The post COVID service bump

Now that things are sort of returning to “normal”, the investment community is again looking into the work comp services business for potential investments.

Couple things I’ve noticed in conversations with investors.

Some service entities are conflating revenue increases due to the “return to normal” with actual new business. In other words, these companies are claiming they are getting new business from new customers (or expanding their business with current customers) when really their existing customers are just seeing more claims as the economy bounces back.

While I get why service entities would want potential investors – and current investors for that matter – to think they are taking share from competitors, that’s a pretty short-sighted approach, may actually be counter-productive – and it’s also unethical.

Investors are going to look deep and hard at revenues to make sure the uptick in revenues is due to actual new business. These people are quite smart and very very good at picking apart reports and data, Companies that mischaracterize their business will find themselves hard-pressed to explain why dollars coming from old customers should not be counted as new.

Second, by characterizing revenues from recovering clients as “new”, service entities will have to explain why their former customers’ revenues aren’t returning. That has made for some very interesting conversations indeed.

What does this mean for you?

Don’t do stupid stuff. Like this guy.