Come on. No, I've been in recruitment 13 years this year 13 years, 20 years.
Speaker 3:We round up in recruitment. It's close enough.
Speaker 2:It's like when you send a candidate CV They've got 20 years experience.
Speaker 3:You're a 600K biller. We round up.
Speaker 2:When he was $10 I would be like hang on, no, 13 years across a couple of markets, the vast majority of that in tech. So I did a little bit of time early on in oil and gas. Fascinating place to play, particularly in Perth where I was at the time. But my main market is executive leadership and really bringing technology leaders into the top job CEO, coo type positions. I think they're the leaders of the future.
Speaker 3:And you've got a good reputation. A few recruiters have actually told us oh, this guy's going to be a cracker to have on. So we're excited, mate. There's some big expectations already from the heads up from a few people. So you were in recruitment, then you founded your own business.
Speaker 3:For the last 13 years you've essentially had side hustles. You've been recruiting, you've gone through a wild story at the network technology business where they kind of got acquired and they didn't and we can obviously go into that a little bit later and you sit on a couple of boards for recruitment is it recruitment agencies and tech companies? I do? Yeah, that's really interesting. And then, obviously, starting your own recruitment business for yourself. What a journey, what a journey.
Speaker 3:It sounds really good when you say it. Where should we start, mate? Because, like what you just explained to me 20 minutes ago around specifically the acquisition of the network technology. Well, is that what it's called the network technology recruitment? The network for sure, yeah, the network for sure. Perfect. That is a crazy story in itself. It's great fun. I also thought it was quite interesting that you have been consulting with agencies on how to sell their recruitment business, which is not something that we've spoken about on the podcast before, so I think maybe let's start there. Does that sound pretty sensible, sounds good. I'll give you the context if you like. Yeah, definitely.
Speaker 2:I was. I'd moved to Sydney in 2017 with the company. Before that, I'd been there for a number of years and kind of watched it grow. I was tapped on the shoulder one day. I was actually going. I was moving to America. It was really good timing. I was moving to Austin, which is becoming quickly the global home of tech, and I thought I've been so good to the guys that I was with at my former company, verse Group. I don't really want to go and do it somewhere else, and it was just one of those opportune moments sliding door moments in recruitment. I was preparing to go and pack the bags and take the wife to Austin. What were you going to do over there? Head up a recruitment business? Yeah, so I was going over there as a VP, which a great company who've done amazing things, and it's really good to have that global perspective too. I still keep in touch with them. They actually subsequently offered me another job not too long after and again, tough to say no to, but that was COVID times. So at that point I kind of went okay, well, what do I now that I'm partially opening the eyes to something else? It's been five years, let's see what happens.
Speaker 2:One call. I got a call from one of the guys over there and he said hey, look, we're trying to do something really interesting. We need someone to come alongside and work with our director to help pump us up, make sure that we're on the pathway for growth and we're going to sell. And for me I thought, wow, that's something you don't get the chance to do every day. Sat down in the room, met the CEO and director, loved them both immediately. It was just, it was like we'd been friends for 20 years.
Speaker 2:Right, very quickly thereafter joining the business, I thought, okay, we've got something cool here. This is really good. I've done greenfield my entire life, so I've never actually walked into a business or had a desk that someone else has had. And it was quite a weird experience, kind of picking over what was there and figuring out how to do it, but really interesting. So, yeah, we were kind of on that journey then from how do we take it, from the business that it is today you know, five employees, one office to something that's going to be really interesting and exciting to grow.
Speaker 2:And I came in and the company had already engaged EY and a bunch of advisors and I really liked the clear plan and direction, so being part of that was an easy discussion. Some of my team from First Group came and joined me at the network, which helped as well, and it was like, okay, let's go and make this thing happen. So it took a few years and there was a few bumps along the way, as there always is the ups and downs but yeah, in 2022, last few hours of the financial year managed to get a deal done and what an amazing experience to be part of Nine months of hard work from not just myself but all the operations team. To be honest, we didn't do all that much. We came in and told people what we do and how we do it and those kinds of things, but a lot of hard work in the back end.
Speaker 3:So, to be clear, this is the network, the network, and so how are you involved in that specifically?
Speaker 2:Yeah, as part of the leadership team it's about particularly acquiring businesses, and there were a bunch of them would come in and say how do you guys operate? What makes you different? What's the process? Yeah, Give us your secret sauce. It's almost like a dog and pony show. They bring you out to come and talk about what you do, what makes you different, how you do things and, yeah, you spend hours in a boardroom talking about what the future could look like crystal ball type stuff so we would do that pretty regularly. Come in and have a chat around. You know, this is where we see this market going. This is what we think is going to happen. It was obviously post COVID boom too.
Speaker 1:Who are you talking to? Yeah, who are you speaking to Essential acquirers? Okay, are they VCs? Are they other?
Speaker 2:recruitment agencies. There's all kinds of people in that discussion, you know. There was multinational recruitment businesses all the way through to advisors of PEVC type firms. There was, yeah, a pretty wide array of different people wanted to have a chat at some point.
Speaker 1:And who was the main person driving this? The CEO?
Speaker 2:The CEO yeah, so this is his company. He'd had it for 10 years plus. He was in the background really pulling the strings and driving things to make it happen. And, yeah, one of those things where I think, when the timing's right and the market conditions were, it's definitely something to have a conversation about.
Speaker 1:Yeah, it's the perfect timing, like I think, um big boom big boom after COVID. You know there was some other famous agencies that you know were at the end of their own hours or being purchased around that time as well.
Speaker 2:Yeah, we always looked at them. We were like, all right, what are you getting, what's the percentage? And we try to find out multipliers and the like and there's some really big deals going down at that point in time.
Speaker 1:And what did you learn through that process? Because I think a lot of people, whether you're an employee or a director, some people have these facades that that's like the end game and you know some people get into business thinking that does happen, but it actually a sale that's beneficial to everyone, that happens cleanly and carries on is probably like a 1% chance of happening, and probably even slimmer in recruitment agencies. So like what did you learn? Or like what were some conversations that you had at the table where you're like, holy shit, this is how it works or Every day every day.
Speaker 2:We'd walk into that meeting and I'd walk out like with a sore brain because the conversations were so much higher than what we're used to right. Recruitment's fantastic for running a business, and you guys know this. It gives you everything you fundamentally need to go and start any business. You're commercial, you understand how to generate business. There's BD, there's the backgrounds and operations, but what it doesn't teach you is what a deal looks like at that level, and the conversations were so long-winded. We'd have people that would come in and be really interested for three months, six months or nine months and go in through data rooms and all that kind of stuff really heavy backend type work and then we'd get to the kind of I guess, the part that really matters where we'd come in and start selling the dream and talking about the future and people would either go, yep, we're absolutely loving this and it didn't work for us, which happened on multiple occasions or it just wasn't right.
Speaker 2:You know, I think the biggest thing that I learned from that is mutual due diligence. The two parties are actually there to understand each other. There's a bit of a drive from owners to go okay, I really want to sell, I want to sell, I want to sell, I want to sell. It doesn't really matter what it's about and you know full credit to the team at the network. Everyone was involved was thinking about the best for all parties. It wasn't go and sell yourself to some big no-name brand business and be absorbed into some massive company. We didn't want that. We were really proud of the brand that we'd built and achieved and wanted to figure out how we could also bring the team on that journey. So we'd been super transparent, without going into specifics of companies and everything like that. But this is where we're at, this is what we're going to do, this is what you're all going to get out of it, and everybody had a piece of that outcome.
Speaker 3:So there'd be two really big parts to this that I think would be awesome for people to understand, Because for some people they understand buying and selling businesses, they don't know how, why or the purpose. And then the valuations on how they're made up. So one part of this question will be around valuations and then I'll follow on to another question, which will be around what the advantages of actually buying a business in the first place. So what are the metrics that matter for a business and how you come to a valuation?
Speaker 2:Fundamentally, the only thing that really matters is your contract deployment or any other things that are recurring revenue. So let's say you have long-term contracts that are RPO paying you recurring revenue. That's really, that's it. That's what EBIT's based on and that's what they then basically multiply it on. So you can sit there and different businesses will have different goals and objectives. So, for instance, some businesses might just want the revenue. They don't really care about the brand or anything like that. You know, you get absorbed into a big business and one day you're wearing one brand, the next you're wearing the next.
Speaker 2:But I think that the most important thing is absolutely recurring revenue. That's the sole purpose, the sole value of your business. Why? Because it's the only thing that you can guarantee. Right? Let's say that we all sell a company today. I go and look at it and go all right, guys, what's our perm futures? Look like it could be a billion dollars. It doesn't matter, it's not real, it hasn't been realized, it doesn't exist. You know, you could all walk out on me the next day after we sell. That's perfectly normal. It happens, unfortunately in these sort of situations. As an acquirer, I might sit there and go all right, we're going to put you guys in some pretty strenuous contracts to keep you there, but I can't actually motivate you to do what you did before we sold the business. It's very difficult. So I think, yeah, if you're not actually able to say this contract lasts this long with this client at this rate, you don't have a business. In that sense, okay.
Speaker 3:Okay, cool. So contracting is the primary reason why people would buy a recruitment business and so, putting aside, you've got one contractor, a hundred contractors. What are the metrics that they're looking for, based on those contractors? That gives them a valuation. So you said EBIT before. For those who don't know what EBIT is, can you explain it for us?
Speaker 2:I love that you put me on the spot. Earnings before interest, depreciation, taxation and I hate this word, but amortization I think it is is that one? So it's essentially your end number that they can then multiply and figure out what you're actually worth. So it's a pretty key number and accountants love talking about it in recruitment. We talk about GP, right. That number is so, so drastically different and it washes out to be quite a different number when you actually look at it and, which is always interesting, when you talk to recruiters and they say I've earned it this, so the company must be worth this. So far wrong.
Speaker 1:Everything is so wrong. Even like EBITDA to net profit can also be different as well, depending on, like, what finance you have in the business and stuff like that as well.
Speaker 3:So just to break this down so we've got revenue, which is the total amount of money flowing into the business. We take out the cost of sales, which might be the contractor's salaries, which gets us our GP, which most recruiters gross profit Sorry, I shouldn't use slang when I'm trying to break this down so gross profit, which is what most recruiters get paid on. You might get 10%, 20% of your gross profit. Then you have your operating expenses power, lighting, heating, office rent, et cetera. Then you have your net profit, which is basically all the costs to run the business, and then you've got your EBITDA or your EBIT depends on whatever way you want to look at it which is also taking into consideration interest, depreciation, et cetera. So you might have a million dollars come in, cost you $600,000 to service your gross profit's 400 grand. Your office rent for the year was 300 grand and you might have $100,000 left over on a million dollars. Hang on, cool.
Speaker 3:So hopefully that's given some context. And so what they're looking for to value a business is your EBIT number. So how do those metrics work? You mentioned before a multiple. What does that mean? And I obviously know what this means, but just to make sure that everyone can follow along nicely. What do the multiples mean? On what metrics?
Speaker 2:Yeah. So generally, companies that are valuing businesses for acquisition or even just general valuations, will look at your EBIT number and then they will figure out a multiple based on what it is then worth to buy. So traditionally, recruitment has like three, four, five, six times multipliers because you can generate that amount over a period of time. It's essentially there to compensate you for getting rid of a business that's earning money. So I'm going to give up my 12 times or my six times, or my three times, because I know that that's what it's worth over that period of time. In tech, in SaaS, we have 10, 12 times multipliers. That's totally normal. So you know we've got a bit of a bung deal in recruitment, but still businesses will come in then and go okay, well, we think that you're worth.
Speaker 2:Your future EBIT's going to look like I don't know a million dollars, right. Based on all the information you've given us and based on comps in the market and what we think makes you kind of similar to everyone else, this one says that you're worth four times that multiplier. So the price there $4 million, right. And it's hard because the emotion of a recruitment owner is oh, I think it's worth, and pie in the sky type number. What is it actually worth? This is the surefire way to give you an actual number. This is what people will pay you. This is what people will tell you that it's worth and realistically it's probably an achievable number. The multiplier is all that varies and that's what different people will come in and have a look at. So someone might like something about your business brand or something like that, and they might get you an extra multiplier. You might get four instead of three or something of that ilk, but that's where negotiations come in.
Speaker 3:Okay, so I'm going to tie this back to what it really means for a consultant. So let's say a consultant, they're building a desk from scratch. They spend three years building their contractor desk from zero to a million dollars GP. Take out their salaries, for example, and let's say that, you know, maybe the true cost of that person could be I'm just going to make this up half of that. And so what they're actually doing is they're creating a million dollars GP, but the equity is essentially what we're talking about here. The equity that they've created for the business might be two, three, four million dollars in equity.
Speaker 3:And so I think what a lot of recruiters perhaps overlook around just thinking about income, is the equity that they can build in a contractor book, similar to a house, where you sit on your house, you do a bit of a reno, you jazz it up a little bit. It's worth 10% more in a year's time. Same type of outcome for a contractor book, whereas, yeah, you're getting cash, you're making a bit of profit, but you're actually building more equity than you're making in commissions that you're earning. So it's a super powerful way to build your future income and your future net worth if you're building your own contractor book, so really interesting. Okay, so we understand what the multipliers are. If you're making a million dollars in your business, you could sell it for a 4x multiple. No-transcript yeah, yeah, yeah, but hypothetically I mean, if you find someone call us.
Speaker 2:A few people would like to hear that.
Speaker 3:Yeah, if you're making one mil net profit or EBIT and you get a 4X multiplier, happy day someone to give you $4 million. There's obviously some nuances to that, but that's just a general kind of ballpark. So why would someone pay $4 million, $3 million, whatever the multiplier is for someone's contracted book? What is the strategic advantage?
Speaker 2:Particularly it depends on the company, right.
Speaker 2:So I think the acquirer is a massive part of that and if you're a large recruitment company buying another one, you'll sit there and go well, I've got that contractor book let's say they're solid contractors in government You're probably going to get 12 months plus your chance of re putting that contractor back in for an extension pretty high.
Speaker 2:So you can, over the course of, let's say, the next two to three years, with relative certainty say that you're going to keep X percent of that. But then the additional part of that is you've actually got a whole team now who've been on a track to continue to grow that. So that's your upside and that's why people are coming in and buying these businesses and that's why, also, no one pays you a lump sum to go away because they want to keep you around for that period of time. Make sure that, a, you're hitting the minimums and also, b, that you're able to then continue to grow and, given stretch targets, to be able to kind of make more for that business and it sounds like everything was built from the beginning and the correct foundations to prepare for sale.
Speaker 1:But the opportunity cost of trying to find a buyer can be massive and quite draining on many, many business owners and also the team, because if you don't communicate it correctly, if you don't have them Like, it can be a rollercoaster. Recruitment's already a rollercoaster just with your own clients. So let alone all right, guys, we've got another meeting taking place, let's go through this. Oh, we're going to get them. Yeah, they're really keen and then they're not. So, like how you know, you want to also keep it like a short period to let that happen Because, like I could imagine dealing with that, it's almost like you're trying to maintain Did the CEO just deal with everything himself? Did he have separation and get an advisor in between so he could focus on the team and growth and executing.
Speaker 2:I think you have to have an advisor right, Because so much of the sheer volume of correspondence between interested parties in itself would be crazy. We saw maybe 20% of it and it was probably a part-time job for about nine months Exactly. Yeah, To get a real deal done with interested parties, mutual interests, that was actually quite difficult. Imagine if you're out there with, say, four or five different parties or asking the same questions and it is just a constant communication stream. People come back and say, hey, can we have a report around this? Can we interview that person? Can we do this, Can we do that? And it becomes, as I say, a pretty intensive process.
Speaker 3:I was about to say to Declan's point around distractions in the business and keeping the team engaged and excited through the process. How do you do that? Because I went through a workshop maybe a couple of years ago and we were thinking big picture and we were like, oh, let's get this business to sale in five years time. What an amazing journey that would be. And one third of the team of that business turned around and said what you want to sell, am I going to lose my job? Why would I want to contribute to losing my job? And all of a sudden it actually went backwards. So we're in the opposite way. So you've got to be really careful on how you position that to your staff. To go, hey, we're going to prepare for an exit, and then they can either go what an amazing journey, let's be a part of it or they could go backwards. So did that ever happen? What was the sentiment in the team?
Speaker 2:A lot of that really started before I was there, so it was kind of a lot of the and it was. It was like five year plus. I think. If you're going to sit there and try to make a specific time period, you actually set yourself up for failure. Let's say, I want to do it by the end of this year. I'm going to take whatever deals on the table then, because my position is weakened, whereas I think if you and yeah, we had COVID in the middle, which probably definitely made it a little bit more funky but you've got to be transparent to a point. But you've got to be transparent to a point, but you've also got to be really professional, and I think we did that really well.
Speaker 2:Full credit to everyone at the network. We were brutally honest about what we were doing, without being highly specific. It was obviously confidentiality and things we could talk about, things we couldn't talk about, and maybe occasionally we were too. Oh, we think it's close. But everyone we would say, hey, look, we're going to tell you as much as we can and this is where it's going, this is how it's looking, don't hold us to it. But everyone was part of that journey from really early on. So everyone that was there from, say, 2019 onwards, had a stake of some part in that business, which really helped people kind of visualize and plan and everything that went with it.
Speaker 2:I think some of the negative consequences of that is that if it takes longer, you do start to lose people. But that's where that just clear communication, that discussion with the team, that look, this is why we're doing this type discussion and we'd have those every week. Obviously, you know it would be so tied into what we were going to do In the background. We might be having that chat every day Like what are we doing? How are we going about this? What's it looking like? These people are interested. I don't know if we're going to be interested in that. What do we distill to the team and what do we not? And there's probably a whole bunch of stuff that even I wasn't privy to, but that conversation was really paramount to keep people on the journey, because otherwise, you're right, it's actionable, they can see it and I think there's a trust that comes with understanding that you're going to act in their best interests, which I think was a really pivotal part of that as well.
Speaker 1:And it was interesting to find out who actually bought the network. So can you explain what the and then maybe make more sense once we know, like the industries you dealt with, what industries did the network specialize in?
Speaker 2:Yes, there's a big government component to what we did at the time. That kind of grew over the time that we were there. It's great margin, it's long-term contracts, it's about as good as it can get for an acquisition, and we were bought ultimately by a defense contractor, which was why? Well, the biggest problem in defense still is they're 10,000 people short of what they need for everything that we do, right, and that number is probably only growing.
Speaker 2:The reason that is is because you can't bring people from different countries in. You know, you can't even bring people from, say, new Zealand. That's changing a little bit. We're talking about Five Eyes, security, clearance and those kinds of things. You need to have Australians and you're working in places that are already talent short. For instance, like South Australia is massive, canberra is always a fun place. Perth has got a pretty small kind of skill set, so they would sit there and go. We need a company that can help us take this message to market, that can really get people interested, engaged in what is fast becoming one of the biggest industries in Australia, and that's not going anywhere, right.
Speaker 1:And defence contractors is very broad. You could be making bullets. Weapon systems yeah. What does Instatec do?
Speaker 2:Instatec was a defence contractor, specifically around telco and some technology pieces that were adjacent to it. There's a whole bunch of stuff that I wouldn't even know. They were highly security cleared in what they were doing.
Speaker 3:Telco communications.
Speaker 2:Yeah, telco communications building applications in that space, Lots of defense work.
Speaker 1:Because I've heard, like Matt Cossons if you've heard of him, he's obviously a really good tech recruiter. He talks about some of the tech roles that he's recruited for government and defense and they're like we'll let you know how it goes. And he's like we'll let you know if they get the job and that's all the feedback. The client will tell them. And he's like and cause everything's so top secret, they can only discuss with a candidate.
Speaker 2:Yeah, it wasn't really my cup of tea, to be completely honest. Personally, I like to be able to sit there and influence things. I don't know, maybe it's the control.
Speaker 1:You think about that. Imagine the struggle that they would go through as a company to try and bring that message to market.
Speaker 2:if they private sector, you lose, and this was a discussion that we had multiple times over that journey. It was like, look, banking is kicking your ass because everyone wants to go and work there and there's not a negative association. Sexy industry.
Speaker 1:Yeah.
Speaker 2:It's boring as batshit, let's be honest, but it's doing stuff that is paying well and will move quickly. So how does the defence industry not just in our space at the time, but how does that industry holistically, actually change its approach to go to market? And I think that's a big challenge for them. I've been away from that space for a little while because, again, I like that kind of fast, reactive nature of things and being able to influence decisions. And yeah, you can't, and rightfully so, right. I think that it's important from a national security perspective and everything like that, that it is the way that it is.
Speaker 3:So how do we solve this? Like if it's 10,000 short of talent. It seems like it could actually be a goldmine if someone puts their thinking cap on and solves this problem. Is that what you're planning to do?
Speaker 2:No, no, I'm trying to stay away from running away from it.
Speaker 3:That's someone else's problem.
Speaker 2:I think it's so interesting. There's so much stuff, and I invested a couple of companies in that space because I think that it's just, unfortunately, where the world is heading. If you look at it and speaking to some of these guys, the stories they would tell me about things they knew which it was horrifying. Right, you're not seeing a de-escalation of this market. How do they solve it? I think one. You need to look at fastacking grads. Well, yeah, that, but absolutely clearances for people from other locations.
Speaker 2:So New Zealand, I mean, maybe that's not the best, but Canada, anyone really, in five hours, we should be looking at seeing how we can bring those people on that journey, because so much of that intelligence is shared everywhere.
Speaker 2:And also, I think you have to get into high schools a lot quicker, and this was one of the things I said. I was like, look, we need to go to places like Mudgie or Port Macquarie or Bendigo, these places that are packed full of people with Australian passports and we can really offer something that other people can't, because the work's fascinating. Right, there's a lot of robotics, there's a lot of, you know, top secret cryptography, the cyber component of things alone. You probably won't work in better environments. But it's also really hard to get people to want to work yeah, and want to work in some of these locations. If I'm trying to get someone from Garden Island probably one of the best locations you can be at to go and work in, I don't know rural Townsville, I mean, what's your preference, right? So that's the hard part and there's not much they can do to fix that.
Speaker 3:It's just by the nature of what they do for business. So what are you consulting and advising these businesses on for sale? So are these small agencies, medium, large? Give us some context on the challenges they've got, the size they are and kind of how you're guiding them through that process.
Speaker 2:Yeah, generally it's been referrals from people that I've known and people that we both all know, who've said look, you've been through this, do you mind having a chat to these guys? And kind of you know, talking a bit about what you did? And generally the struggles are much the same when do I start? What do I do? What's a good outcome? Look like I've got this idea of what I want to do, but how's it actually going to yield results? And the first thing I often say is look, you're in it for the long haul. You're not going to go from agency of two years to suddenly selling for X times million dollars in a very short period. It's going to take time. I often say to people the foundation is the most important thing. You need to have the back end in order. That's by far the most important piece. Why? Because it makes it a lot easier to go through the process, data rooms and everything that goes into selling a business. If your shit's all over the shop, they're going to look at it and go.
Speaker 1:I'll just go down the road to someone who knows what they're doing and define what shit's all over the shop Like to me that's like a lifestyle business.
Speaker 2:You're just Totally yeah, and I think lifestyle businesses aren't ones to seven years to sell it. You have everything locked down in the back end. You have ordered reports as you meant to every time. You have top end CFO involved in the discussion. You have commercial management involved in the discussion. You have your HR and operations on point. We had all of that Some of the best people I've ever worked with and their job was to make sure that us recruiters who like to go and do deals and everything like that were kind of kept in check.
Speaker 2:We can't do it at this margin. We won't do deals that look like that because it looks bad when companies look at it on a spreadsheet they're figuring out oh well, if your total margin is this, why do you have this one down here at 10%? Let's say so. It's actually about keeping the standards really high and about kind of building a company with an ethos of excellence or as close to excellence as you can find, because companies come in and they want to do deals quickly and they want to do deals that make sense for them and if you're haphazard and you don't have a CRM and there's nothing really that they can take and look at and action and value, you don't actually have a value, and that's the hard part for a lot of people. They have to start investing in the back office early.
Speaker 3:What do you see in these recruitment agencies lacking? Is there a pattern where you go? Ah, this is the 101 mistakes of a recruitment agency. When thinking about selling.
Speaker 2:I think there's different ones for different people, right, like one is the reason that they want to sell. You know some you'll sit there and go, okay. Well, I think I can make X amount of money. Where have you pulled that number from? What does that look like? Oh, you know, I've seen recruit buyers, companies for that. It's surely it's what it's worth. Yeah, but we're talking about companies like Bluefin that are massive, you know, multi-state businesses with X number of contractors. You're this. So if we want to get you to there, this is the work that's required to get you there, and that's not to say that you won't be acquired, but your expectations need to change on what that looks like. I also think that the market needs to be for it right, and interest rates were very different to what they were then. Pe and VC firms were going absolutely crazy at the time. Everyone was buying things. It was like the last plane out type thing at that period of time. Get things done, get the deals in and kind of cement them.
Speaker 3:I think if you're looking at it now, you're planning for a three to five year window or longer. Why, why why that?
Speaker 2:timeframe. Well, I think, first off, you need to have a demonstrable period of time of consistency. So people want to see, remember that there's no emotion attached to this purchase, right? So companies come in here and they'll look at spreadsheets and, yeah, they'll have conversations with staff and people like that but they want to know what the value of that business is.
Speaker 2:Empirically, I don't care about your work from home policy. I mean, yeah, cool, it's good to know, but it's irrelevant to us. What are you worth on paper and what can we take from that business and generate more revenue for ours after we acquire it? So I think, if you're going to have that period of time, it takes that long to get the back end together and get your processes right and to be able to actually go into discussions on a strong footing. So if we were to come together and someone said, hey, look, I'll offer you two and a half million dollars for a business today, yeah, most people wouldn't be able to turn that around and some people would just go yeah, sure, no worries.
Speaker 2:And terms and conditions are very important Understanding what's good for both parties, due diligence mutually, and it needs to be right. There's a lot of companies out there that'll just give you a bunch of cash, acquire your business, bring it into theirs and there's nothing wrong with that If that's the goal and everyone's on board, happy days. But I think a lot of companies have a cake and eat it too. Mentalities I want to sell for X and I want to be around for a year and I want all my money and then I just want nothing to do with it and got to work on my golf swing.
Speaker 3:Great. So what's realistic then? If that's not realistic, what is realistic for someone to sell their business?
Speaker 2:Like two to three year earnouts standard.
Speaker 3:So an earnout is.
Speaker 2:A period of time between the start of the transaction and the completion of the transaction. So the business takes you over on day one. 365 days later, the first year times that by another two or three. In the end you'll sit there and go, okay, well, we've actually met all the goals that we achieved or that we agreed on day one, and that might be EBIT growth, contractor growth, that might be whatever it wants to be right. There's no real hard and fast rule. Each company will have their own goals that will tie back to their goals that they're talking to their board about. You're going to have to hit those to then get every cent that you were promised on day one.
Speaker 3:Yeah, so it's not like your business is worth a million dollars. You get a million dollars and walk away. What would typically happen in these scenarios? They'll go your business is worth a million dollars. I'll give you 60% of it now. I'll give you 20% of it after a year to make sure that the ship doesn't sink, and then I'll give you another 20% of it the year after, just to you know the steady growth, to avoid someone coming in, getting their money running away and then the business is worth. Nothing is essentially what you're saying Bang on.
Speaker 2:Awesome, which is what anyone that's done this before will do. They'll sit there and go, okay. Well, how do we actually make sure that I'm incentivizing you guys, who are an integral part of the business, to continue to be that integral part of the business?
Speaker 3:What happens if they say it's worth a million dollars? I'll give you 60% now, as long as the profit at the end of the day doesn't drop below the original deal metrics. So as long as you don't go from a million dollars profit down to $200,000 profit, I'll keep giving you that agreed amount. What if it does drop?
Speaker 2:Well, that's where the lawyers come in, the advisors and everything that you do at the first day one. That's the really important part of that discussion how do we actually mitigate the worst case scenario? It's like going into a new business and setting up a shareholder agreement. You hope you never have to use it, but you want to make sure it's really well done, Because if it goes the way that it says there, then you want to make sure that you're actually able to say, well, look, I'm still entitled to this and it happens right. You know, I think a lot of businesses that were purchased during that period of time were on massive COVID highs and everyone thought that the gravy train was going to continue. And I mean, we've probably had the worst year we've had in tech recruitment in yeah, possibly ever.
Speaker 3:Really, though, or is it just perspective, because it was so good beforehand?
Speaker 2:yeah, there's definitely that right and there's definitely that I think I I fluctuate between thinking that I'm old and jaded and that this is the way it was beforehand and this is normal, and, uh, the world's gonna end. Why are we in tech? You know, maybe we should do something else. But that's probably from my, my past scars being an oil and gas winner at all. When dead, the whole world just stopped one day, well, over a period of a couple of months. So I don't think it's been that bad. There's still been deals being done. There's companies. You know you're not seeing companies go into administration ad nauseum, right, it's not the case. There's been a couple, absolutely.
Speaker 1:But there's been 22,000 small businesses going to voluntary administration or liquidation in two years.
Speaker 3:Really.
Speaker 1:Yeah, in the last two years Terrible, isn't it? 23, 24. Terrible the biggest downfall of businesses ever.
Speaker 3:All right, why? This is pure speculation here, but why do we think that is yeah?
Speaker 2:I've got my ideas. I think there's a combination of political reasons, I think it's interest rates, I think it's the good times that have come through and people not knowing how to run a business and not knowing where warning signs are and being able to adjust. I also think that personal consumer spending and everything like that means that the expectation of what you can earn needs to be up here now when, in reality, when you start a business. I think when I started my first business, I pulled maybe like eight grand out of it in my first year and that was all that really we could do. It's not meant to be easy, right? It's not meant to be as hard as it has been the last couple of years, but the role of a small business owner, which is something like 80% of the market, that's pivotal, and I think a lot of places have actually turned their back on small business A lot of politicians, a lot of governments over the last couple of years. Why do you think?
Speaker 1:I think people just got used to the good times, didn't account for the bad times. So then they overspend, like a lot of midsize, any agency that got over like six to eight staff. They started hiring marketing people, they started hiring extra admin. They got really heavy in their OPEX on non-billing roles and it was a bit of a flex. It was a bit of you know, first time immaturity where you think you're killing it because you've got a certain headcount and then the yeah, the tide ran out, so to speak, and then you saw who was actually playing ball.
Speaker 2:So many companies were like that, weren't they? And not that went into administration or anything like that, but you would see them massively scale up and you'd go, wow, that's really interesting. This company went from 15 to 45. And I was always really mindful to not do that. A wanted to hire 18 players all the time, so there's not that many of them. You can't go hiring 15 in six months. But B, it's going to end at some point and I was kind of the I don't know, maybe the pessimist walking around while everyone was seeing sunshine and lollipops. I said, listen, this is not normal. We need to prepare for when it goes the other way and we need to implement AI. We need to talk about how we're going to be in front of our clients more. What are we going to do when the inevitably you know bad times do happen?
Speaker 1:And a lot of unskilled staff, like. So you know, like what Carolina said on the other podcast, she was a four year. She's four years in recruitment now, but she started in 2021. So she's like I walked in, I thought being a recruiter meant you're a rockstar and you get given all your jobs and this is easy as and then, like, no one actually warned her to the degree in which she has to win business now and she said it was such a shock and that just happened at scale and you saw, you know, agencies look like they're doing really, really bad and recruiters now, like it's still affecting. I speak to recruiters all the time and it's the reason why they're leaving as well, because they're like the goalpost has changed. The boss is so highly strung. My comm check's changed this, that and the other. So Some checks change this, that and the other, so it's still like there's recoil from Big time.
Speaker 3:Yeah.
Speaker 1:And it takes for ages, like if you have to go get a loan out to cover your business withhold, like you know, potentially paying your taxes on time to pay wages, like that's a really fast wheel that you can't get out of very quickly. Yeah, and people think like, oh, it's only a BAS payment, it's just three months. But it's only a BAS payment, it's just three months, but that could take two years, three years to pay off. And then like what does that affect you else in the future?
Speaker 2:Yeah, Spirals pretty quickly.
Speaker 3:Yeah, faster than you think. I think people get used to and realign their expectations to what the new standard is really quickly, definitely, especially when you start in 2021 or 2022 as a new business owner and you're making truckloads of cash Like you sneeze and all of a sudden you've got a deal. I was saying to a lot of my consultants who started around that time they would just send a bulk email. They'd get seven jobs on that, half of them would be exclusive and they'd fill them all. And it wasn't until I audited what they were doing that they had clients coming back to them asking them questions around terms and their mindset was oh, this guy's too much, he's too hard. I'm like he's asking you what the replacement guarantee is, like yeah, no, he's too hard If he's not just coming back saying I'm ready to go, I'm not going to bother, it's a buying signal and I sat there and I was like, are you serious?
Speaker 3:You're putting this guy in the too hard basket because he's asking three questions about the terms and all of a sudden it got. Everyone got really comfortable and then, as soon as that comfortability kind of ran out, not many people were able to adjust too quickly, especially living standards as well, I think everyone. When they start earning 100, 200, 300 grand, it's really easy to be like this is the new standard. I'm way, I'm so much better than I was six months ago and then over over leverage themselves and I've seen so many people do it and it takes a lot of humility and humbleness to just kind of rip straight back and go okay, let's, let's get back to basics and let's keep cracking on, because you know, before COVID you'd be doing BD for four days straight, you'd get two speckies in one job and you'd be like, oh, hopefully I can convert these. This is the good times.
Speaker 2:I think I, you know, I started my career during the oil and gas and mining boom in Perth and there were guys doing 300 grand a month at that period of time, Absolutely killing it. 150, 200 chefs out, that kind of stuff AMGs, Rolexes.
Speaker 2:Yeah, you'd look at it and go I'm doing terribly, because I'm doing 50 grand a month Now like, yeah, brilliant, it was really good by those standards and I think it's a positive thing because it makes you aspirational. If you see other people can do it, it's actually feasible. But it's also just. It had no longevity and I think you know the pros and cons of the industry during the most recent period of time is that if you didn't focus on fundamentals, all you had was a telemarketer, really, and someone who was just trying to go and speak to people who didn't want to be spoken to, largely about jobs they didn't care for and have any interest in.
Speaker 2:I think the most important thing for the last few years and where I started focusing my attention was relationships, personal relationships, so that when the bad times are there, you can pick up the phone and go, hey, how are you going? Hey, look, I don't have much on, but I might have something coming up that could be worth a look at. Okay, hey, look, I don't have much on, but I might have something coming up that could be worth a look at. Okay, cool, You're going to get that work when there's not much else out there. Also, I think you know that the market is changing and the expectations from clients and candidates is evolving. I think a lot of companies aren't matching that as well, how?
Speaker 3:so? How are they evolving Like?
Speaker 2:what are you seeing? I think that the community play is the biggest play going right, like people will sit there and it doesn't take much. A quick LinkedIn search will show that people don't like a lot of recruiters. I don't know why. Right, we're great, people get to know us, but in reality, some of that's probably quite fair. There's been a lot of behaviors that have been rewarded by the good times that are not what we would want to show as representation of our industry. So I think that what that has led to is A you get recruiters earning silly money who don't actually have to do anything and are being rewarded for behaviors that we would look at and go. Well, that's not conducive to the overall benefit of our industry.
Speaker 2:What that now needs to change is people are going okay, but I now need to know who you are and what you're about. I want authenticity. I want to see content from the person. Um, you know, content has been a massive part of what I've been doing for a number of years and podcasting and the like. I find that what it means is that people know you or think they know you a lot more. I'm sure you guys probably see that in your travels too, and the the by-product of that when you're going into business is people go. Oh yeah, nice to hear from you, like you've been meaning to call them for six months.
Speaker 1:Yeah, it's weird. Sometimes you get quoted on stuff you said two years ago, completely.
Speaker 2:Yeah, I was listening to something you said the other day. I was like shit. I don't remember what I said the other day, it was like it was months ago. But what that means is that the people that resonate with you and want to do business with you, they're authentic in their on in recruitment and try to nail it down. Even if it was shit work or even if it was stuff that you would look at now and go God, don't waste your time on that. They don't know what they're doing. You just get so much less of that. We don't get paid for all the work we do, so we need to stop doing that kind of work is my personal belief. I think the community play helping people with training, development, you know, free content on job searches, helping clients with salary data without even having roles Like these are little little things, but being able to help someone on their journey, as well as their company on their journey, I think that's non-negotiable in this day and age.
Speaker 1:Well, it's very like the tech industry is known for. Like what are they called? Like beers and ops. There's beer ops.
Speaker 2:What's beer ops Like a community group, massive group, uh, in every state where they'll go and like book out. I think they had it at a marvel stadium this year down in melbourne. It's in every state. It's literally a bunch of engineers and a bunch of vendors and the like that get together. It's a weird old industry because there is that kind of reclusive, almost nerdy element to it. But you know, us recruiters aren't necessarily that way in Climb. But then you've got the salespeople in that space as well who will make you a killing. I love it, but it's a strange old place.
Speaker 1:Tech do it really well though with community. Like there's not that many other industries Like construction to a bit, but like I'm talking about recruiters that are involved in community, like tech women in digital, these types of forums. Tech exec that's a big one. Is that a big one and who is that?
Speaker 3:Bullock, bullock, steve Bullock, just a little plug there.
Speaker 1:Yeah, nice, that's Australia's fastest growing one, and so these types of communities add a lot of value. But how would you go about it? If you're a recruiter and you're like, hey, I want to have a profile like Josh, I want to have presence in the industry, like Steve, how do you actually start a?
Speaker 2:community. Well, you've just nailed it. You have to start it right, and I think the market is really interesting in our space because they react well to the fact that we're not technical. We're not engineers I'm more technical than the average and I know nothing, but that's nothing more and I would go, yeah, it looks great. I go, no, it's a piece of shit. What are you talking about?
Speaker 2:So, getting in front of those people and having a conversation with them and just being real, just being real, just being authentic, being like, listen, I don't know anything about this. What would you look at or how would you go about this? And also, I think, just acting with integrity and authenticity. I know that seems really, really basic, but do what you say. Add value to the people that you're going to have a conversation with, and none of that old school kind of cloak and dagger bullshit that we say all right, yeah, there's a place for it in some agencies when you're competing with multiple places. Totally get that, but people resonate with people like them and everyone is sick and tired of getting 100 calls about the same role. So just be honest and go hey, look, have you had the conversation already? Yes, I'm aware of it. Okay, cool, no worries, look if I say anything else, but I think you'd be good for it.
Speaker 2:Little things like that. It helps build capital and it helps show people that you're genuine. I think also just caring about the people you work with. I'm so lucky the people I speak to every day. They're really interesting. I walk away from conversations and just go, wow, I'm often the dumbest person in the room and I love it. That's what it's all about room and I love it.
Speaker 3:That's what it's all about. I think community is going to be the biggest differentiator for a lot of businesses in the future, when we think about the world it already is.
Speaker 1:It is yeah yeah, Jim Shark beat Nike.
Speaker 3:Yeah, yeah, like we see all these. We still see all these businesses with these like online digital strategies and in a world where everyone's so connected, it's almost like community physical getting together type of communities will actually drive better outcomes than just spraying, and hopefully someone will engage with you on a really surface level. So I think in the future, any businesses that align themselves with either building a community or really community focused will be able to leverage and build so much more trust than others that just try and skirt around it or do it as a marketing facade. Yeah, because it is a big throwaway line for a lot of people. It's like, oh yeah, you know we're out there with the community and it's like what actually is that? And it might just be someone taking photos of themselves in front of a building.
Speaker 2:Always going to a meetup and saying, yeah, there's no shade on people that do that. It's better than the people that sit behind a desk all day. Our job is people-based right, and when we were, two years ago, starting to plan out Northstar, we started to figure out the most important thing is this space. We were doing it organically that's kind of how we'd always been, my business partner and I so when we started looking at it, it was like, okay, how are we actually going to make this beneficial for all parties? A, it can't be us. We can't be that, that middle piece in the wheel. We just need to be another spoke on it and we need to help promote people that are going to add value to others in the community. Um, I think it's really easy.
Speaker 2:As you say, it's a throwaway line and the world is so connected in this day and age everyone thinks that an online community is a community. It's not the reality of what people are looking for now is actual connection and community and connection can be the same thing, but often it's. I've got a group of 400 people and I send some stuff in a chat group. That's not community, you sure. No comment, but being able to actually say, hey, I know that person, you know, I know what makes that person different, and I think you as a recruiter instantly get credibility from both sides of that equation.
Speaker 2:Like you know, you're in the community over here and I know this person from another one. I know that person. I don't just know this, even I know that person. You should have a conversation with them. Oh okay, why? Might be just a mentorship thing, but eventually there might be something there and you'd hope, naturally, that they come back to you and say, hey, thanks for that introduction, here's a recruitment fee, right? Also, I think the work that you get out of those kinds of communities is so much better because people look to you for trust and they will sit there and say, hey, I've got this problem and it might be completely unrelated. I've got this HR issue what have other people done? And the ability to actually help people at that kind of level. It's so linked to the ability to then help a business better.
Speaker 1:Yeah, you need to get to that trusted advisor status as fast as possible, but you can only get there just by doing the work, doing the work, it's undefeated, unfortunately.
Speaker 2:Right, the phone is your best friend. Pick it up, have that conversation, get out and meet as many people that make sense. It's hard to differentiate between those that are worthy of worthy is being a terrible word but the ones that are going to actually appreciate that investment in you and the ones that are never going to call you again or never want to hear from you again, from you again, and that's okay. Some will, some won't.
Speaker 3:So what? You can't make everyone be the way you want them to be, so are you building a?
Speaker 2:community yourself. Yeah, we've been like that for a couple of years, right. So kind of intrinsically it's been a really part of how I've operated. Is there a name? What's the community name? The community is just part of our North Star group, so it's part of what we're trying to build in the back end. There's some technology that works. It's not a chat group. There's some technology in the background to make sure that we're actually bringing people together on that platform, but also in person.
Speaker 3:So what type of people are you bringing together? Is it people that you're?
Speaker 2:Well, our three specialisations are pretty intrinsically linked. So one is data and AI. I've been consulting in data and AI for a number of years. I still know nothing about it, but but it's really interesting and it's part of what people are talking about Cybersecurity, which is a big part of what we've been doing for the last few years, and we actually built a community in that space prior to leaving the last company and executive leadership those three you got a nice little triangle.
Speaker 2:You put that to anybody at a board at the moment. Those are the three things they're worrying about how are're going to get the best executive, are they on the hook for a cyber incident and what the bloody hell is AI? So if we're able to help people in all those communities I find that they're very much linked you need to have the best security people possible. If you're going to go crazy on AI because it opens you up to some concern, you need to have good executives who are going to help you plot that course and take that roadmap on how you're going to take your business there. And I mean, everyone needs good cyber people.
Speaker 3:That place is not going anywhere. So the last couple of months you've been building your agency, the North Star.
Speaker 2:I've got that right now North Star.
Speaker 3:Partners yeah, North Star Partners. Talk to us about some of the challenges that you've had in starting an agency, because there's a lot of recruiters out there. We think that 2025 is going to be the year of the new agency startup. We're seeing a lot of recruiters kind of get the ambition and kind of the wonder to go what if I did this for myself? Some are at the early stages, some are at the later stages. You're at that perfect stage of I'm going live right now, but what was the kind of what did you have to put in place over the last number of months if it was that to really get to where you are today, to launch?
Speaker 2:Yeah, I think you've got to start with vision, right. You want to know why. What's your why? And if my why is I just want to work for myself and work flexi awesome, cool.
Speaker 2:I don't think that was ever the ambition for us. It was like okay, we want to come in and really be at the tip of the spear in our space. We want people to look at us as trusted advisors. We want them to sit there and say, hey, that's the kind of business that we should be speaking to about our work. And cyber's got a lot of really good agencies and exec has a fairly strong reputation in that space as well. So a fairly strong reputation in that space as well.
Speaker 2:So, looking at how we can kind of bring that all together, it was kind of a vision of mine for a number of years and talking to my business partner about it, it was like all right, look, we need to figure out why and what and what's actually going to be different. And for us, I think we're ahead of that curve when it comes to things like community. We have put a lot of time and effort into building relationships over the last number of years. We've got, you know, we've only just started and we're launching officially in February, but the plan for us was always to do this and it was just about what that needed to look like, and I think if, if either of us weren't fully committed, we just we'd keep going and doing other things. You can earn great money for other people and add value. At the top end, I think what I've learned is it's always harder than you think it's going to be Always harder.
Speaker 1:It always costs more. It always costs more and takes longer.
Speaker 2:Particularly if you screw it up early, right, or you make mistakes and everything like that. And I was lucky, having done a lot of that myself over the years and having so long to plan it. I wanted to take six months off after finishing my last role. That was always purposeful. Figure out what I wanted to do six months off after finishing my last role. That was always purposeful. Figure out what I wanted to do.
Speaker 2:Spend a bit of time in startup land, do a bit of consulting, which has actually been really useful, because we in recruitment are very blinkered. We know how to run a recruitment business or run a desk or plan your day around BD calls, et cetera, but the real world quote unquote is not actually like that. So, going and speaking to founders about issues that we would look at and go, you're having issues with contracts and IP clauses why? Oh well, you know, I just trusted them. Oh guys, come on, you know it's a rookie mistake.
Speaker 2:So I think when I, when I, founded the business, or when we decided to found the business, we wanted to know that it wasn't just going to be noise, we weren't just going to be another company that everyone had kind of known of but no one had really kind of bought into. So planning was paramount and I think that's really been the differentiation getting feedback from people hey, what would you want to see in a business? Speaking to people that have been in our network and mentors and that kind of thing, and actually getting validated learnings about what's wrong with our industry and trying to put plans in place to fix that.
Speaker 1:What did they come back with? What's wrong?
Speaker 2:A lot of people don't like us. I'm not going to lie to you. There was a lot of things right, like even down to the way that we do business and the way that we're incentivized, and there was some stuff I'd walk out of meetings and I'd, but it's really interesting to know they feel that way. How can we help address that for the betterment of the industry holistically, but also when we're going to go to market. What does that look like? So one guy tech CEO. He said look, what I really don't like is I actually feel like you guys aren't around long enough.
Speaker 2:I'd never heard anyone say that Like people generally want you in and then they want you gone because there's a presumption that maybe we're going to come and try to steal people and that kind of thing. He said I would pay you more if you were part of the journey for 12 months and made that person I hired better. And I remember walking out of that going yeah, there's something in that and bringing that into our community play and figuring out how, when people join our community, they're at X and how we can then get them up and make them more hireable or more desirable within the market by linking them with RTOs or people that are already in that space. It's really not that difficult, but for us that was really kind of it was inspirational, because we just assume people know what we do and how we do it and actually taking the time to ask what feels like a stupid question absolutely, you know, impacted the way we decided to go about business.
Speaker 2:What was like the hardest challenge you had. Look, I think the hardest challenge is twofold. One, you know, not having the brand and not really being able to do too much until you know this year how did you go about getting the brand together Like marketing agency?
Speaker 3:I knew what of, knew what I wanted to do, right.
Speaker 2:And when I remember vividly when we actually figured out we were going to name it North Star Partners, we were sat having dumplings one day and I was babbling on, as I like to do, about True North and how it's important and people and that's a really important thing in all businesses and this part I was like there's something in that. I'm on ASIC having a look. No, can't find anything to do with True North. Okay, well, maybe there's something else there. And the iteration ended up coming out and it just it was right. You know that moment where you go, I get it.
Speaker 2:And we started like testing it with people going, hey, would that make sense? And they went. I can totally see why you guys would use that name. It reflects who you are, it reflects what you're trying to do. It makes perfect sense to us. So I think when you actually have that law start and you know what you're trying to do, it's a lot easier. But yeah, we went out, we spoke to a bunch of people. We, you know, used all our networks that we could and said, all right, how can we do this as cheap as possible? And we were really lucky. We found a fantastic designer who just hit it out of the park and I remember opening it going oh that is good, awesome, this is going to be good.
Speaker 1:What made you want to do it as cheap as possible?
Speaker 2:I think it was early doors right, like just purely on the design side.
Speaker 3:Yeah, A Is that where most of the money gets invested up front.
Speaker 2:No, most of it, I think, is well. I think your actual cost of setting up no-transcript, the barrier to entry in our space, is horrendously low.
Speaker 1:I think that's what it's good and bad, definitely. Like you look at. You know you've got to be licensed. Now, say real estate, you've got to be licensed. You've got to be licensed. Now, say real estate, you've got to be licensed, you've got to have trust accounting, that's got to be audited.
Speaker 1:Like it's not that easy just to go and set up a real estate firm and then to run, like, say, a property management business, like it can be a shit show if you don't have your ducks in order as a as a agency owner. But in everyone thinks like, and rightly or wrongly, you can start a recruitment agency for I don't know, you could almost start for $0. Yeah, essentially, you register a company as a sole trader and you can start at 500 bucks. Like the success and the abundance and freedom you're probably not going to get from it. You'll probably just get a stressful, low paying job. But the reality is, I don't know. I think that adds, it doesn't make, it creates an opportunity for you to be, to be great. You only have to be good. But then it's also frustrating. Every man and his dog can just do it.
Speaker 2:I'm fully on board with licensing.
Speaker 1:Yeah, I think it needs to happen because, like you look at how pivotal and how much a good recruiter can transform a company, that same bad recruiter can fuck up a business really fast. So there's got to be like a happy media, I know, like the RCSA has its place and they're, you know they do things to a certain extent, but there's got to be like a rubber stamp, like the labour hire authority. That yeah.
Speaker 2:I mean, I hate the fact that in certain states you need a labour hire licence, but also it makes sense. I feel like it's a bit of a cash grab. There's so many other areas of government that rule over that, like IR and workplace laws and everything that go with it, but I think that the RCSA is great for advocacy, and particularly when it comes to things like the IR laws changing same job, same pay, right to disconnect, which is a nightmare for people that live on phones, as I'm sure all of us do.
Speaker 1:How do you understand those tricky things in layman's terms?
Speaker 2:Totally. But also, what are we doing to bring the quality of our industry up? And time and time again, unfortunately, we see examples of where that hasn't been the case and the people that get impacted are people that are contracting to these businesses or consultants and what have you. And that's where we have to sit there and say, all right, well, we actually need to contribute to making it better, to uplifting the reputation, because, yeah, it's a tougher gig for everyone else when everyone has a bit of negativity towards us.
Speaker 3:Yeah, it's funny. Like over the last two years I've realized and I've always known this to be the case that recruiters have a bad name because there's a lot of cowboys out there and you find that the cowboys aren't actually the recruiters at agencies. The cowboys are the recruiters who started their own agency with an Excel spreadsheet and have a $10 website up that calls themselves a recruitment agency owner. They're actually the cowboys that aren't adding the value that might make a placement. The person doesn't last and because really it doesn't really matter or impact them much, they won't give them a replacement, they won't care, they'll just move on, find another client. And they're kind of, they're bringing the majority down and I'm using general terms here. You know this isn't the case for everybody, but I'm starting to find there's actually more agency owners, one-man bands, that are sticky, taping some ideas together and presenting themselves as a recruitment agency. They're the ones that are probably impacting us the most. So it's really strange.
Speaker 3:To Declan's point, it's kind of like I've always said it's our blessing and curse because there's a really low bar in recruitment, which is bad because we all get tarnished for the same brush, but it's good because you don't have to be outstanding.
Speaker 3:To be a really good recruiter, you just have to do what you say you got to do and you're like you're a God. And so, for the people that take it seriously, they make lots of money, they're well-respected, they have a good quality of life and then the people that are kind of, you know, in this scarcity mindset of like I'll just do this myself and I'll just figure out this and you know, yeah, whatever I'll just you know, I'll get a bit of cash here, get a bit of cash there, and it's like super short term, transactional and not sustainable. They're the ones that are hurting us the most. But yeah, it's a weird industry and I'm still working out the best way to try and evolve that from being this kind of Yahoo kind of cowboy to like these professionals that actually care for what they do. Because, like in the US, have you dealt with US recruiters? Much, very different they are just they're like lawyers. Yeah, they take it super seriously.
Speaker 2:And the way they do business is completely different. When I was moving over there, the rate's like 30%, 35%, almost everything is retained as it super seriously, and the way they do business is completely different. You know, when I was moving over there, the rate's like 30%, 35%, almost everything is retained as it should be and the discussion that you have. It's a long discovery process. You get to know the people. It's how it should be.
Speaker 2:Yeah, I tried to emulate that here, and some clients, they're just preconditioned to the race to the bottom. Yeah, so it's not always on the recruiter, right? Sometimes the one-man band will go hey, I'd love to work with you. Oh, this is how we work. Oh shit, okay, I need the deal, All right. Yeah, cool, I'll do it. It's hard to point blame all in one direction.
Speaker 3:It is 100%. But yeah, you're right, in the US they kind of hold a very high standard for themselves and the work that they do and it forces the companies to go okay, these guys are taking it really seriously. I've got to take this really seriously too, whereas sometimes recruiters they don't take it too seriously. You know, a recruiter will take a job brief, like I hear from companies all the time. A recruiter takes a job brief and disappears. Yeah, never get a candidate. Can you imagine that?
Speaker 1:Yeah, that probably explains why the average billing per head is like 5x in the US compared to here.
Speaker 3:Yeah, so I was looking at recently like productivity per recruiter and in Australia it's like $175,000 on average of revenue per recruiter. In the US it's $680,000 per recruiter. So not only is that 10x the amount of recruiters, they generate four times the amount of revenue and it's just a whole different, weird landscape.
Speaker 2:Very culturally different too. So you know, the company I was joining had a big office in New York and was based in Texas and also had an office in LA, but they were all just all over the shop doing whatever you know. They'd go and have conversations with someone in Miami and ultimately they were hyper-specialized. So the result for the client was I actually know my shit from top to bottom Like there was guys who were working on just this one technology workday. They were making $3, $4 million a year just doing that all over the country, but hyper-focused. So I think here we have that kind of laid-back mentality and we also maybe don't celebrate that kind of hunger and drive to do the $3, $4, $5 million that some of these types do. Maybe that's a cultural thing as well.
Speaker 3:Yeah. So lastly, mate, tell us about North Star Group. What is the North Star? What are your plans for the future? Give us a bit of an idea on that.
Speaker 2:Yeah, I think yeah, depending on when this is actually released. We're having our end launch party, you know the official coming out type thing which feels like so overdue late February, and then from there the plan is really this will align pretty well. Yeah, I think so. Yeah, and I think I'll probably be in everyone's LinkedIn feed. There's podcasts that we're dropping around that time. There's a few announcements that we want to be doing around that same period.
Speaker 2:If I was to look back on it and say six months and what would constitute success? I would say a really solid group of billing clients and it doesn't have to be a huge number, to be honest, I'd rather it isn't but ones that you know that every time there's something there, you're able to really generate a result for them. I would say the end goal longer term, which I hate putting down this is going to come back to bite me, but realistically, we want to be in every major city. We've already got set up in the US as well. We've already got set up in the US as well. We've got one person over there who's doing a bit of work for us. It's a natural segue between both locations.
Speaker 2:I want really people to say those guys are right at the tip of the spear when it comes to the best in their sectors, whatever sector that may be, be it cyber, be it data and AI. If we decide to then expand that into legal or insurance, what have you? We're doing it to be at that tip of the spear? The way that looks is really simple Doing good work with good people and not being the ones chasing the ambulance which is so easy to say right now.
Speaker 2:So we'll see what happens in six to 12 months.
Speaker 3:No, I love that. So how does someone get in contact with you?
Speaker 2:LinkedIn's the best way I've like most. Spent far too much time on there and otherwise all the other paraphernalia and everything that goes with it will be announced in due course, really soon.
Speaker 3:Love it Awesome mate. Well, thanks for joining us.
Speaker 2:Thank you, it's been a good chat. Really enjoyed it boys.
Speaker 3:And, yeah, it'll be coming out probably in three or four weeks, so it'd be awesome to watch this back and celebrate the launch of your business. I'm excited. Thank you, awesome Thanks, mate. Thanks for tuning in to another Confessions of a Recruiter podcast with Blake and Declan. We hope you enjoyed and got a lot of value and insights out of this episode. If you do have any questions or you would like to recommend someone to come on the Confessions podcast, we would love any introductions and remember the rule of the podcast like share, share and recommend it to a friend Till next time.