In today’s newsletter:

• Roll-Up Opportunity for Production Companies

• Acquisition Opportunity for Small-Midsize Event Agencies

• Mastermind Group for Event Business Leaders

• Green Ledger Books

• Our Excel Moment . . . On Steroids

• The Margin Multiplier

• Where Is Your Company’s AI Manifesto?

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M&A Update

Roll-Up Opportunity for Production Companies

I’m advising an event production company (creative, scenic, fabrication, staging, lighting, sound, etc.) that is leading a roll-up*. We’re looking for companies with around $1-2M in EBITDA, clean financials, reasonably predictable revenue, and whose owners are aligned with the roll-up vision. To learn more, email me here.

*For those unfamiliar with the concept, a roll-up combines several companies into a larger entity for the purpose of then selling at a higher multiple. Five companies each doing $1M in EBITDA, for example, might all sell for 4-6x, whereas the combined company doing $5M might sell for 7-9x. In addition to that arbitrage, merging the right combination of companies offers economies of scale, cost savings, a stronger leadership team, complementary services/clients/industries, and other synergies.

Event Agency Acquisition Opportunity

I’m working with a meeting & event agency looking to acquire one or more smaller agencies (Adjusted EBITDA of under $1M) as part of their growth strategy. Ideal target agencies should demonstrate strength across key event planning competencies to include some or all the following: Sourcing, Event Logistics & Management, Creative & Production, Event Tech, Onsite Staffing, Air Support - Individual & Group.

To confidentially explore this opportunity, please call or email me.

NEW: Mastermind Group for Event Business Owners

In response to some of the feedback a number of you have shared, I’m gauging interest for a new Mastermind Group for owners of event businesses looking to support each other in taking their companies to the next level. We’d meet once a month over six months for three hours, where participants would take turns in the ‘hot seat’ sharing challenges and opportunities they want feedback on. In between group meetings I’d have 1:1 calls with everyone to troubleshoot issues and help them stay on track. We’d need the right mix of at least 6-8 companies to make it work.

Interested? Shoot me a note.

The Silver Bullet to Doubling Your Profit Margins

Green Ledger Books

The year is 1987 and you run a small accounting firm. You keep the books for a dozen clients, mostly small to mid-sized companies. Up till now that’s been done by writing numbers in pencil onto the light green pages of leather-bound ledger books, which came with pre-set vertical columns and horizontal lines.

Any time a CEO wants to get updated forecasts, or model out how the business would do under various scenarios, you need to input all those numbers by hand. It’s a tedious process, but the only process available. Indeed, that’s how it was done for centuries.

You’ve heard of computerized spreadsheets, where you can update entire financial statements in minutes, but those are only available to large corporations with big budgets. Until now.

Microsoft has just launched Excel for Windows, making it affordable and available to anyone with a personal computer. [Lotus 1-2-3, launched in 1983, was actually the first commercial spreadsheet, but since nobody under 60 knows about Lotus, we’ll go with Excel for this story.]

Suddenly, the monthly reporting you do for clients that used to take you 20 man hours can now be done in two. The financial modeling you do for CEOs every year during budget season can now be done every month, and instead of running two or three scenarios of sales forecasts, you can run dozens, hundreds even! All at a fraction of the time and cost.

Suddenly, you have a once-in-a-lifetime opportunity to dramatically scale your firm and compete with the big boys. You can now take on five times more clients, without increasing your staff. You could even drop your hourly rates by 20% and still quadruple your profit. The only thing you need is that all three of your bookkeepers have to learn Excel, and fast.

Two of them are all in, excited by the time-saving opportunities Excel offers. But one of them, a guy named Bill, is resistant. He really, really prefers his green ledger books. He promises to continue doing stellar work, and your clients like him. You tell him it’s his call, but you’re now raising the productivity standard for everyone by 30%, and he’s got to keep up. Within three months it’s readily apparent that he can’t, so you have to let him go.

Our Excel Moment . . . On Steroids

This is where we are with AI: a seminal opportunity to accelerate productivity on a scale previously unimaginable has been dropped in our laps, exceeding the Excel example by orders of magnitude. Yet by and large, most companies have thus far treated it as a shiny new toy for their employees to play with, if and when they want. Excluding event tech firms, shockingly few event businesses seized this opportunity.

In a February post I talked about AI creating winners and losers in the events industry, the winners being those firms and teams that mandate productivity increases through AI. They do so by weaving it into the fabric of their work flow, and building a culture fostering AI experimentation and socializing the best AI practices.

In the roughly four months since then, most CEOs I spoke to have not made much progress on this. When I ask why, they say they encourage everyone to use it, but don’t want to force anyone. That’s the wrong approach.

What they should be doing instead is following the example of the accounting firm example above, and increasing productivity standards for team members, and leaving it up to them how they achieve that. Realistically, it’s highly unlikely they’ll meet your productivity gains without AI, but if they can find a way to do so, what do you care? At the end of the day, it’s the productivity increase you want; the AI usage is just a means to get there.

[Though in reality, do you really want to have employees using the equivalent of the green ledger books and rejecting Excel? Wouldn’t you rather be known as a firm that embraces new technology? Think about the last time you saw a company list its Fax number on their business cards or website, and how that made you feel about them.]

Whether that’s mandating faster turnaround times for client work, or bringing in-house services that you previously sub-contracted out, or any other example, the bottom line is you should be looking for 10%-40% improvement in output and/or a reduction in cost on the work your team does.

The Margin Multiplier

Event agency net margins tend to average between 8% and 12% (though I know many outside of that range on both ends). Hands down, the largest cost input is labor - the people who sell, strategize, design and produce all the client meetings, events and activations - at anywhere from 25% to 55% of revenue, depending on a number of variables, such as how much of that revenue is pass-through. Using AI to drive 20% labor productivity doubles your profit margin. Getting a 40% productivity gain triples it.

Let’s look at some scenarios for a hypothetical event agency where cost of goods sold and labor are 25% and 40% of revenue respectively. This assumes the number of employees stays the same but are able to generate more work.

Now let’s assume you want to do the same level of revenue, and use AI to trim your staff.

Those are pretty dramatic improvements in profit, and I believe part of the reason we’re seeing an uptick in private equity interest in the space. In fact, over the past two weeks I’ve spoke to three leading PE firms who’ve invested in event agencies and other service providers, and all of them acknowledged as much.

Where Is Your Company’s AI Manifesto?

In recent weeks a number of high-profile CEOs have “leaked” their companies’ AI Manifestos, which require comprehensive use of AI as the new baseline.

• Tobias Lütke of Shopify said that “Using AI is now a fundamental expectation of everyone at Shopify,” where they will “add AI usage questions to performance and peer reviews.” Before asking for more headcount, “teams must demonstrate why they cannot get what they want done using AI.”

• Micha Kaufman of Fiverr speaks of “radical candor'“ when he says “Here is the unpleasant truth: AI is coming for your jobs. Heck, it is coming for my job too. This is a wake up call.” He urges employees to “Study, research and master the latest AI solutions in your field. Try multiple solutions and figure out what gives you superpowers, (by which) I mean the ability to generate more outcomes per unit of time with better quality per delivery.”

• Duolingo CEO Luis von Ahn made waves by stating that the company will “gradually stop using contractors to do work that AI can handle”, and that AI use will be “part of what we look for in hiring,” and “part of what we evaluate in performance reviews,” in advancing a strategy to make the company “AI-first.”

• Greg Shove, CEO of Scott Galloway’s education company, Section, said that in order to be an AI Manager (and not an AI Freeloader), employees would need to “Use AI every day,” “Run workflow audits for yourself and your teams and look for opportunities to introduce AI into those workflows,” “Share successful use cases,” “Only hire people who are AI-proficient (and ideally aI-obsessed)”, and “Every 6 months, review the impact of AI on your team and report back your planned changes to headcount.”

Folks, the race is on. You don’t want to be the frog in the pot, not realizing the water’s boiling until it’s too late. Sooner than you think, you’ll be losing business to competitors who are able to offer the same or better services for a fraction of the price, simply because they’re leveraging the greatest force multiplier in our lifetime. Instead, junk those cumbersome green ledger books, and be the early Excel adopter, before it’s too late.

Here’s to taking your event business to the next level!

Howard Givner
Senior Advisor | Oaklins: DeSilva & Phillips (M&A) email me
CEO | Heathcote Advisory Group (Consulting) email me

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Catch up on recent articles:

• How Much Is Your Event Agency Actually Worth?

• Using An Accountability Partner to Get Your Biz to the Next Level

• A Tale of 2 Acquisitions: Opus Group CEO Shares M&A Insights

• AI Is Creating Winners & Losers In Events: Which Will You Be?

• Exploring A Sale Without Employees or Clients Finding Out

If and when you’re ready, here are ways I work with agency owners:

• Business Coaching & Owner Accountability

• Business Diagnostic & Company Valuation

• Growth Consulting

• Exit Planning

• M&A (Buy Side & Sell Side)

Wanna chat? Email me, or schedule an intro call.

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