Highlights from the 2022 ETA conferences

I had the privilege of attending three ETA conferences this year: IESE, Harvard Business School, and the first annual ETA Forum in Australia. In general, I found this year’s content to be better than usual. I was unfortunately unable to attend all of the concurrent sessions, but I jotted down some key takeaways from the session I did attend.

If you did the same, please comment below so we can all benefit from your learnings.

Note that while I tried to transcribe as accurately as possible, the excerpts below are close approximations of what was said, not always word-for-word. For this reason, I have left the quotes anonymous.

Talent & culture

CEO:

• [Talent] is going to be the single biggest thing that consumes your bandwidth.

• Whatever your value creation strategy is, it’s contingent upon getting [the talent piece] right.

• Be proactive with promotions and raises. There’s nothing more powerful than an off-cycle raise or promotion. 
  

Searcher/CEO/Investor:

• I should have spent 2-3x more time and effort on the people part in years 2 and 3.

• What are they telling their families about your company? Then they start evangelising the company, you know you’ve won them.

• Focus on the whole family [of the employee]. Invite them all to the holiday parties, send gifts.

• If you really want to be great at this [talent piece], you want to be invisible, empowering your teams [from the background].

• An HBR article analysed the common traits of successful CEOs of PE portfolio companies:

  • Authentic leadership

  • Ability to build a team

  • Grit
    

Searcher/CEO: 

• My first 4 leadership hires were all wrong. I outsourced too much of the process. My role now as CEO is 90% hiring people… I’m sourcing them myself, and then empowering them.

• You have to resist the urge to control. I don’t even do 1-on-1’s anymore. I lead collaborative team sessions where I ask questions rather than give directives. [Investor comment: That’s possible when you have really great people.]

• The first year was just fighting fires on the people front, no strategic direction, all fighting fires. Year 2 and year 3, a lot of my time was spent on “what do I really want this company to look like?” Where are the holes in the organisation, and how do I build this company for scale?

• Hire slow, fire fast.

• We’re all highly geared for efficiency, we all have a million things going on, but honestly the best use of your time is to take hours out of your day and just spend time with your employees, watching and doing what they do. It’s so easy to get caught behind a computer, but the quickest way to build credibility is to go do their jobs with them. That goes so much further than a pay raise or whatever else you do.

• For our current hires, we first go through all the people we know. I’ve found that word of mouth is definitely the best way [to source good candidates].

• Schedule time to work with your employees. I encourage all my management team to spend at least 4 hours/week working with employees. I really believe in having a systematic approach to relationship building. Schedule it.

• Always be hiring. Always keep job postings up. Never take them down. Always be in the communities.

• [How can a small business attract A talent?] 

  • Exude values and mission.

  • Show clear professional development opportunities.

  • Buy a company where people want to live.

• When you have a big hiring failure, it’s important to do the post-mortem. What did you get wrong? When someone leaves, are they running from something or to something?

• In order to hire well, we had to really understand our company and values. There’s a lot of selling involved.

• There’s a lot of value in just showing up consistently with a plan. Even if you’re kicking below the surface. 

• The key point is being authentic. You need to find your leadership style, and be authentic to that.

• Show your values. If you say that as a company you put customers first, spend the first 10 minutes of the meeting talking about customers.

• We set up a Slack channel so customer reviews could be seen by the whole company.

• You don’t have to go far down the organisation to find people who don’t value equity, but you still want to build in other long-term incentives.

Topgrading was recommended several times.

Pricing

Searcher/CEO: 

• Repackaging our offering unlocked a lot of value, even before raising prices.

• We then increased prices on new customers

• We took embarrassingly long to raise prices on existing customers. We were waiting for perfect information [which never came and would never come].

• Nobody likes price increases, but everyone wants compensation increases.

• It’s helpful to set a maximum price increase in customer contracts. Don’t tie to inflation.

• Pricing increases contributed to 30-40% of growth in enterprise value. [That was a 9-figure valuation increase.]

• [In the current inflationary environment] there has never been a better time to raise prices. If you’re not raising prices right now, you’re in trouble.

Searcher/CEO/Investor: 

• I’ve never met a first-time CEO that’s not scared to increase prices. Employees don’t like it either. It’s important to put data around it. That one customer complaint is uncomfortable to handle, but it does not mean the price increase was a bad decision. Look at the 900 other customers that paid the increased price without complaint.

• It’s a dereliction of duty if you’re not raising prices right now.

Searcher/CEO: 

• We could increase our prices by 20-30% a year, but as long as they could see that it was less than what was published on the website, they felt like they were getting a deal.

• New customers do not negotiate price.

Building through acquisition

Searcher/CEO:

• We severely underestimated the disruption a seller can cause when kept on post-acquisition. 

• The equity alignment is key if the person has some role in the business going forward. 

• Having a lender that’s willing to work with you on the definition of EBITDA can be a huge growth driver. 

• Post-acquisition, we first integrate finance and accounting. Then HR. Then marketing, but you have to be careful/thoughtful about the local brand.

• We keep our cybersecurity brand separate from our IT services business, because we believe specialisation is important in cybersecurity.

General

Investor:

• Of the top 25 search funds of all time, nearly all of them had major hardship in the early years, often existential hardship.

• A lot of the growth in value in search fund companies has been in years 4, 5, 6, 7, 8.

• [Investor] has done a study and found a very clear and direct correlation between the sheer number at the top of the funnel and the outcome of the search.

• The board is working for you, not the other way around. You’re not reporting to the board; you’re using them to be successful.

Searcher/CEO/Investor:

• Don’t buy 2-3 companies at the same time. That’s correlated with low returns and searchers getting fired. It’s very difficult to put two cultures together.

• You should try for a home run, but a double is a fantastic outcome. (You can search baseball.) Remember that this is your first deal. It’s not your last deal.

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