Our CEO Sam Glasswell recently jumped on a call with Sandy McMillan, the founding partner of Sterling Associates.
They discussed the current challenges in the due diligence process and how Arbolus is helping to overcome them.
Watch the full discussion here:
Let’s start with an introduction to Sterling Associates, what do you do?
Sterling Associates is a business research and consulting firm. I happen to be the founding partner and I started the firm about 19 years ago. Clients hire us when they need market insight to make business decisions and off-the-shelf research won't do it for them.
We're helping clients identify, prioritise and answer key questions that underpin their business decisions. Those could be investment decisions or operating decisions, such as deciding about a new market they might enter, understanding the effectiveness of their sales force, etc. Each of our projects is designed to address the specific issues that our clients are facing. We're a generalist firm that covers a wide range of industries.
Most of our work heavily relies on what we'd call primary research, basically going out and talking to the market, whether through interviews or surveys to collect perspectives, because those perspectives are not available in off-the-shelf research reports. Objectives often include market size and growth, market trends, customer dynamics, how companies select their vendors, why they win or lose and feedback on specific vendors.
And who are your typical clients?
We serve both investors and operating companies. It's probably around a 50– 50 mix. Investors are more often private investors than public while the operating companies are a wide range. Some are portfolio companies of private equity funds. But we've also worked with public companies and also small and medium businesses.
Could you go into more detail about what types of projects you work on?
My understanding of what your audience might be most interested in would be our work with private equity funds, where we work both on commercial diligence, sometimes called market diligence or customer diligence, but basically helping them understand the industries that they're investing in, the positioning and prospects of individual companies.
We also support fund portfolios to inform strategy development that could help them assess adjacent markets that their portfolio companies might enter, do win-loss analysis, understand why companies have won or lost with their sales prospects and the drivers of sales trends from a market perspective. Sometimes we just do customer satisfaction and feedback, or we'll call it the “voice of the customer”.
When and why did you choose to work with Arbolus?
So we're newer to Arbolus. We started working with you in January of 2024. And we have worked with and continue to work to some extent with other expert network providers as well.
However, we were finding that on some of our projects, our existing partners were not moving quickly enough or not digging deeply enough to reach segments of the market that we needed to reach. Some examples of hard-to-reach audiences were social media participants (individuals who make their living off social media), niche, specific types of engineers for a particular product and international reach. We were introduced to Arbolus and found that you have something to offer there.
You've been delivering results for us really well on custom recruiting participants and also reaching some of these hard-to-reach segments, whether it be international or specific profiles.
What’s your perspective on the market at the moment and the current challenges in the DD process?
With commercial due diligence, we've noticed that timelines are tightening, our clients need to move extremely quickly, relative to 10 years ago or five years ago. And they need to pivot quickly. We have had projects that start up quickly, go on, pause, start again, and maybe get cancelled.
That probably relates to the number of assets in the market and the fact that funds are competing really aggressively for them and need to move fast to preempt processes or get in front of other bidders.
But secondly, depending on the segment of the market, there’s a dearth of really quality, strong assets. They may get started on something or want to take a quick kick on the tyres on it and then decide - no, that business does not have the profile of what we think will be successful for our portfolio.
We've always been under pressure to move quickly and we do. But we're increasingly under pressure to be nimble, do preliminary work that would inform how hard clients can run at something and be prepared to start and stop on a dime.
With regard to reaching market perspectives, as the expert network model has matured, we have noticed that the perspectives we get from individuals who participate in expert networks sometimes come across as stale or recycled. Some folks seem to do a lot of interviews or respond to surveys through many expert networks. You almost feel like you put in your quarter and they start their spiel and it's the same thing that everyone else has heard. So we're always looking for fresher perspectives, people that haven't been tapped 30 times before and spoken to everybody else in the market.
I think with Arbolus, with custom-recruiting we found that you also have some measures in place to look at how many interviews experts are doing and if they are doing this almost as a second career or not. We appreciate the feedback you take on whether the interviewee was really informed, and whether they paid attention to cues.
Similarly, on our web survey front, which you've also helped us with, we are finding an epidemic of what we would call fraudulent or close to fraudulent responses in survey data.
Less so with Arbolus, where you know the people who are replying to surveys and more so with lower-cost vendors that promise to get you survey samples for a niche audience, whether that's school teachers in K -12 schools or optical engineers. They say we can supply you with 50 perspectives but when we go through the data, a lot of those perspectives don't make sense or they look like people are typing in garbage or they are answering conflicting answers or their IP addresses are not where they ought to be.
So we're spending a lot of time on quality control.
We have appreciated with Arbolus that you will in certain cases unblind a respondent if you need to. You will look into that and you take real care to make sure we're getting the responses that we want and that you do know the people that are on the other end of that survey.
Without mentioning details, how has been working with Arbolus helpful in delivering to your clients in recent cases?
I think very helpful. Of course, there are projects that are super successful and some that are medium successful, but that goes with the territory. And we face that ourselves as we do our own custom recruiting too. We know certain audiences are just super hard to reach. We have appreciated the transparency of Arbolus teams and the ability to discuss what we're finding as we go after participants.
One of the first projects we did with you was reaching a niche type of engineer on a survey in a very short timeline. We had only a few days to fill this survey and we needed to reach a specific type of engineer. We did do some of our own custom recruiting, but given the speed we needed to move, we had to supplement with expert network partners. We used multiple partners on it but you reached the highest N of high-quality respondents outside of what we did ourselves - I believe, roughly 50 respondents for that niche population within a few days. And the data was really high quality, so we did not have the issues that we sometimes have of having to disqualify responses later or throw them out.
You're also helping us right now to reach engineers in different countries. You helped us to identify and interview some of those folks in a later phase of work in international locations outside the U.S., which included both Asia-Pacific and Europe.
We're doing another one right now that has a number of respondents in a specific small European country. Arbolus is helping to both, recruit for interviews and surveys. Europe is always a particular challenge to reach respondents, especially when we start narrowing in on geographies or countries with lower populations to draw from.
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