In 2012 Ezra Auperle founded a very successful production company, SIXTYFOUR FILMS. They worked with some incredible brands including GQ, Tag Heuer, Bumble, Musashi and Cobram Estate just to name a few. In the last 8 years, Ezra has restructured and pivoted the business a few times. He bought out a partner, restructured the business to make it more profitable, and eventually sold it to a larger competitor.
As SIXTYFOUR FILMS is a service business and many businesses are going through tough times at the moment I felt that Ezra would be the perfect person to interview during the crisis that is Covid-19. He didn’t disappoint.
You can see the full interview here, below is just an extract. Sorry for the screen shot of my phone, apparently IG Live does not save.
Interviews are taking place on the @expert_hub instagram account at 8am on weekdays.
What was one of the best decisions that you ever made for your business?
I haven’t always made the right decisions, but I’ve also been very fortunate to make some really good ones. One of the best decisions I made very early on was to hire good people and treat them right. This helped us build great company culture and loyalty from employees, contractors and clients. At the end of the day if you’re operating a business that sells services it’s only going to be as good as the people that are delivering them so it’s an important point to focus on.
Advice like this sounds common sense, but unfortunately you don’t tend to have to go far to uncover horror stories from people in most industries. I was lucky that when we started SIXTYFOUR FILMS I had heard stories about people not being paid, being put in terrible accommodation, and being treated without respect so we set out to be the opposite and it turned out to be USP for us.
If your business is financially healthy you should be able to pay people on time and it’s such a small investment to put people in slightly nicer accommodation or take them out for the occasional lunch or drinks. It’s money well spent that builds culture and loyalty. People remember the small things and one day it can make a big difference. For us it’s been eight years and we’re still working with the same employees, contractors, and clients in some capacity.
And what was the worst decision you ever made?
Being married to something too long. It’s an easy trap to fall into when you continue doing something a particular way because it’s what or how you’ve always done things. We’ve always worked hard to constantly improve our systems and processes, but we still got caught out.
We had a clear-cut niche when we started. While most of our competitors were pursuing infrequent big-budget commercial projects, we targeted more consistent lower budget work. This enabled us to hire full-time staff, which created cost efficiencies and enabled us to deliver work faster as we weren’t reliant on external contractor availability, particularly when it came to revisions. Our volume-based business model worked and was the process that we were married to, but our business changed.
The success of our business was built on the amazing creative talent we had in-house. The challenge we had from a company culture perspective was to maintain the creative fulfillment of our staff when we were pumping out high volumes of content without much creative scope. This led to us pursuing larger budget productions with more creative scope and thanks to our amazing team we started winning them. The problem was that we weren’t resourced to service them internally and began working with a significantly higher number of external contractors. Effectively the opposite of our business model.
Blinded by our previous success we continued to operate the business with the same cost and price structure. It wasn’t until we had several months of poor profitability that we made the decision to restructure to resolve the issue.
It took a while to realise that the business had changed. I do feel that I held onto the old vision too long, I should have been running the business due to what it had become, not what it set out to be.
You mentioned that last year you made some big changes to your business that made it much more profitable and if in the situation that many are in today, you would do the same time. What were some of the key things that were draining the finances of the business?
This is why I wanted to come on and chat with you as I feel my experience here has some relevance.
I was fortunate as I was able to make a strategic decision, not a reactive one like many businesses are being forced to at the moment. If I was experiencing the Covid-19 crisis I would most likely take the same cost-cutting measures I took when restructuring my business.
As I mentioned previously, our business shifted from high volume low budget productions to predominantly low volume high budget. This created some really significant pipeline volatility. We could land several major contracts for one month and hardly anything the next. The result was a profitability rollercoaster that was very stressful and wasn’t financially sustainable.
Looking at the needs of the business we had to cut our baseline operating costs to align closer to our revenue lows rather than our revenue highs. This meant that we had to lose some great people. People that made our business what it was. Redundancies are never easy, but if you’re honest about the situation and have good relationships with your people they’ll understand and still feel respected. There’s also great information resources out there for small business owners like Fair Work that outline your obligations as an employer. It’s really important to look at this information particularly if you have less than 15 staff as your obligations for redundancy payments are different to larger businesses.
I was really stressed about making people redundant, not only because I really care about these people, but because I didn’t know if the business could fully function without them. At this point in time I hadn’t been producing for four years and had my own doubts about taking on the roll if contractors weren’t available.
Fortunately, bringing on talent as we needed wasn’t an issue. In fact, many of our previous employees after working full-time for so long were interested in continuing their careers as full-time freelancers. This meant we got to continue those close working relationships with the same people.
The result of the restructure was unbelievable. By aligning our costs to revenue lows we removed nearly all of our profit volatility. Find the right core group of people and you’ll be able to scale up for demand, but won’t run a huge loss in a downturn.
You managed to sell a service business. For people looking to package up there’s, do you have some tips for them? What information should they have ready for buyers? What are the key things that may be the assets the buyers are after?
Let’s start with the biggest negative asset. The first thing potential buyers want to know is if the director walks out the door tomorrow, will the business fall over? This is called key man or key woman risk.
If you are personally delivering the service front line, then you’re probably too valuable to walk out the door. So, step one in selling your business is making its success less dependent on you. You can do this by nurturing talent, fostering leadership within your team, and shifting your focus from delivering the service to managing the team that does it for you.
I made the decision to stop working on projects in 2015 when I hired our first producer. I was stressed about handing over the relationships I worked so hard to build and it was hard to let go of, but it was one of the best things I did. Instead I focused on building process, culture, marketing, and profitability.
Step two is part of managing the business. You need to ensure that you can demonstrate ongoing profit and consistency. When the conversations progress with buyers you’ll need to share financial performance so you need to ensure its accurate and attractive to a potential buyer. Some great things to have are consistent margins, supply agreements, and client retention.
Step three is ensuring you have a great CRM and clear and scalable processes. At the end of the day a buyer wants your clients so it’s critical you manage and maintain an accurate CRM. The more customer data you have the more attractive it is.
If you have developed any proprietary systems or technology, it will no doubt add to the appeal of your business to a buyer. I’d recommend imagining what you would want if you were going to buy a competitor’s business.
I forgot to mention that it’s worth thinking about who the best buyer for your business would be. In my own experience I found there were three candidates:
- A large client that’s looking to build an internal team to reduce external costs
- A competitor that’s looking to drive rapid growth
- An employee buyout where they take ownership and pay some cash upfront
and the rest through future company profits
I didn’t go through a broker, I simply picked up the phone to called potential candidates. I prepared what I thought the critical information was, which is basically what I mentioned above, and fortunately managed to get a deal done with one of our largest competitors.
To wrap it up, what are some of your general tips for people?
Take calculated risks. Most of the time you don’t need to make a decision right now. So take as much time as you can. You can still be strategic in a reactive scenario.
Don’t be married to your processes, you need to think outside of the box. Be willing to adapt because there are so many people stuck in the way that they do things. We always rolled out new processes even when it was challenging to do so.
Keep an eye on the news to see what is going on. Obviously last night there was a big announcement about the Job Keeper payment. You want to be able to tap into this stuff as quickly as possible. It could be the difference between success and failure in this difficult time.
Ezra Auperle, Founder of SIXTYFOUR FILMS