I’m Dr. Jeff Kingsley and welcome to another edition of Riding in Cars with Researchers. I want to talk to research site owners about two types of value that you can deliver. There’s the value to your customer, which I always summarize as EQTCS (enrollment, quality, adherence to timelines and customer service). It’s the value that you’re delivering to your customer, but the other type of value is the value that you could deliver to the potential next owner of your research site. It’s the value that someone would be willing to pay for to buy your research site. If you are paying attention at all, you can see the amount of consolidation that’s going on in our space right now. Consolidation has gone on forever in pharmaceuticals and biotech. Consolidation has been happening for quite some time in the CRO space. But it is happening far more frequently in the site space and it needs to. Frankly, the site space is the most fragmented space there is in clinical research and we need to professionalize. How do you create value for a potential acquirer? Acquiring a business is risky. Rule #1 reduce the risk. So what’s the risk to an acquirer?
Key Person Problems
Well, there are a lot of small research sites that are held together with duct tape and the duct tape is you, the owner, or it’s some principal investigator or office manager who is the one who knows everything and does everything. And without that one person, the business will shrink. The business may completely collapsed and fallen apart. When that’s the case, you have what’s called a key person problem. And you have to deal with this. If you do have one critical person, you need to do two things: (1) start training someone else to be able to fill those shoes; and (2) try and lock that person in long term. Give them an incentive to stay after a transaction, after an exit, for you so that you are establishing less risk and more value for a potential acquirer because that person is now stable. And in fact, you’ve created more stability in the cross training.
Infrastructure is technology, people, adding multiple different job descriptions. It’s appropriate complexity to your business so that you can hire experts for expert roles. Instead of having people do roles and responsibilities that they’re frankly not good at, implement technology to enhance efficiency and the quality of the research that you’re conducting. These are all things that a potential acquirer would want to do post-transaction, but that adds risk to the transaction. If you can do these things pre-transaction, again, you are delivering value.
Professionalization is Happening
Now the consolidation is happening in our space, no two ways about it and I feel firmly that professionalization is happening in the research sites. Space professionalization meaning you have to become a true professional, not a hobbyist in research, to survive in the next world. What’s going to happen is as this consolidation continues, as sites professionalize the industry, we’ll raise the bar on what is acceptable site performance. And if you have not professionalized, you will be left in the dust.
So professionalizing today makes your business stronger. Whether you continue to own it long into the future or if you choose to sell it, it will add tremendous value to the business that you’re trying to sell. It’s a win for everyone involved. It’s a win for delivering value to your customers today. Delivering value to a potential acquire win-win. Think about it. Look for all the areas of risk in your company, areas where you have a key person problem, areas where you have poor quality, areas where your KPIs aren’t living up to an industry standard. Shore those things up with people, cross-training in technology, professionalization.
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