CFO SPotlight: Phil Dennis, BizSpace

In October 2019, we sat with Phil Dennis, CFO at the PE backed flexible workspace provider, BizSpace. Entering the final quarter of 2019, which promised the first December general election in a century and the finalisation of a paralysing Brexit process, we speak to Phil about his business, its transformation, working with Private Equity Investors and the way ahead.

Phil: BizSpace is the UK’s leading provider of regional flexible workspace, a nationwide network of predominantly owned sites, comprising primarily offices and workshops. We’ve created a repeatable business model focused on acquiring, repositioning and operating heterogeneous business centres, serving the needs of almost 4,000 businesses across many industry sectors.  The transformation of the Group over recent years has progressed each year and has impacted every part of the business, from our branding to our strategic planning process, from how we define the business model to how we engage with our customers. We’ve enhanced the quality of the portfolio through acquisitions and disposals and upgraded financial planning and business analysis. We’ve strengthened the size and the composition of the management board and doubled our loan funding. One thing that has not changed during that time is our values: Honesty, Teamwork, Passion, Professionalism and Fun. 

As CFO, my role was initially to help move the focus away from the operational detail towards better articulating the strategy of our business to our investors. The first step was to build a five-year strategic plan where we set out the essential components of the change programme and the financial plans. Once we had secured investor confidence in that plan, we set the focus to the implementation of a steep-gradient programme of change, whilst also preserving all the good aspects of the business.  As with most businesses, the focus changes over time and recently it has evolved towards optimising the trading and financial performance to take advantage of the scale and reach.

Critical to our success has been the support of a high calibre team which we built to implement our strategy and drive the investment programme. This initially included hiring a Head of IT, a Head of People and Culture, a Head of Acquisitions and Development, as well as building the strategic planning and FP&A team. More recently, we have supplemented the Management Team with an Operations Director, a MarketingDirector and a Non-Exec Chair of the Audit Committee.

The Group has increased the value of its investment properties by 140% since 2016, whilst recycling non-core sites for a good premium. We’ve recently enjoyed another strong month for new sales and are on track to deliver EBITDA substantially higher than last year.  We will also benefit from additional latent growth in the portfolio as the occupancy on recently acquired and development sites increases further. There’s always more that we can do to improve the potential and value of the business; that’s the real stimulation of working in a PE backed environment. 

HedgerWay: What’s your view on the flexible working market and its future? How sustainable is its growth?

Phil: Before flexible workspace was an industry as it is now, Bizspace were offering customers a very short, simple licence agreement and a service offering where customers could see the benefits of flexibility, affordability, simplicity and community. The flexible workspace industry is expected to quadruple in size over the next seven years and independent research has shown that the UK regional flexible workspace market is forecast to grow at 14.4% per annum for the coming years.

The number of SMEs in the UK has increased 50% since 2000 whereas the number of larger businesses has only increased 15%.  Our business centres offer a sense of community and this is now increasingly sought by employers and employees alike.  This community helps to attract and retain talent.  We remain positive about the structural shift towards flexible workspace within the overall workspace market. However, there is a fundamental difference between those providers of flexible workspace who own the freehold and/or very long leases as we do, and those higher profile service providers which take on ever growing lease liabilities, some of which face the related financial risks to their liquidity.

HedgerWay: Having worked with Private Equity investors for the last 12 years of your career, what advice would you give to other CFO’s seeking their first move into this world?

Phil: That’s the million-dollar question and the first thing to say is that every Private Equity firm has its own culture and characteristics. CFOs need a thorough understanding of who the sponsor was for the acquisition of your investee company. Understanding their affinity with the business model and knowledge of the vintage of the fund will help inform you of the intended exit horizon. These factors will influence the future investment strategy, the tone of the relationship and dialogue with the management team. 

My main advice would be to –

  • Listen and learn from your business colleagues and gain their support. A CFO is uniquely positioned to seek out the data but must choose the right time and place to challenge the prevailing wisdom.
  • Build credibility with your PE colleagues as well as your CEO and management team as you have a duty to offer them the same impartial counsel and advice. It’s important that you build a good relationship with all of them; they might not always like what they hear but in time, they will respect you for that advice. 
  • Accept that good ideas have many fathers and bad outcomes are often orphans. You don’t need to have the biggest ego around the table. Take satisfaction if your ideas are being implemented and changes being enacted. Celebrate your successes and enjoy them because it’s invariably a transformational journey as a CFO of a PE-backed company. 
  • Build the best quality team that you can afford and leverage technology to make better information available as quickly as possible to those who can use it to positively influence the future of the business.  Technology is evolving in finance more than I’ve ever known and the next generation of CFOsmust embrace the opportunities that data analytics presents.


HedgerWay: You’ve managed businesses through the full economic cycles, overseeing expansion, acquisitions and equally being required to manage restructures and cost reductions. In your opinion which is the more challenging role for the CFO, upscaling or downsizing?

Phil: Each has its own challenges and fulfilling components, but they are very different. 

Immediately after the global financial crisis, I reacted as many CFOs would have done and focused on the cost reductions we were able to implement to mitigate the impact of the rapid fall off in that group’s income. I had the experience to know intuitively that the scale of the downturn meant it was not going to be a short spell and that the business required a structural change. In that situation one needs to be decisive, resolute, analytical and speedy to make the necessary changes. 

Rightsizing the business can often save the jobs of many employees and although it’s difficult to enact redundancies, you must feel that you’re doing the right thing for those who remain. 

On balance, I’d say downsizing is the most challenging of the two, however, I would also say that the challenges of upsizing are different but no less crucial.  Whilst everyone is usually supportive of investing, buying and increasing the cost base, it’s usually only the CFO who must help inform decisions on the highest priorities – where and when to invest, proving the returns on those investments and ultimately managing the liquidity needs of the business.  The duty of the CFO is to bring to life the financial implications of big investment decisions, guide the decision process to the right outcome while still being progressive in shaping the business to the final agreed strategy. 

HedgerWay: There have been some high-profile businesses under intense public scrutiny recently due to their inability to demonstrate a clear route to profitability. In your experience, what are the key considerations when growing a business whilst also maintaining and protecting profitability?

Phil: Firstly, if it’s too good to be true and the returns offered are unusually high given the risk profile, there’s probably something wrong with the investment being marketed; not always, but in the great majority of cases.

A growth business seeking a first move either globally or nationally may not generate profits in the early years and that on its own is not an issue. A secure and committed source of funding, either equity from shareholders or debt from the bank to last sufficiently long to deliver the transition into profit and positive cash flow is what’s crucial.  Inevitably, robust cash flow forecasts and forecasting of covenant headroom are essential. 

Less easy, but equally crucial, is adapting to changing market or competitive conditions, and then convincing the business owner or CEO that the previous plans are no longer valid, or the business model is less secure due to the changing economic circumstances, competitive threats or previous over optimism. 

It’s difficult when you are advising on the survival of the business however the CFO is the only person who is uniquely positioned to escalate the need for urgent change on a previous growth strategy which may have gone unchallenged for years. Majority shareholders often look to make a clean break from the past and sometimes bring in new leaders, however, it’s not uncommon for the architect of the original strategy to be blinkered to the problem.  From a CFO’s point of view, that’s when the alarm bell should be ringing to undertake a more fundamental review of the business model and implement remedial action quickly before the cash burn gets out of control.  A CFO must be open-minded, analytical and prepared to adapt according to the circumstances. 

HedgerWay: How do you manage your time and what advice would you give to other’s working in very demanding environments?

Phil: CFOs in my experience invariably work long hours, especially in roles which require major strategic transformation. You must find your role fulfilling and try to focus on the most important objectives and deliverables whether for the wider business or the finance function.

Determine your own priorities, avoid saying yes to every request, take advice widely from your NEDs and other wise individuals and hire the very best team that you can afford  Without some great team members, you’ll never succeed.

Be clear with your team, give them honest feedback but avoid micromanaging and instead consciously focus on delegating effectively.

When out of the office, enjoy your time so you know what you’re missing when you are working late nights.  I haven’t got a magic solution.    I wish somebody had told me in my mid 20s the secret to getting a balance; being a CFO with the challenges of family and a social life. I don’t think I’ve mastered it quite yet!! Perhaps the best advice is to find a tolerant and forgiving partner!

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