Tim Tolan founded The Tolan Group 18 years ago to focus on the executive recruiting needs of mid-cap private equity firms investing in the healthcare sector. It was a fortuitous decision. Today, his firm swims across three primary lanes – healthcare services, healthcare tech and behavioral health. They are three of the hottest markets for top talent.
Tim has deep healthcare expertise both as a search practitioner and a former executive of several publicly traded healthcare tech companies. He was an executive at CITATION Computer Systems, Healtheon/WebMD and at ProxyMed. Earlier in his career he led sales and business development for several healthcare software companies in the physician practice management space. If anyone has a deep understanding of the healthcare ecosystem, it is Tim Tolan.
As that ecosystem has evolved, so has The Tolan Group. Two years ago, Tim and his partners carved out a de novo healthcare staffing company and recruited healthcare staffing veteran Dave Stillmunkes to run it. ClinTech Health is focused on long-term healthcare and the IT market and has enjoyed significant traction in those two market niches.
Enriching the Brand
Now the founder and his management team are diversifying again, launching a new division to provide interim finance and accounting professionals for private equity-backed portfolio companies for short-term or long-term assignments. “The talent market shifts all the time, but this is the biggest movement we have ever seen,” Tim told ExitUp in a recent conversation. “I spent most of my career in early-stage companies, so this was an easy pivot for me.”
Not to be overlooked, of course, is the value that recruitment firms gain by scaling their platforms with new, and recurring, revenue streams like interim services. “You enrich the brand,” said Hunt Scanlon Ventures co-founder and ExitUp publisher Scott A. Scanlon, who is advising the founder on growth and exit strategies, “and in the process you enhance your worth to strategic buyers and PE firms seeking investments in human capital management.”
Below are excerpts from a recent conversation that Tim Tolan had with ExitUp editor-in-chief Caleb Edmundson that we think you will find insightful. The interview has been edited for length and clarity.
Tim, what’s new?
That’s a loaded question! 2023 has been an extremely good year for us and we are well ahead of our annual plan. Last year we invested heavily to get ClinTech Health off the ground. We decided early on that we did not want outside capital, so we funded the startup costs internally from our primary executive search business. I think time will prove we made the correct decision as the costs of capital today are far more expensive than just a year ago. Now ClinTech Health is a stand-alone company and operates independently from our executive search platform, although the ownership is the same.
How is your core executive search business doing in the current environment?
We made changes to our business model earlier in the year and it’s really paying off in spades. Our core executive search business will almost double in revenues this year, despite the PE slowdown that started last spring. Candidly, we began a multi-quarter dip starting in May of last year and our business was choppy throughout the remainder of 2022 with lots of peaks and valleys. Most other search firms experienced a similar pattern according to what I read in Hunt Scanlon’s sector reports and daily news briefings. Our core business is talent acquisition for private equity-backed portfolio companies. Today, that represents over 90% of our business. When PE firms pulled back because of the rapid interest rate hikes that started in 2022 and the conflict in Ukraine, we felt a dip. But all that changed at the beginning of this year and the demand for portfolio hiring has just exploded, at least in the niche healthcare sectors that we service.
PE firms tell us that you respond well to their needs for speed and efficiency when searching for talent.
We maintain an impressive time-to-fill metric of just under nine weeks and that allows us to handle the recruiting peaks and the increased volume of search engagements. This is largely due to the unique way our firm is structured. Unlike traditional executive search firms that have full-360 recruiters, we are a split desk firm, meaning we have a separate business development team from our client delivery team. This allows us to do much more volume based on the way we are structured. Our unit volume is growing, and we are adding a lot of new client logos. The outlook for the remainder of 2023 is strong and all signs are pointing to continued demand as we look ahead to 2024.
Tell me about your leadership team.
Having a background as a senior executive in several companies throughout my career I always had a great appreciation for building great teams. TTG is no exception; we have built a great team of leaders. When I started the firm in 2005, I did everything because I had to – that’s what entrepreneurs do. But as we’ve grown, we have had to build the framework to scale, and I started the process of delegating key responsibilities to others. Last year, I sold part of TTG to three partners and each partner runs a major part of the firm today. Kaye Johnson spearheads all operations and finance while overseeing and managing production. She is based here in St Augustine along with me. Rachel Gauthier leads our client delivery team and resides in Wisconsin. Tim Russell heads up our business development efforts and all things PE-related while residing in Atlanta. Essentially, we have been mostly a virtual team for over 10 years – always keeping a small office in St Augustine. In February, we exited our St Augustine office lease and now use a shared space for our local Florida team. It seems to work quite well. We use the shared space weekly as needed and meet as a company often on Zoom while client delivery and business development meet separately with their teams weekly. Multiple times a week we cascade information across the company to keep everyone up to date on what’s happening across the firm. It is a cost- and time-efficient way to work.
You are a Hunt Scanlon Top 40 healthcare recruiter and a Hunt Scanlon Top 60 financial search provider, so your success in search speaks for itself. So why the move to diversify twice in the last 24 months?
There are several factors that led us to make this decision. First and foremost, our clients have been asking for additional human capital talent solutions to bridge the gap when a senior finance person suddenly leaves the organization. By 2025, it is expected that more than 50% of the U.S. workforce will be comprised of contract, freelance, and part-time workers. This presents a great opportunity for us to transform our business by building and layering new talent solutions offerings. By doing so, especially in the interim finance arena, we can offer a highly useful solution to the unique talent challenges our clients are facing. In return, we have created a recurring revenue stream that will increase our overall value as an organization.
What can you tell us about the demand for interim talent across the finance spectrum?
Three months ago, CFO Magazine stated the demand for interim CFOs was up by over 103%. Interestingly, 2022 capped off a five-year high in CFOs resigning which might explain why CFOs are the most requested executive roles to fill at our company. To be sure, PE demands are high for interim leadership and the reasons vary. But one thing that seems to remain constant is the challenge with financial leadership as a PE-backed platform begins to scale and grow. The skills and expertise to run a $250M platform are far greater than a $50M platform, so PE firms often find themselves seeking a CFO upgrade as their platforms scale. That’s where TTG Interim comes into play. We can parachute a seasoned CFO, Controller, or VP of Finance with deep private equity experience into a PE platform while we initiate a new search for a full-time finance executive who can lead the continued growth and scale of their platform investment. That totally aligns our expertise with their talent needs.
Is your new interim offering focused on your main three service lines in healthcare?
Yes and no. While we plan to offer our new interim solution to existing PE partners and their portfolio companies, we also want to broaden our reach by making TTG Interim a vertically agnostic offering. We have several PE partners that have invested in several sectors outside of healthcare and we want TTG Interim to serve as their interim talent solution across their entire portfolio. We’ve done CFO engagements outside of healthcare at the request of several of our PE partners and this was another data point for us to decide to launch TTG Interim.
What is your relationship with candidates?
Really good question. We conduct a lot of executive searches involving CFOs and other finance roles in our core recruiting business. While sourcing candidates, we speak with them about their own career aspirations. This is all part of building trust and understanding their motivations and goals. During many of those conversations it is not unusual at all to hear that some of the candidates start to discuss their interest in possibly exploring fractional roles. Many of these folks are in mid- to late-stage careers and are attracted to the freedom that interim work offers. Now with our new interim division we can help them find short-term assignments, which might align with their personal and financial goals, or we can offer full-time, permanent roles. It’s truly a win-win.
What makes TTG Interim unique, Tim?
We have developed a proprietary screening process to quickly identify which finance and accounting candidates would be ideal in a PE setting. Since we go through a detailed process on permanent roles, we know exactly what PE firms are looking for. This proprietary process allows us to expedite screening, so the ideal candidates quickly move on for a more in-depth evaluation so we can certify them internally as a TTG Interim candidate ready to start immediately to step in as a senior financial leader for a PE-backed company. Our proprietary process allows us to quickly get to a go/no-go decision on their candidacy in a compressed timeframe without sacrificing the quality that our PE partners demand. And, of course, our primary focus is on timely client delivery.
Excellent insight. What’s next?
My focus for the balance of 2023 and beyond is to stand up TTG Interim and make it the preeminent resource for PE firms every time they need a talent solution around finance and accounting. We believe the timing is right for the markets we serve and making this a pure play finance and accounting service line that’s vertically agnostic is strategic for us. This approach gives us a chance to engage with a PE firm that may not have healthcare as part of their portfolio today but may invest in the healthcare sector in the future or has an immediate need for a finance executive for any of their platforms. TTG Interim aims to become the go-to finance and accounting interim partner for our clients whenever those critical needs arise.
Caleb A. Edmundson is Editor-in-Chief of ExitUp, the investment blog from Hunt Scanlon Ventures designed for professionals across the human capital M&A sector. Caleb serves as an Associate for Hunt Scanlon Ventures, providing robust industry research to support the firm’s investment group. Connect with Caleb.