Today we have the first of a 3 part series, where we dissect the growth and sale of an IT consulting business.
In this episode we talk in depth with Sam De Longis, the man who built this business from the ground up, from a start up 2 decades ago, to a company with more than 300 staff – which eventually sold to a listed entity.
If you like a good story about the roller coaster ride of business, and how to ride out adversity and turn it into a beautiful exit into retirement, join me in this episode of the Deal Room!
- Sam’s business growth strategy
- Dominating a government panel by getting on the ground early
- Flexibility in business and learning to adapt to changes
- Retirement – a decision of the head, not of the heart
Today we start a new podcast series with Sam De Longis, founder of the IT consulting company, Trilogy Resources. I had the pleasure of working with Sam when he sold his business back in 2012, and he is literally one of my favourite clients of all time!
Our new series with Sam comes in three parts. These three episodes each feature a distinct phase in the business cycle and Each of these episodes contain important, but slightly different, lessons about growing and selling a business.
Before I dive in to my discussion with Sam, I think it’s worth me talking a little bit about the background to this episode.
Sam established his business in 1988, and through the next 24 years built it from a start up to a business with more than 300 staff, and was awarded the Best Candidate Management Program during the Recruitment Excellence Awards in 2010.
Sam did this while weathering a number of serious storms in his business. But with a lot of grit and determination, and some clever strategies to boot, the business made it through the other side – to thrive.
In Sam’s final years before his sale, he set about strategically readying the business for exit. With a result of lining up multiple keen buyers so that he then had the advantage of being able to choose the buyer that was the best fit. So Sam’s story in this 3 part series is an inspiring tale for anyone who is currently stuck in the trenches of business building, or who is working hard to create a happy exit.
In part 1, which is this episode, Sam and I discuss his growth strategies – how he dominated a tactical position in a government panel for contracts in Perth and why this strategy was important in building for the sale of his business. We then talk about how he came to the decision of exiting the business, and we dig into the thought process and motivations behind this conclusion.
In part 2, we’ll drill into Sam’s insights in the business sale process and how he prepared himself and his business for sale. And finally, in part 3 we come full circle as we chat with Sam about life after the sale.
So if you are after an inspiring and practical story, don’t go anywhere. Here we go!
Sam’s business growth strategy
Joanna: Did you have a strong strategy about how to grow your company? I mean you’ve already talked about it being sort of organic and slow and stable growth.
Are you the sort of person who sits down and goes “okay, this is what we’re looking like in five years’ time, in 10 years’ time” or did it just evolve?
Sam: No, I never sat down or any of that.
Joanna: I love it Sam. I absolutely love it.
Sam: No. I was never smart enough to do it. Again it was just the same thing. Just do the best you can do. I never really had a plan or vision to hit a particular goal or whatever.
But what I did do is that I worked out long time ago that in business and in life, personal life. When you’re at a point where you think you’re doing okay and you’re in a cushy situation, you’re actually not. You’re going backwards. It’s very true in business.
You’re either going forwards or you’re going backwards. To think that you’ve arrived at some plateau which is where you always want to be. I think it’s rubbish.
Having said that, I think I’m at a plateau now in retirement. But I think I can allow myself that sort of luxury.
Joanna: I think so, Sam. I think so.
Sam: But at any other time, particularly in business, you need to be going forward. And how you do that, whether you measure it by money or whether you measure it by achievement or whether you measure it by number of people or something or whatever, you’ve got to have some sort of measure. That can be soft measures. We never had any hard measures.
But the growth part I guess is probably the period from about 2005 till when I sold in 2012. That coincided with two things.
One was, in the end of 2000, I bought out my other partner. There’s three of us originally. By this point I was on my own from 2001. Then we fell in that hole about 2001 to 2005 where the market was bad.
I was now completely free to do the type things that I wanted to do. That was a bit different. It was an opportunity. That opportunity came on the actual recruitment side of the business, where we were able to get on to a major government panel.
I probably won’t go into too much. But the way this panel works, there was an opportunity.
First of all, Perth is sort of a two horse town. It’s either government or mining. Well, that’s what I reckon it is anyway. People might tell you different, but it is.
The story was the government had decided that on the recruitment side, that they were going to go out to this panel, a PSA-type third supplier panel agreement.
They were going to reduce these panels down to five players, so five companies. What that really meant was 50% of the work in Perth on the recruitment side providing external resources which is what this was really all about. It’s contractors. That market was going to be closed down to 99% of the companies around town because there was only going to be five people.
I saw that as a real serious threat to the business that we were in. So the first strategic decision was when that opportunity arose was we have to get onto this panel at all costs, at absolutely all cost. That was a very clear decision.
I sat with my senior guys and said “look, we have got to do this. We cannot afford to be locked out of government” since it’s such a huge supplier conduit for contractors and people in I.T., if we’re going to stay in I.T. so that was the first decision.
The second one was then figure out how to get on to this panel and could we get on? We were a very small company at that time.
In reality, of the five people that got on (we were one of them), all the others were a couple of very large local companies and the rest were Australia-wide very large recruitment companies. We were very much the fly in the ointment here.
Dominating a government panel by getting on the ground early
Joanna: And so how did you do it Sam? Tell us how you did it.
Sam: Well, we got on the panel. We told a good story. Ironically, whether that was part of it, I think we had a good reputation around town. But also, it turned out that we had the lowest price on this panel as well.
That was definitely something that was crucial. Price. Look, with all government departments, regardless of what they tell you, the price is always the thing.
So we got on that. That was great. That was wonderful. We celebrated. It felt great. At least we’re on, right? Now, how the hell are we going to make money?
But that was the second part of the problem. People get ahead of themselves, right? Especially when it’s tender situations. All other arguments become academic if you don’t get on, so that the first story is you need to get on.
In this case here, whilst we’re on, I thought well the risk is not all that bad because if we perform badly there was no. It’s not something if you’re writing software where you commit yourself to a price and then you can literally end up losing your house and your whole business if it’s a fixed price quote This was a panel.
I felt that we were genuine about the price that we put up and that we could do it. But I wasn’t sure. In reality I was justified in the fact that the other five players that got on the panel were all within (this is like flat hourly rate thing) but were all within about 50 cents of each other on this panel.
Joanna: Really? Wow!
Sam: Yes, it was. It was that darn close. People don’t realise it, but it was.
So our quote was spot on to get on. I think the other people who got on realised that as well because there was a lot of other large companies who had put prices that just weren’t going to work. So we got the price right.
But then I thought well, how are we going to make this work? Can we make a profit?
I hope so. If we get enough people, we can probably make it work.
At that same time, the mining started to pick up a bit. A lot of the companies who were on these panels decided to chase the mining more than the government contract that they had.
I saw an opportunity here. Normally governments always go out and get three quotes for everything and typically they’ll go for the lowest quote. In this particular case, the margins were fixed anyway.
It was unprecedented in the fact that for the first time in their life, they actively encouraged the government clients to pick someone from this panel. If they found that they could develop a business relationship with these people and if they found that they were getting good service, they didn’t have to go out to the other four people on the panel.
That was a real light bulb moment for me. I said this is absolutely fantastic. If we get in and do what we normally do and provide really top service, these guys are not bound by the normal government rules of having to go out and get two other quotes from other people.
We can genuinely have a normal business relationship where they’ll just keep coming to us and it’s genuine. They don’t have to justify. They can do it. That was a real game changer.
I said to myself whether we can or can’t make money on this panel, we need to be the first people to try to see if we can make money. I made a strategic decision that we would pursue this very strongly while the other players were off taking advantage of the mining industry.
We did this, and we ended up being quite successful at work. We gave these guys really good service and the other people we’re not giving them as much service because again driven solely by short term making money for this year sort of philosophies I guess.
They’re off chasing the money somewhere else while we were mooring. This is an opportunity that we can do really well at if we get on the ground early.
I found out that most of the time when people wake up to an opportunity, the opportunity has already gone by. I thought, whilst that’s under the covers let’s get out there, really build this up and we’ll be the first people to find out whether we can make a profit or not.
If we don’t make a profit, we’ll pull out and the other guys can find out for themselves. But in the meantime, let’s do it.
So we did that and we did find that we were able to make a profit.
Once people started to realise that we dominated this panel. I mean in the end, before I sold, we probably had over 75% share of the revenue come through this panel.
Joanna: Wow. That’s just amazing.
Sam: Yeah. By the time people woke up because they saw us doing well, they thought oh there must be some money in it. Of course, by the time you try to get on board it’s too late.
It’s like when someone tells you “Hey, go and buy the share. Buy it now. Buy it now.” Well normally it’s at the peak and you buy it and then two days later it goes down.
Joanna: As we’re seeing in the share market at the moment.
Sam: Exactly. I found that this was the same in business. When someone starts telling you this is the new hot thing to get on board, the real people got on board five years ago and it’s only the turkeys who come looking around for an easy feed. Don’t think that you’re going to get it now.
So that was the strategy and look that worked out very well.
That was a definite and deliberate decision to pursue this thing because I saw something that could work if we put the right amount of it. We were vindicated by the fact that people would ring us because they knew they could get good candidates. They knew they got exceptional service.
Under normal circumstances, if you looked at it externally you’d say, would you do it? For the rates were so low. But at the end, we ended up having just round about the 300 subcontractors on our books.
We were able to grow quite dramatically in that time. In fact, we won a couple of awards etc.
Let’s take a break
Let’s take a short break. When we get back, we’ll talk about the importance of flexibility in business and learning to adapt to the changing trends, particularly in the area of technology. And finally, we close this episode with a discussion on how Sam came to the conclusion of deciding to retire.
And that’s next, this is Joanna Oakey and you are listening to The Deal Room Podcast, brought to you by the commercial legal practice Aspect Legal
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Welcome back! Earlier, Sam talked to us about the amazing story behind how he grew his business organically. He also talked about the importance of being able to see opportunities as they arise and getting on the ground early.
Now let’s pick up our conversation with Sam and drill into the importance of not rushing in too quickly when making business decisions. We’ll also talk about the concept of flexibility in business and learning to adapt to changes, particularly in the area of technology. Then we’ll close this episode with a discussion on how Sam finally decided to retire.
Joanna: There was obviously a long time invested in building up the foundation of the business. Obviously, you weathered a few storms. But you backed yourself at the time that you needed to.
You had this hunch. You backed yourself even though. I guess it could have gone either way. If it went the wrong way, then you just would have built yourself up and found the next thing. But I think part of it is about backing yourself.
Sam: I agree. Well that’s true. That’s probably one of the other thing I mentioned earlier. I’m not scared of long hours, hard work. I consider myself to be average.
I do think a lot before I make a decision. I’m not volatile in making decisions. I think about them quite a bit. When I get to a conclusion, then I’ll act on it fairly quickly because it’s all done. The groundwork has been done. We see the opportunity and need to jump on it.
I don’t make emotional decisions, typically that I regret. I will think long and hard about it. But look, it’s only over the years. It was never always like this but I have developed quite comfortable in backing myself up.
I’ll take the responsibility. Look, this is the way I see it. If you see it better, that’s great. But this is the way I see it. I’ll go for it and if it falls over, I’m happy to cop it in the neck.
It’s okay. I’m not going to bitch about it. I’m not going to groan about it. Move on. Learn from it. Move on and try something else. But you’ve got to give it a go.
Some people just rush in too quick and don’t think things through. Maybe because of my I.T. background. You think a lot about things when you’re programming and doing things. It’s black and white. It’s either yes or no. It’s on or off. I look at it hard before I make that decision.
Joanna: An element of flexibility also helps as well right.
Flexibility in business and learning to adapt to changes
Sam: Well I think if you’re in I.T. or anything like that, where you see this growing every year. It’s a new playing field and you’ve got to constantly adapt and change. If you’re not a person who likes to adapt and change, then you’re going to be dead. You’re one of these guys who’s sitting there. “Oh, I didn’t see it coming. Oh things have changed.”
Well, you should have changed around it. You either adapt to change or you fall behind.
Being in I.T. things were always changing and that was part of the interesting thrill of it I guess.
Joanna: I think it’s a good comment because every business now is in that realm that I.T. was whilst you were growing your business. We’re in a period of incredible flux and change. So yeah, it’s so applicable to everyone now, not just I.T.
Sam: Yeah, not just I.T. Well, I see people go on about online sales and you’ve got a brick and mortar store that’s not doing so well. Just get over it. You’re still in the business of selling goods. You need to adapt to how goods are sold today. There is no point sitting there and bitching and saying nobody wants to come to the family store anymore.
You’re in the business of selling goods and just work out what that is now in today’s market. You can’t just sit there and say well it’s changed around me. Well, bad luck and I have no sympathy.
Joanna: I love it Sam!
Sam: Well, you got to. You can’t just sit there and just say it’s changed. You should have been changing with it. It’s just the way it is.
Retirement – a decision of the head, not of the heart
Joanna: Absolutely. And so then, let’s talk about moving into the exit of the business. You mentioned before that you really only came up with the idea of an exit fairly close to the time that you did sell. About a year or so did you say, before the sale?
Sam: Yeah, and those 12 months is probably that period that I’m saying to you that I don’t make decisions quickly.
Sam: I never had this concept of retirement. I never really understood what it meant. I never really understood the concept of not working and expecting to have money to live in roughly the same lifestyle as it were when you were working.
The concept of not working never really occurred to me either having seen my father having to work all his life and the sacrifices that he did. The retirement thing was never something that I’d ever sort of considered.
While you have people spending all their life just about “I can’t wait till I retire. I can’t wait till I retire,” I never I never had that feeling. My intent was to discontinue the work and I never really thought about how one day when I would not work.
But over the years, a few people started saying to me how old are you now, Sam? I’ve been around the industry a while obviously. I knew a lot of people in Perth who figured I was getting close to retirement age. And I said, really? I was 61-62 or so. Really?
I never really thought about it. I don’t know. In my head, I knew I was at least five or 10 years to whatever. I never thought about it. I never did.
Joanna: As I said, we had a quick discussion before recording this podcast. I think when I first met you and you were well down the path of sale when we first met in your office in Perth all those years ago.
But I recall my first thoughts after meeting you was wow, fabulous meeting. I really enjoyed meeting you. I knew at that point that you had this great story about your business. But I left thinking Sam is not going to sell. I just got this feeling that you couldn’t see yourself in retirement.
You were well down the path at that time. But the feeling I got from you was you weren’t someone that was ready to retire.
Sam: The story was I didn’t have to retire and that was the thing. I think that probably helped me in the negotiations thing as well as I said to the guys at the time. I don’t have to sell it but I wanted to. If I don’t get the deal that I want, I’ll pull out of it. I was quite genuine because I could easily see another 5-10 years of stuff that we could have done and continue to do etc etc. etc. So I didn’t have to.
It was purely a decision I guess from the head and not the heart. I mean from my heart I could have had the passion and the drive and the desire to continue to work for 5-10 years.
Probably people saying to you that you must be getting close to retirement. I just say “No.” But asked about it the tenth time you think, is there something in this? I started to think about a couple of things.
This certainly wasn’t significant. But I did have an older brother who passed away at the age of 60 a few years before with a massive heart attack at the age of 60. I’d just gone past 61 I think at that point.
When I was 37, when I started Trilogy, I did an exercise (actually, not on paper) just in my head projecting 10 years out. Where would I be? What would my life look like? What would I do? That’s when I left Matt Newman.
The conclusions that came at that point was that whilst I was earning top money and I was in the top 10 earners, I looked at it and said in the next 10 years if my car packs up, can I ever see myself buying a new car? The answer is No. Can I ever see ourselves going on an overseas holiday? Answer was No.
There’s a whole bunch of things. I thought even though I’m doing well I need to do better for what I want to do for my family. I want my kids to have things and my wife have things.
And because they changed the work, the way it was. I was going to end up sort of sitting in a corner. I didn’t want that and that’s the decision I made then to leave.
For the second time in my life I found myself doing the same thing in my head at that point saying “well, what’s the next 10 years going to look like?”
I was coming up to 62 and I thought right so 10 years I’d be 72. Will I be alive? Will I be healthy? What about all these things the wife and I kept talking about we’d like to do more travelling? I was with the business so I couldn’t get away for more than about two weeks at the time and it was always a hassle.
I looked at all those things and thought when are we going to do those things? The biggest reason was that it was difficult to get away to make it happen. I also came to the conclusion that we were never going to do the travel and we were never going to be able to do all these things unless I had more time.
So I did a bit of an attempt to say well why don’t I cut back a little bit. Maybe try four days a week and have a day off and then that might be the way to do it and eventually let my business develop a manager or someone to take on more responsibilities.
I looked at that and I tried that.
My wife is fairly used to me working back late. I get home at seven o’clock or something. But at this particular time, it was a Friday night and I decided I was going to have that Monday off so we’re going to trial this four day week thing. So anyway, I get a phone call from my wife and she tells me it was 10 o’clock at night and I’m at the office.
She goes, “where are you?”
I said, “I’m at the office.”
“Well, what are you doing there?”
“Well you know I got my mails right?”
She goes “yeah,”.
“Well,” I said “I’ve got to clear it up for Monday.”
So the reality was (and I did that for a few times) but the reality of life was I was just getting an extra sort of eight hours of work on Friday night instead of Monday morning.
The bottom line was it wasn’t going to work. It wasn’t going to work. At that point, I realized this is either full on or full off. I either need to be here and if I need to be here, I need to be here full time or I need to completely get out of it 100%.
Because when am I going to do this travel? And as I said I had another couple of new grandkids coming on.
I’ve always spent a lot of time with first my own children and my grandkids. I always have done. I mean I didn’t have too many hobbies or things. I loved my family.
When I wasn’t working, I wanted to spend time with family, which I did. My family never missed out. There was never any problems on that side. But I want to spend more time with grandkids. I want to do more travel. I want to get a little bit fitter. And I thought I need to do this and it needs to be full on, full off.
That’s when the opportunity for selling a business sort of became a little bit more real. I thought well that’s the only way because these next 10 years, which we’re in right now, are the golden years for me.
All these other things that you said you were going to do. I realised I’d never get to do if I was working full time.
I became aware, for the first time in my life, that the business had real value mainly because of this 75% dominance on this government panel. That was the conclusion as to why.
Let’s wrap it up
That’s it for this episode with Sam De Longis.
If you’re interested in learning more about Sam’s story, you might want to tune in to our earlier episode, where Sam discusses how he started his business and weathered a few storms during two particular downturns in his business. You can listen to this episode on our sister podcast, Talking Law by heading over to www.talkinglaw.com.au and looking out for episode 49. We’ll be linking our show notes to that page as well.
If you like what you heard today, please pop over to Podcasts on your iPhones or Stitcher for Android and subscribe to The Deal Room Podcast to be the first to know when a new episode is out. This episode is part 1 of our 3-part series with Sam.
Join us again next week as we continue our conversation in part 2 where we talk to Sam about the sale process – how he got his business sale-ready and the importance of putting yourself in the shoes of the buyer and ensuring opportunities for them to get great value out of the business.
At Aspect Legal, we offer a number of great services that help businesses prepare for a sale or acquisition and get transaction ready. We also have a range of services to help guide businesses through the sale and acquisitions process.
We work with clients both big and small and have different types of services depending on size and complexity. We provide a free consultation to discuss your proposed sale or acquisition – so see our show notes on how to book a time to speak with us, or head over to our website at Aspectlegal.com.au.
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