Some great Recruiters don’t start a business because they need a few bells & whistles not covered by the traditional SSG offering - & that is a terrible shame.
It might be a Salary Support issue – perhaps our potential Recruiter Client needs a guaranteed income from Day 1? Sometimes, it might be Salary + an office. Occasionally it might be salary + an office + access to some crazy, weird& wonderful job board SSG has never before encountered. Now & then our budding entrepreneur might want to launch their business with employees of their own – a great biller or two willing to join a start up who need to be paid whatever happens (as employees tend to do!). Almost always it is a combination of the above driven by an insatiable desire to grow a business that will one day sell, securing a £multi million windfall for our ambitious Recruiter (which is really a pension or an escape plan or maybe both?).
Great Recruiters facing such challenges still represent potentially great business for SSG. All that we need to do is to create an enlarged model of our traditional offering which can address all of these issues. We need to be flexible. We need to be creative and we need to be brave. We need to be investors!
So, a few years ago we came up with the SSG Equity Investment model – which has the traditional SSG offering as its base and additional hard cash financial and intellectual investment as the frosted icing on the cake. Of course, in the style of true hard core, hard cash investors, SSG hopes to reap a reward (well, you just knew that would be the case, didn’t you?).
In exchange for these bells & whistles (i.e. the additional investments), SSG will ask for a junior equity position in the new business (usually 20%) which gives us zero control but an exciting vested interest in the growth of the fledgling venture. Oh, and we also lower the Service Charge and work like dogs (no offence, Sweep) to help you to achieve the seemingly impossible £ multi million exit.
SSG Equity – The Power of 3
Bottom line is that your new business needs the traditional SSG offering & some hard cash to overcome some hard core obstacles.
SSG's Service Charge
If we are a junior equity partner in a start-up, then we lower the traditional SSG Service Charge. Clearly, our motivation has just changed or we are just crazy (or both perhaps?).
Create an Exit
Remember that age old cliché about contracts & investments? Never get into either unless you can see how to get out. OK, so SSG needs to demonstrate how that might work.
Equity Investment Sound Bites
SSG contracts (in the traditional SSG way) to launch & support a new business for you. This relationship is governed by the SSG Working Agreement as normal. Nothing new here of course but then simultaneously (as if by magic), you agree that SSG takes a minority equity position (the 20% thing) in the new business in exchange for the provision of the required bells & whistles (the salary, the office, the wish list extras). Because the new business now has two shareholders (you and SSG), we need to establish a Shareholders' Agreement, which is just as benign & straightforward as the Working Agreement. So, in a nutshell, two agreements instead of one – a Working Agreement & a Shareholders' Agreement, rather than just a Working Agreement.
Ok, so we know what might encourage you guys to enter this equity investment relationship, but what is it that SSG is looking for? Well, our original (& remaining) primary motivation is to demolish any obstacles which might stand in the way of SSG working alongside a great Recruiter. Of course, this equity option represents considerable risk to SSG, so we need to be that little bit more convinced that we share the same goals as our Recruiter partners. For SSG to profit through this option, our Recruiter partner must really, really, really want to build a business that will one day sell to a third party (maybe SSG?). It is only if we all agree that this is the plan that makes this option work for SSG. Other than that, we just go with our gut instinct – a philosophy which has worked for a long time, so we trust it (you know the one – ‘can the Recruiter do it, does the Recruiter want to do it & will we all get along?’).
The process of getting your business launched via our equity investment model is pretty much the same as getting your business launched through our traditional offering – we chat, we meet, we complete our requirements list, we present to you the Working Agreement & we launch your business. It is exactly the same with the equity investment model – except that we need to spend a little more time understanding your wish list (i.e. the additional bells & whistles that you need) and some extra time in presenting to you the Shareholders' Agreement. The process is not really more complicated, it just takes a little longer & maybe that is a good thing as we are all committing to one another in an even deeper way than the traditional SSG model requires us to do. It is very handy that we are to take a few extra moments to consider the consequences of doing so. As ever, it is SSG’s role to Project Manage the process and to make it all happen.
The Shareholders' Agreement is really just the extra layer of paperwork we need to cover when we all consider an equity investment. Instead of just one agreement (the Working Agreement) associated with our traditional offering, we now need to zip through a second agreement – the Shareholders' Agreement. This second agreement acts as a safety net for you (the Majority Shareholder) and defines what SSG (the Minority Shareholder) is committing to do in exchange for the equity (i.e. our 20%). It also confirms that we agree on why we are doing this & what we all hope to achieve. It goes no deeper than that – it doesn’t need to. This whole equity suggestion is based on the exact same criteria as any SSG relationship – transparency, mutual respect and gut instinct. Nothing more than that!
You are the Majority Shareholder. You will hold 80% of the shares and we will hold 20%. We are (very) minor shareholders. We cannot tell you what to do. We cannot make decisions about the business. This is no coincidence – no casual maths. The fact is that we do NOT WANT any control over the business – we want you to be in charge, to feel motivated and excited by the ownership and potential rewards. We want the venture to have one boss. For SSG, this is about working to help you to achieve your goals and in doing so, we believe that SSG will also do very well as a result of our 20%, but the fact of the matter is very clear – you own 80% and we own 20%. You are the Boss. We can advise, cajole, nag and moan – but every decision will be yours. Such is the life of a Minority shareholder!
Of course this equity investment option is risky for SSG. Not only are we accepting the risk attached to our traditional offering, but we then decide to strip out the Service Charge profit attached to that traditional offering. On top of that, we commit more money, more hard cash and more intellectual resources to try and make the equity exit happen. So, if we are wrong then that is bad news for SSG, but to be frank, it would be bad news for you too. Experience has taught us that such a risk is just part of the process and if SSG can’t stand the heat, we ought to get out of the kitchen. We have no comeback on this investment just as we have no comeback on our traditional SSG launch, but that’s OK – we trust ourselves and we trust our partners.
A significant part of the equity investment process is about removing the obstacles (another word for risk really) that a Recruiter faces when starting a business. With the equity model, you get the salary support that you need to keep body and soul together throughout the ramp-up phase – no worries about the mortgage, household bills, school fees and season tickets for Liverpool F.C. In addition, you keep more of the cash in your new business as SSG lowers the Service Charge associated with an equity investment. However, in our minds your risks are largely still the same as with the traditional SSG offering – i.e. you could put every available ounce of effort into a new business having left a perfectly good job and it still might not work. On top of that, I think that you might have to accept that if a new businesses didn’t work for you when benefiting not only from SSG’s traditional support but also the extra money, resources & time, then perhaps it will never work for you?