Session Intro: Hanging out your shingle is not building a business.
Creating value that others will recognize and ultimately pay to own (read "buy")
takes vision, planning and execution. In this session, you'll hear case studies
from SEM business executives who have conceptualized and implemented strategies
and tactics that make their companies intrinsically valuable.
Chris Elwell, President of Third Door Media is moderating this session and speakers include Bruce Clay, President of Bruce Clay, Sean J. McMahon, President of EngineWorks and Matt Naeger, Executive Vice President Operations at Impaqt.
Sean is up first. You need to build value beyond client engagements. What is value? A fair return for something or a monetary worth. He then points out that he was one of the co-founders of TrafficLeader, which was sold to Marchex. He talks about how in the old days before engines updated their indices in real time, they were held hostage to waiting for product pages to be indexed. Therefore they added value to their company by co-creating the paid inclusion model. Inktomi was their first partner in this. It was pitched that they could monetize their natural listings while improving index relevancy. Other engines were to follow.
If you focus on creating value into every client relationship. market value will follow. In the case of Marchex, they saw TrafficLeader as having all these relationships with search engines. This was value beyond revenue and client rosters. They view an acquisition of TrafficLeader as giving them direct access to the search engines.
Sean then begins to relate his experience of what he is doing now -- which is providing high end search marketing. He is doing things smarter now than he did with TrafficLeader. One of the things he has one to build value beyond client relationships is to extend keyword research into understanding what their marketing messaging should be even beyond search. He provides a real life example with client -- Lisa Cline.
Up next is Bruce Clay. He provides some history as to how his company has grown. Started as one man company in 1996. Now he has 39 employees and 11 openings. Over the last 5 years they have had 40 - 70% growth compounded. They have offices all over - London, Cape Town, Sydney, Tokyo, China and looking at Brazil. His business is based on quality verses quantity.
One of the values in his company is not only the level of service but the fact that they offer training and a set of proprietary tools. Bruce points out that they like to train employees from ground up. Account managers are in on the proposal/contract process. Every client has to become a testimonial.
They make their clients take their training course. Otherwise they will refuse to serve them. The idea is to empower them with knowledge so they understand what they are buying and so the project flows smoother. I can totally understand this theology.
Now he talks about when someone actually wants to buy you. First analyst will ask for client list and phone numbers. This is followed by them learning procedures. Accounting info is looked at after this. Then employees are audited. Another thing that is looked at is your business plan. Retention / renewal / satisfaction is key.
Actual valuation of a company is 4.3 x Revenue or 11.3 times EBITDA.
Finally we have Matt presenting. He starts by saying that you need to decide what kind of company you want to be and what kind of clients do you wan t to work with. Those types include enterprise, SMB or boutique. Then you have to decide what your are comfortable in managing. Only take on clients that fit the size of your company. Keep your reputation in mind. The client is interviewing you but you should be interviewing them at the same time.
Don't be afraid to share knowledge with clients and the industry. Blogs, articles, etc. help accomplish this. Let your clients in on what you are doing.
Matt provides a brief history of his company. Started in 1999. Initial clients included anyone -- no selection process. They built business by educating clients as to what SEM is. from 99-04, they grew at a rapid pace. They did not have brand recognition until they decided to build the brand through industry events.
Some of the challenges they face along the way included too many clients with too little time. Also the Jupiter Constellation of having to grow for growth's sake.
Here is a recap of "some" (not all) of the questions that were asked and answered.
- What are some vehicles you use to improve retention rate of employees?
Matt answers that providing ownership to employees is very helpful. Give them the opportunity to add what they think is value to the company. Employees are more important than clients. Bruce says they originally tried to hire people with experience but that was fruitless so they decided to self train. Bruce also feels like employees are most valuable asset they have. Sean agrees. He also believes in giving your main employees some kind of ownership.
- Next question is related to Bruce's valuation numbers. Where did he get
He replies that he gets it from newsletters he receives and points out that valuation depends on assets, whether you have software or just services., etc. Another tip is that if anyone thinks your company is worth buying that it is also a company worth keeping.
- When you bring on new client, do they get an assigned account manager?
Matt responds that it depends on size of client.
- Do account managers do work themselves or simply manage / communicate to
Matt says that account managers are trained and are doing some of he work themselves such as SEO strategy and the like. Bruce points out that their account managers do not do the work but simply manage the clients/accounts.
Session coverage by David Wallace - CEO and Founder SearchRank.