The Long Game: Building Relationships and Credibility in Consulting with Grant Marcks

Grant Marks: My philosophy is centered around don't let yourself get caught up in the day to day transactional part of this job. Think about every interaction you have as an investment for the future, whether it be three years, five years, 10 years down the line.

Narrator: Welcome to Consulting Uncensored, the podcast that pulls back the curtain on the good, the bad and the ugly of the consulting world. This is where real conversations happen about leadership strategy, culture and careers in consulting. Hosted by industry veteran Neil McNamara, each episode features candid discussions with consultants, executives and firm leaders who are building, challenging and reshaping the industry from the inside. No filters, no fluff, just honest insight into what actually works and what needs to change. This is Consulting Uncensored. Here's Neil.

Neil McNamara: Grant, good to see you. Thank you for joining Consulting Uncensored on location. What I like to do at, ah, the start of these is to have you introduce yourself instead of me. Go through your, your bio and background and then you can give a bit uh, on Riverside and your current role. Yeah, here at Riverside.

Grant Marks: Yeah, absolutely. Grant Marks, I'm a partner at the Riverside Company. I help lead our origination practice. We are a 35 year old private equity firm focused on lower middle market investing, partnering mostly with entrepreneurs, closely held family owned businesses as they continue to grow and scale. We do a lot of different things kind of up and down the middle market from buyout to non control investing and we're one of the few global players at our end of the market so we also invest in Australia and Europe. So uh, we're a diversified firm and we do a lot of different things and we're highly active. So we do about you know, 50 to 100 deals a year on average. A partner leading our origination team, you know, which basically means I'm out hunting for new deals and new deal opportunities, working with our deal partners to help craft theses and you know, figure out the best ways to invest our uh, investors money, figure out the best areas and where, you know, the puck is going to be passed in the future and then help with corporate development and M and A and figuring out the right way to build our businesses so that ultimately they're more valuable when we go to sell them to the next buyer. And so uh, that's uh, that's basically my role in a nutshell. We work across our North American fund. So that means that I get to do deals that are, you know, two, $3 million of ARR and burning money uh all the way up into the middle market, you know, 30, $40 million EBITDA uh, kind of platform investments and everything in between.

Neil McNamara: So one of the things, one of the topics I like to get into and dig into is business development, broadly. Right. And so this is an interesting one. Right. Because your role is, is a business development role within your, within private equity.

Grant Marks: Yep.

Neil McNamara: Different from a role in a professional service organization, selling, but it's still similar to valid. Right. And so I think, I think that'd be fun to start with. Kind of your, your philosophy, what you see works well within your own industry.

Grant Marks: Yeah.

Neil McNamara: And then let's overlay that because you're also, you guys are consum of consulting professional services. So, so you're selling but you're also buying. Yep. And you see, you know, you see best practices and worst practices. Maybe we, we dig into that a bit to start.

Grant Marks: Yeah, I mean, I think at the core of it, and I, I can't take credit for the mentality that I've adopted. I have to give credit to the people who have taught me and have come before me. And Bob Landis, who, you know.

Neil McNamara: Well, I was with him last night.

Grant Marks: Last night, you know, he, he really, you know, was one of the, I would say, you know, the founders, the, you know, forefathers of private equity business development. And he helped put in place, you know, the, both the culture and the approach that Riverside takes that I've learned from over the course of my career. I didn't really get into this, but I started my career here as an intern. So Bob gave me a chance, you know, uh, 17 years ago. Um, and uh, you know, I've taken it and run with it, obviously. But, um, the philosophy is something I think you can appreciate in the consulting world. It's a long sales cycle and this is a long term partnership based game that we are all playing. And along the way there are transactional interactions that we might have. But I think my philosophy is centered around don't let yourself get caught up in the day to day transactional part of this job. Think about every interaction you have as an investment for the future, whether it be three years, five years, 10 years down the line. Uh, how do you want people to be thinking about Riverside? How do you want people to be thinking about you and their interaction with you? We were talking before we started about what that might mean and I was mentioning first case, like worst practices. Yeah. We say no all the time. Right. As a industry. It's an, it's an industry of, you know, hey, only 1% of all the deals that we look at we actually do transact on. Right. Um, so how do we turn and flip the other 99 from what could be a really negative interaction? Hey, you know, this is not for us. Actually the worst version of that is just saying nothing and letting, letting you know whether it be the banker, the business owner, the advisor.

Neil McNamara: No, communication is bad communication.

Grant Marks: It's the worst. And so flip that on its head and say, how do I turn that interaction into a positive? Um, not for us. For the following very thoughtful reasons in a timely way. And did you think about the following buyers or. Hey, you know, this is a little bit non traditional for us, but you know, here's an introduction to a person that I think would be a great fit who's pursuing entrepreneurship through acquisition or something like that. Yeah. And so, you know, just, just taking that and you know, compounding it. Right. Doing that consistently every time, hopefully over time will mean that people think highly enough of us to give us an early call. Talk to us before business is getting ready to go to market. Build the credibility and the relationships in the market, uh, to have a right to win them when the time is right.

Neil McNamara: I guess an analogy in our business is when a client comes to us with a need that we aren't the right ones to serve, you know, and, and you can just say, no, that's not us.

Grant Marks: Yeah.

Neil McNamara: Or you could say, yeah, I, I don't think that's our wheelhouse. But here are, you know, three other potential firms that we know do good work in this space. Do you want me to put you in contact with them? Right. I mean, it's this. Those are really diametrically opposite responses there. And uh, yeah, the other analogy that

Grant Marks: I think about is, you know, the sales cycle one which is that, you know, we, we are not buying a business from every investment bank every year. They are not selling a business for Riverside every year. Although we've got a big portfolio and everyone takes that and it's like we think we should be right. But um, you know, so, so there can be years and years and years where we have, you know, droughts of acquiring between investment banks, between, you know, um, uh, or representing us on the sell side. We are now clients of Versus.

Neil McNamara: Now that's, that'll be, that'll be a good long term story for us to.

Grant Marks: That's, I mean that's a perfect kind of long, nurturing story. We, you know, it started years ago and you know, with the notion that, hey, you know, we are a big disparate organization, we have a lot of different pockets of capital that we talked about.

Neil McNamara: We're very difficult to get in with. We do a lot of our, we do a lot of what you do ourselves.

Narrator: Ourselves.

Grant Marks: But it was full finance director team.

Neil McNamara: Right. It was eyes wide open too. That was. I think this is a really good story, I think for our industry and a really good, you know, just demonstration of how hard it is. And I think we should come back to too, because I'd like to understand. I'd um, like to hear on average for you in your role on, on the origination is like how many years on average is it from initial meeting with a founder led business to actually transacting on. Granted, there's only 1% but just when you do do it.

Grant Marks: Yeah.

Neil McNamara: It's years, right?

Grant Marks: It can be.

Neil McNamara: Yeah.

Grant Marks: I mean there are examples of it taking five, six, seven years of like, you know, staying with a business and a business owner. If you, if you really like and want to work with, whether it be an individual or you like their concept or their business or their franchise or whatever, whatever it may be, you know, it can take patience and it can take time to meet that owner or seller, where they're at, at that moment and say, okay, now is not the right time, but I'm also politely not going to leave you alone for the next five to six years. But do that in a way that is, you know, again, palatable to them. Meet somewhere, they are, whatever you want to, however you want to phrase it.

Neil McNamara: Bringing value.

Grant Marks: Uh, yeah.

Neil McNamara: Establishing your own ability to build a relationship.

Narrator: Right.

Neil McNamara: I mean that's where it really comes, you know, you want to build a relationship with that founder so that he looks at you and he looks at Riverside and be like, this is the company that I want to partner with when I'm ready to do this.

Grant Marks: Yeah.

Neil McNamara: And again, so very similar to the, our client story with Riverside where you're like, okay, guys, five years, like we're, we, you know, we. Yes, we, you know, we have a ton of portfolio companies. So there's, you know, on paper there should be a tremendous amount of opportunity for a firm like yours.

Grant Marks: Yep.

Neil McNamara: But it's going to be really hard because of these factors.

Grant Marks: Yep.

Neil McNamara: But. And you say like, but if you keep at it, uh, eventually you will get in and if you do good work, you will then get streams of work.

Grant Marks: More, more and more focus.

Neil McNamara: More, more folks. And. Yeah. And so five years later, we finally, you know, got, I think we had like maybe one or two opportunities along the way.

Grant Marks: Yeah. Yeah.

Neil McNamara: And we, you know, like anything. Right. You never win the first proposal or you, uh, if you do, it's awesome. But you know, a lot of times that first proposal is not the one you win. And so you establish some credibility through proposing and that and that process, you build more relationship with buyers, uh, going through the proposal process and then you get another one and then we finally hit one and then we, you know, knocked it out of the park on that project. And then I don't know if you know this, but then literally last week we get a phone call and it was, hey, we need you to start tomorrow on something.

Grant Marks: Yeah.

Neil McNamara: Which is.

Grant Marks: That is actually breaking news to me on this podcast. But yeah, that's, which is.

Narrator: I'm not sure.

Grant Marks: I'm not shocked in any way.

Neil McNamara: Well, it's not. You told us that's how it worked. Right. You, you finally get it for do, do work, this and then now you're in the flywheel and now you're a trusted advisor and we're just going. Then it was like, hey, I need you guys to start tomorrow on something. It was like, yeah, uh, how do we go from.

Grant Marks: That's, that's a big part of it too is just like intellectual honesty. Right. And you know, I, there are times when you have to withhold certain truths, you know, in this business. But flat out lying to people is not going to win you any friends. It's not going to be any favor. It's wrong.

Neil McNamara: It's really never, it's never a good reason for that. Yeah.

Grant Marks: Only going to lead to people being upset with you. And the other philosophy is like, it's related. I just want to be able to walk into a room and have people be like, that is a person that I like and trust and want to work with. Right. And you know, I don't want dozens of people looking in the room be like, uh, oh, that guy screwed me over on that deal. And you know, so I, I think as part of my people pleasing personality. But it's also part of, you know, what I think does well in, in this world is when you can have the, the credibility and trust and authenticity of relationships.

Neil McNamara: Those things together are so important.

Narrator: Right.

Neil McNamara: Because you can have the likability. Uh, but if you don't have the credibility. I've known a lot of BD guys, even gals you, uh, know over the years that likable people like them, people let them take them play golf, they'll let them buy them drinks, they'll take a meeting with them, they won't throw them, they won't give them any work because they might like the person, but they don't have professional respect for either to them or the, or the organization that they're representing too. Right. Because a lot of times that person may not be responsible for the actual execution of the work. And that's why in our industry, I feel like the seller doers are still the most valuable because that you've got both. If you're good at what of the doing, you, you establish that credibility. Uh, and then if you, you know, are like, you know, you have that likability and then genuineness of really wanting to establish a relationship, not just in the door trying to sell you work.

Grant Marks: Yeah, right.

Neil McNamara: And trying to, you know, earn trust. Gain trust, build a relationship and have somebody like you want to be able to spend time with you want to then work with you. All those things really have to come together because if you're missing one of them, it's just not going to.

Grant Marks: Well, that is a difference between our businesses. Right. You know, Riverside is functionally kind of specialized and we've got origination and you know, we'll sit with deals for a little bit, but at the end of the day, like, very rarely, if ever are we sitting on the board.

Neil McNamara: Right.

Grant Marks: We're not leading the transaction diligence and you know, execution to close. Our philosophy is that sometimes, you know, the, the people who are best at that are not necessarily best at, you know, the, the selling, uh, part of our job. So I'm curious, like, how do you find that in your industry? Because it, it is heavily a seller doer model.

Neil McNamara: It is, um.

Grant Marks: And is what I said true of, of consultants? Like, do some people thrive in certain situations better than us?

Neil McNamara: 100%. And the way, the way I look at it, and this would be interesting in how you would, um, how you would think about this in, in your own, um, in, in what you're doing. Uh, I, I break apart kind of the, kind of the business development lanes and in, in getting, getting work over the finish line or you know, getting, getting actual new projects on the door. So there's, and I think this is where maybe you'll sit.

Grant Marks: Right.

Neil McNamara: There's sort, um. Sourcing.

Grant Marks: Yep.

Neil McNamara: Origination. Right. So the people that are good at sourcing may not or may not be as good at closing. So I think it's like sourcing and closing. And sourcing is normally at an individual level. Closing is normally a team sport.

Grant Marks: Yeah.

Neil McNamara: And so I think again, depending on

Grant Marks: how is closing proposing and having that proposal be accepted.

Neil McNamara: Exactly. Okay.

Grant Marks: Yeah.

Neil McNamara: Getting that it's closing. The engagement letter is signed yeah, so um, so that I, you know, the way we go about it is that in many cases, depending on what the project is, you normally need a technical expert, somebody that's really good at doing that in the room, convincing the prospective client that we do this really well. And that's normally not the same person that's sourcing.

Grant Marks: Right.

Neil McNamara: That's sourcing the work. And a lot of times the people that are really good at executing the work and really good at articulating how they execute the work and getting the client comfortable, they do it really well, aren't any good at sourcing. Total unicorn that can, I mean real unicorn front team that can do all of it. And so, so I look at it as, as a team sport where and you've got to have people that are doing, you've got to have people involved, they're doing all of it and rarely can one person. So I don't know, I guess we

Grant Marks: are helping keep the top of the funnel, you know, as full as we possibly can. We are doing that, you know, at its best when we are you know, locking arms with the deal partner, you know, VPs who are really convicted around uh, either a specific business or an industry, a vertical and like hey, we are going to build a outsourced accounting services platform or whatever it may be. And um, when you can marry good quality, relationship driven sourcing with really high conviction execution, um, we can get lots of deals done. And so we're trying each year to really impress upon our own team and by extension the broader riverside, that that's the way that we can get the best deals done, deals in the best set of circumstances, hopefully off market if possible. But even when we have to compete to win. Right. The knowledge that we've got a uh, thesis, a real strong conviction and we've built a relationship hopefully with that owner, seller, pre process prior to having uh, a bank engaged. So that's when it goes well. And that's kind of the story of your sale process to us.

Narrator: Right? Yeah.

Neil McNamara: And that is a very, I would say typical. And even the duration, even, yeah it easily can be years uh, to get in. I think the, the only other it's

Grant Marks: not to be clear.

Neil McNamara: But yeah, we love it when it's not. I mean we like, we really, really appreciate it when it's not.

Grant Marks: Yes.

Neil McNamara: But we, we also understand that the ones that take months, there's a uh, hell of a lot of luck involved. Yeah, it's, that's just, that's just the reality. Right moment, right place, right time Right. Yeah. And so it normally is an investment of years in relationships because what we're doing, again, we're also not selling commodity. We're not doing commoditized services.

Grant Marks: Right.

Neil McNamara: I think commoditized services can be quicker because there's not as much risk, uh, in engaging a new firm to do this commodity thing. We're doing much more complex, much more value add, but inexpensive.

Grant Marks: Yeah.

Neil McNamara: You know, we're a very expensive firm. So it's like, you've got to build a lot of credibility to justify our rate card. And you'll like, well, so you get

Grant Marks: what you pay for.

Neil McNamara: You do, you do. But again, we are on the top. You know, we're kind of, you know, we are at the top end of that. And, and you'll appreciate this. We did just, um, get a new project with a new fund, literally a fund. We didn't know it existed two months ago, which is that this, this golden. Something like that comes in. But in the negotiations, the principal was like, listen, like I, I hear you on. You know, why your rate card is so high is because you guys are so great. I'm gonna need you, because I've never engaged you before. I'm gonna need you to prove that on one. So I need a bit of a discount on this first one to prove it, how great you are, and then I won't bust your shops on the next. On the next rate card. But you're gonna have to prove it. It's like, fair. Fair that I, I accept that, that, you know, you need, you need to see it in action and, and then you'll recognize it and we get back up to where we should be.

Grant Marks: Well, as, as you were describing, you know, selling to another private equity firm. It occurred to me that the reason in part, that we connected was like, this world is so small. We had some mutual connections through a Chicago firm that.

Neil McNamara: Right.

Grant Marks: You know, well. And, um, I have a good friend at. And like. So back to the reputation thing that I was thinking about. Right. Like, that was a. One very quick, easy phone call for me to be like, hey, tell me about.

Neil McNamara: What do you know about this guy?

Grant Marks: Yeah. Can you, can you help me understand, you know, what exactly they are doing for your portfolio companies at what time and inflection points? And, um, that was really valuable. And so leaving good references is another big part of our philosophy at Riverside is it's actually plastered all over, you know, the walls and stuff. Like, leave good references in your wake is the one of the number one kind of goals for Our firm.

Neil McNamara: That makes. That. That makes sense. That makes sense. Yeah. I didn't think about that as much from your perspective. Yeah, it's. It's huge for us.

Grant Marks: Because in any B2B sales role, like, really, you're only as good as, you know, your last project or sale.

Neil McNamara: You better have client advocates.

Grant Marks: Yeah.

Neil McNamara: You know, because if you don't. If you can't, like, lift off, like, three or four funds, like, off the top of your, you know, uh, off the tip of your tongue right there when somebody asks, like, who.

Grant Marks: Oh, that.

Neil McNamara: Who do you work for? That will take. That will take the call that you've done something like this for, you know, that will pick up the phone and take the time and sing your praises to me tomorrow.

Grant Marks: But. But the other part of it that I was kind of alluding to is, like, because this world is, you know, relatively small, uh, it can't just be the five that you put on a reference card. It has to be pretty much the fact that I can sub rosa and call.

Neil McNamara: Yeah. Really?

Grant Marks: Anyone that you've worked with before.

Neil McNamara: Yeah.

Grant Marks: And, you know, they have to also be your. Your advocates. Um, and have, you know, a positive story, uh, to tell. Yes.

Neil McNamara: It'd be the same for you with founders.

Grant Marks: Correct.

Neil McNamara: Right.

Grant Marks: I mean, investment banker. I mean, any sort of, like.

Neil McNamara: Yeah.

Grant Marks: We also want you saying good things about us. We want, you know, our attorneys. We want, you know, uh, uh, you know, our. Our background screening providers. We want every single person in our ecosystem.

Neil McNamara: Everybody operates like this. I agree with you 100%. That is exactly what you want. That's exactly what you want. Or it also comes. There's. There's another. Another part of this philosophy which. Not as much as business. Just. Just business.

Grant Marks: Yeah.

Neil McNamara: Life, actually, um, is. There's no reason to make enemies.

Grant Marks: Yeah.

Neil McNamara: Like, it just does you no good. And I've had these from. Whether it be, like, enemies within the firm. I've had, like, you know, people discussions in the firm where it's like, listen, like, I get it. You're pissed off.

Grant Marks: Yeah.

Neil McNamara: Ah, you know, maybe. Maybe rightfully. But all you. What you did when you got that off your chest, you know, you made an enemy in the firm, and did. Did you just make the firm more or less valuable by doing that? And did you benefit at all? Like, uh, the only thing that you did was you got to blow off steam at the person. Like, in this whole construct, nobody's benefited from this situation, so let's just not do that.

Grant Marks: It is philosophically something that I wish more people would appreciate abide by. I think for that reason at times like we, we have a lot of homegrown talent. What we say Riverside. So like people who have been here since. I'm an extreme case, but like I, I started here as an intern.

Neil McNamara: Yeah.

Grant Marks: But we have a lot of people who have been here with us for a long, long time. Um, and I think by and large that's a really positive thing. But I think what that does is it kind of ingrains that part of our culture. And so at times people who have come in from the outside, you know, particularly at senior levels, haven't always been a good fit. Because this is a shock to you, I'm sure. But private equity isn't always like the softest touch industry. There's people who have some pretty sharp elbows and aren't afraid to speak their mind and sometimes they aren't afraid. Can be really let people know, uh, whether that be mistreating service, like, you know, talking down to our service providers, like that's a, that is really a thing that like we want to avoid at all costs.

Neil McNamara: Like it's unnecessary.

Grant Marks: Yeah.

Neil McNamara: Like have big boy conversations.

Grant Marks: Right, right.

Neil McNamara: If a stern thing needs to be said.

Grant Marks: Correct.

Neil McNamara: It needs to be said. Somebody use a hell.

Grant Marks: Respectfully. Exactly.

Neil McNamara: Exactly. Like it's just.

Grant Marks: And, and with the spirit being like, how can we fix this or how can we make it better?

Neil McNamara: Yeah, no, um, that's. There's no reason to treat somebody professionally disrespectfully. There's just no reason to do it. And, and again we, and again. And we all look, I've flown off the handle plenty and whatnot. So we want to make mistakes, but then just acknowledging that it was a mistake. Mhm. Shouldn't have been like that. Apologize. Move on again to our conversation earlier about making enemies.

Grant Marks: Yeah.

Neil McNamara: You know, unnamed investment bank that, you know, made an enemy of me, which again, it just boggles my mind, you know, that, that a firm would speak so disrespectfully to another participant in this industry,

Grant Marks: someone who's ingrained in this ecosystem that we're like this flywheel of like banker service provider, private equity, like company

Neil McNamara: in our, in our industry, like narrowly focused in our industry. At the same time it's like why would you. And again. And be given the opportunity to acknowledge, well wow, that person shouldn't have spoken to you like that and shouldn't have been, you know, disrespected you and insinuated that you would do something so unprofessional yourself.

Grant Marks: Yeah.

Neil McNamara: Yeah. So to make, um, the glass half full of this is that. It gave me a. It gave me a topic for my next. The. My. My next Just Neil Talking podcast, um, is going to be how to take a potential client and make a. Make. Make them an enemy.

Grant Marks: Make them an enemy. Yeah, exactly.

Neil McNamara: I'm gonna have a lot of fun.

Grant Marks: Yeah, we're gonna.

Neil McNamara: Again, I'm just gonna like, this is

Grant Marks: your, like Spider man origin story.

Neil McNamara: Yeah. So it's, it's good to get content, I guess. Right. You know, I gotta keep the flywheel going of, of if, uh, I'm gonna release one of these like every other week. I gotta have. I gotta have some engagement stuff.

Grant Marks: Yeah.

Neil McNamara: And with the, um, you know, with the uncensored title, that one will definitely have profanity. I was even thinking about putting profanity in the title.

Grant Marks: Yeah.

Neil McNamara: Here's my response to this. So, yeah, we're going to, we're going to have some fun. Yeah, we're going to have some fun. Have some fun with that. So, um, just to round out what we were talking about, because I was thinking about the, again, the different, the different roles in business development and in our organization. And I think the other thing that is important to us, and again, I'd be interested in how you analogize this, uh, with what you're doing is that there's that technical expert that does the work really well and in the sales process convinces a client we do this or he or she does this really well and we're the team that they should engage. The other thing that I. One of my quips in our business say all the time is like, the best way to get more work is to do great work. It's the antithesis to the cross in our industry. Cross selling and introducing other people from other parts of the firm and other things that we do. And I've had this, where I've had. We've been doing a pure play office of CFO engagement and you know, somebody that's more focused on integration, management and uh, you know, that more of operational, you know, piece of what we bring to clients. It's like, hey, I need to be, you know, hey, that person needs to bring me out and introduce me and whatnot. I was like, nope, nope, nope. What that person needs to do is just, you know, needs to hit a home run on this engagement. And that person needs to be not distracted with anything other than doing great work. Yeah. Again, for the next like six to eight weeks. Like, um, I'm not, not. Not next year.

Grant Marks: Right.

Neil McNamara: But it's like if that person doesn't do great work, we're not going to get any more work anyway. So it doesn't matter. They don't need to come and interview. So do this project, knock it out of the park. Then, then we can have the broader conversation after building credibility and respect and whatnot. And you know, the reality is if that person does great work in those six to eight weeks, they're probably gonna be asked to stay long and then we'll, we'll have the market permission to come out and talk about that and then, you know, talk about other ways that, that we can help. But right now just cut it because again, that's the big firm mentality is like, okay, well now we're in there and so we gotta, we gotta cross sell and bring the tax person and uh, the post merging person, whatnot and introduce everybody. No, no, let's just focus.

Grant Marks: Yeah, the, the best corollary that I can think about is, you know, we're so, we are pretty well entrenched in the franchise ecosystem as a firm. I think it's, it's a pretty great analogy because there's 4,000 give or take franchisors. That's like our universe of uh, what we are interested in partnering with, acquiring, et cetera. There's probably about 4,000 private equity firms

Neil McNamara: that are selling just in the middle market.

Grant Marks: Yeah, exactly.

Neil McNamara: That's pretty much the number.

Grant Marks: Yeah. And, and you know, we've uh, done 65 deals in the last 20 years in franchising. Um, you know, when we get a franchisor deal across the finish line, you know, my mentality is that's a, that should be a reference point for others. And you know, if we've been doing this successfully for 20 years, you know, back to the earlier point, we want to have another 20 years, but you're only as good as your last deal and you're only as good as the, whatever that business owner is going to tell the market. That the ecosystem being so small means that first of all, every franchisor files an FDD and has a lawyer. So the franchise lawyers are, you know, heavily involved in advising these folks. The, there's a set of accountants that are really specifically focused around the franchising industry. There's service providers that help you sell franchises. So there's an ecosystem around that 4000. Any one bad apple can spoil that whole bunch at any given time really. So, you know, the same thing that you were saying about wanting to do that good work, like we want to get that deal, we want to get it closed. We also want that owner saying good things. You know, after the deal has closed, they're becoming, for the most part, they're folding into one of our platforms and, you know, they're becoming a part of our Riverside ecosystem and organization and we want them saying good things. If they're here for five years, five months, 10 years, however, you know, long their, their career trajectory is going to take them along the Riverside path. And so, you know, I'm always really focused on, hey, let's, let's get good deals done and then, uh, let's make sure that we are helping those businesses grow better, faster, you know, more, uh, more efficiently and, and make sure that we're creating a network of evangelists that go back to that small little ecosystem and say, hey, we really like working with Riverside. And Riverside is only one of, you know, maybe a couple of dozen folks that are really dedicated to doing franchising deals. So we just need to keep that flywheel really moving and we need to keep people excited about partnering with us. Makes sense.

Neil McNamara: So maybe we can move on to the other topic, uh, that I wanted to cover. What I love being able to do is bring on guys like you, representatives from a firm like Riverside, and talk about investing in our industry. Right. Um, I got this idea from all the. Where you and I have spent some time at some of these conferences specific to our industry, where, um, an investment bank will bring us together and we'll sit and I have 12 to 1530 minute conversations with investors in our space just talking about the industry. I was like, I love those conversations. They're engaging. I feel like the broader participants in our industry will find those interesting as well. And it's a hugely dynamic environment of investing and what private equity in our space broadly, uh, has dramatically changed over just the last two years. Yep. So I'd like to hear, maybe we could talk a bit about again, kind of your thesis, uh, in consulting, broadly. And then what, you know, for what you're look, you know, what you would be looking for. Like when you go to these conferences and you're meeting with other founders like me. What, what, what are factors that get you more or less excited about a specific firm and the opportunity that firm has in the market?

Grant Marks: Yeah, well, the professional services industry as a whole has attracted a ton of private equity attention in the last couple of years, whether it's, you know, uh, accounting services, you know, now law firm. Law firms are the next frontier, outsource, uh, certainly, you know, cfo, you know, and other Kind of professional services. So, and the reason for that is pretty simple when you boil it down. Big market, big tam, lots of players, you know, so consolidatable industry and you know, generally pretty well diversified. If they're providing good services that are differentiated, what we really look for is that part of it. Right. So are you providing a service that you know is unique, cannot be provided? Whether that's a higher quality service, it could be at a higher price point, um, within a particular niche or a vertical that is really specific, whether that be highly regulated or something that requires certification or something that is like there's a fundamental factor that is underpinning the demand driver for that service. Uh, and then the other part of the reason that I think private equity is attracted to this is because we understand it, we're customers of it, we, yes, we know it, we implement it at our portfolio companies.

Neil McNamara: Easy to wrap your hand around, wrap your head around, you know, how these businesses operate, how they make money. Yeah, how they do it better.

Grant Marks: And then the last component is, you know, uh, a lot of the founder led businesses that we tend to work with, you know, it's, you have to use Virtus as an example. I don't know that this is true of your firm. But like, you probably wear a bunch of hats as the founder. And so what are the ways that we can, uh, help mitigate some of that? You know, best use your time, um, you know, bring in the professionalization opportunity, bring in the technology enablement in today's world to help you quote faster, more accurately, you know, um, and uh, you know, bring better service to your clients at better margin to you. So, um, and then what else can we add to the pie? Uh, what other components do you, if you, if you had them as your part of your menu of services, would you sell to your clients that you don't have today? Should we buy it? Should we build it?

Neil McNamara: Broadly speaking, are you a big buy and build fan?

Grant Marks: Yes. Done.

Neil McNamara: Right.

Grant Marks: And in the right industries, we've done a lot of consolidation within the fire and life safety industry. Okay. And you know, another massive TAM, you know, nine $12 billion market, sorry, much bigger, but 9,000, uh, players in that industry. There's room enough for 45 different private equity backed platforms at this point. In that market. It's um, probably even more than that. Um, and a huge opportunity to professionalize, route, optimize. Um, the thing that we did really well with those platforms that one, we still own and two, we exited was really driving the recurring service oriented mix. So Changing the revenue profile of the businesses to be as attractive, as recurring, as sticky as we possibly could. Obviously, driving organic growth was a big part of it, but we acquired a lot of businesses along that path and at worked well because, uh, we were willing to start small, we were willing to do a lot of small deals efficiently. The model really worked there. There are other businesses that we own where we say, hey, you know, we've, we've bought a nice platform here. We think there's three or four, you know, core competitors that we can consolidate that do the exact same thing. And we're buying, whether you call it aqua hiring or buying a book of business or whatever we're buying.

Neil McNamara: I like those.

Grant Marks: Yeah, these are great.

Neil McNamara: Those are great.

Grant Marks: Those are highly, highly accretive.

Neil McNamara: Yeah.

Grant Marks: But there's, you know, maybe there's not an endless universe of those.

Neil McNamara: Yeah, there's.

Grant Marks: But at the end of the day, we're going to need to diversify this business as well. So, you know, we're going to add labor law posters, we're going to add i9 compliance, we're going to add E verification. We were going to add components to it. And some of those things that we've added, we've bought and some of those things we've built. And there just was an inflection point where we said, hey, what's out there? What can we buy? We can't buy everything that you want to buy. Um, and so it's a function of what's available, but also what is the cost of that relative to the cost of building it organically? Um.

Neil McNamara: Right. And how long does it take? The whole period? Exactly. How much patience do we have with the organic? Organic's always slower.

Grant Marks: It is.

Narrator: Right.

Neil McNamara: But it's less. It's normally stronger.

Grant Marks: Yeah, yeah. Like. And are there things that you can do to build that conviction over time? Right. Whether that's. We did a really fulsome customer survey. Like, what are the services that you are buying? That, um, of our core customer. What are the services that you are buying today? And what would you buy from us if we offered it and we did that survey and we basically just followed the bar chart.

Neil McNamara: Yeah.

Grant Marks: This is what we're going to try to pursue. And we're going to build some of it and we bought some of it.

Neil McNamara: That makes sense. That reminds, uh, me of how we got into quality of earnings. It was a much more, it was a much more unofficial survey, but it was basically enough clients asked us to do it. Yeah, they were just like, you know, because I was dead set against because it is in what we do. It's the most commoditized thing that we do. It's very to your point on differentiation. It's so tough to really differentiate in the quality of earnings world. But I simply had too many clients say, well, with all this post close and off CFO support work that you do, it'd be great if I could hire you to also do the uh, quality earnings on the front end of these investments. Okay. I get told that enough. It's like, all right, I guess, yes, we will add that we'll grow that organically, bring on people to uh, to do that. But that, that's kind of that. That's the approach I've taken on some of the. Doing additional things has been more in response to the market telling us.

Grant Marks: Right.

Neil McNamara: That it would be great if we would do it. Or you just get enough of these, hey, do you do this? Or I've got to, you know. And you say, say known enough times, you're like, well, maybe we should.

Grant Marks: Right.

Neil McNamara: And we've got some right now that we're actually debating because we do get asked a lot of times, do we really want to be in that.

Grant Marks: Yeah, that, that survey example is not necessarily indicative of like everything that we would do.

Narrator: Right.

Grant Marks: Some of the data point top of the list. Like we just wouldn't do.

Neil McNamara: Just don't want to.

Grant Marks: We are not going to do background screening because we don't want to compete against first advantage. Like it's, it is more of a commodity, to use your example. It's more of a commodity service and we just didn't want to be in that business. So um, yeah, we, we didn't take it as gospel. Like this is what we must. That's like.

Neil McNamara: Ours are like, like staff augmentation. Yeah, that's a really good one. It's like, it's just, it's not. There's revenue there. There's plenty, lots of revenue there actually.

Grant Marks: Right.

Neil McNamara: But it's, it's, it's tough to quality control. It's a different business. And um, I'd be interested in your perspective of this too, you know, to narrow in on, you know, our industry off the cfo.

Grant Marks: Yeah.

Neil McNamara: I think it's funny that, uh. And I think I say this in one of my podcasts that's going to be released soon on uh. Oh yeah, I did an update after going to one of the Clear Sites conference and it's like, yeah, here's, you know, here's like five things I took away from it. And, and one of them was every. Because office CFO multiples have gotten a little out of control. Um, every business that touches anything in accounting and finance has rebranded themselves as an office cfo. Free money. Go just do a fun Google search.

Grant Marks: Yeah.

Neil McNamara: Or just, just, or just go to you know, every one of these accounting services companies and go to their website and see how they've rebranded themselves recruiting firms. Like really like, like just pure recruiting firms.

Grant Marks: Staff.

Neil McNamara: I've called themselves Office Simply. It's like guys, it, it's not that easy. Like you don't get to just rebrand as Office CFO now you're going to get a 15 times multiple on your exit.

Grant Marks: Um, it's funny, we do a lot of software investing, right. And you know, in vertical software right now there's, there's trends in, in two ways. Um, you see people all of a sudden changing their URL to AI or you see people going the other way where they're like oh, we're actually more tech enabled business service with a uh, you know, AI based software underpinning or whatever. So yeah, it's uh, yeah, the AI

Neil McNamara: ones, that's the other one. Like um, one of my competitors is now AI powered in their tagline.

Grant Marks: Yeah, like whatever, whatever that means really.

Neil McNamara: Like.

Grant Marks: But you don't have to explain it. It's just a marketing.

Neil McNamara: Okay. Yeah, yeah, yeah. That's a whole nother, a whole nother rabbit hole. We could go down on getting uh, to the AI come out to multiples though. So what drives you guys to pay a market leading, you know, premium. Like what, you know, what factors do you look at and say I will, you know, I will, I will go and compete for this asset and I will pay, you know, I'll pay top dollar, uh, for this consulting business. What, what are the factors that get you there?

Grant Marks: Growth, recurrence, retention. Really said another way in this world. And specialization, like the uh, marriage of those three things. Plus hey, we are platform worthy. Meaning we've got maybe we've already built some of that scale and infrastructure and we've got you know, real professionalization around technology, you know, finance, recruiting, you know, all the things that you, you would build if you were, you know, selling a middle market, upper middle market platform, you know, your billion dollar platform. Like if you have built some of that infrastructure along the way, like that's what is going to make private equity lean in and pay a little bit more.

Neil McNamara: If you say growth, what does that look like on um, the, I guess the historical side and then Kind of the go forward. How does that. Yeah, you like to see that track.

Grant Marks: There's nothing prescriptive about it. The way that the market grows is one way to measure it. Typically we are looking for. And if you just look at general private equity, LBO math today, with a cost of capital like you need to really see, like to pay a teens multiple for a platform, you need to see corresponding like at least double digit growth into your hold period. And the best indicator of what you're going to do in the future is

Neil McNamara: what we did in the past.

Grant Marks: So this is not like rocket science. But the other thing that I'll say is in any business's evolution, as they grow and scale and get bigger and bigger, the harder it is to grow. When you're starting with smaller platforms, we tend to want to see even bigger growth than that 10 12% that we might be underwriting as a firm. And obviously every single model that we've ever put together is exactly accurate and

Neil McNamara: that's how it's always played out that way.

Grant Marks: Yeah, we've never missed a budget. Yeah.

Neil McNamara: Company that reminds me of a, another services investor. There's a client of ours that we're talking to them about and they did a bunch of inorganic and one of their platforms and they're like we've, we've uh, according to our models we've, we've acquired 20 million of EBITDA. It's like we are below 20 million of EBITDA, uh, the entire platform right now. So we'll just start. They're like, yeah, I'm sure we got some of that wrong but I think there's some, some of this hasn't been executed.

Grant Marks: So it's like.

Neil McNamara: Sure. It's somewhere in between. The models are wrong and the execution fell down. So can you help us bridge some of this? Uh, yeah, but yeah, I was like, ooh, that's. Yeah, that's a, that's a bad fact pattern.

Grant Marks: Yeah. Right.

Neil McNamara: Now I can see why.

Grant Marks: That's why they need you to.

Neil McNamara: That's exactly like, I can see why you need some help here.

Grant Marks: So.

Neil McNamara: Yep. I think there's, I'm sure there's something we can do. I'm sure it wasn't just the models were off. Yeah, exactly, exactly on all of these. Oh yeah.

Narrator: Well good.

Grant Marks: Any.

Neil McNamara: I mean those are the core topics I wanted to get to. Any. Anything else you'd want to chat about or, or leave us with?

Grant Marks: No, no, we continue to be active, you know, in your space. Grateful clients of yours. So yeah, all Good.

Neil McNamara: Excellent. Well, thanks for the time. And I know you got to get to some. Some other, uh, you know, sourcing this afternoon.

Grant Marks: Yeah.

Neil McNamara: Yeah. Excellent.

Grant Marks: Thank you.

Narrator: And that's it for this episode of Consulting uncensored with Neil McNamara. Want to join the conversation? Connect with Neil, um, on LinkedIn to share your thoughts on today's episode and join a community of consulting professionals who want to cut through the B.S. uh, thanks for listening. There's a new episode every other Wednesday. We'll see you then.