Podcast Transcript

Sean: [00:00:06] G’day everyone, and welcome to the ScaleUps Podcast where we help first-time Founders learn the secrets of scaling so they can fulfill the potential of their business, make bigger decisions with greater confidence and maximise the value they can create in the world. I am your host, Sean Steele, and I'm joined today by Bradley Conn, the Director and Head of Accounting at businessDEPOT. How are you today, Brad?
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Brad: [00:00:27] Good, thanks. Sean, you?
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Sean: [00:00:29] Fabulous. Yes, I'm wonderful. I've been looking forward to this interview and folks, if you are joining us for the first time today, we've got four kinds of guests that we have on this show. We have Founders who've scaled, we have industry experts on scaling and we'll be following a group of first-time Founders over a series of years. And finally, we have experts on failing. Well, why would we have experts on failing? You know, from my perspective, no one tells these stories and they’re so instructive and Brad, I'm super excited to interview you in full disclosure. We've known each other for a little while, but you know, I'm so intrigued by your field because you get to see the financial and emotional.
You get to see the stories through the numbers, but you also of course see the stories through the people, and you get to see the business consequences of things that don't work out, and I know everyone loves to talk about the stuff that's gone well, but you get to see the other side. Of course, you see lots of stuff that goes well, but you also get to see some of the stuff that doesn't go as well across a vast range of, of industries. So, I've got lots of questions for you today. And for those who haven't heard of businessDEPOT before, this is not just an accounting practice. Is it Brad? You guys do quite a few things. Could you give the listeners a bit of an overview of what businessDEPOT does, and you know, what does a sort of typical client look like?
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Brad: [00:01:53] Okay. So, businessDEPOT is very much based on the one place model. Basically the one place that businesses and the people behind those businesses can go to, to work out what they need, if they don't already know what they need in relation to solving problems in their business, getting over hurdles in their business or growing their business or whatever that is that they're trying to do with their business. So, what we've tried to do is get a collection of various services that we think that all businesses will need at a particular point in time, if not ongoing and have them all under the one roof, not just so it's geographically handy, but all those businesses are basically under the one roof and are constantly sort of talking to each other and communicating with each other. So, it's a way in which the group can sort of band together and provide a holistic-services to businesses, not just secular type businesses working in their own sort of silo-centric world and not taking into consideration.
Things and that the businesses that, that we have under the one roof, obviously, while I'm head of accounting. So, we've got an accounting business, which takes into consideration the business advisory side of things, self-managed super funds, tax returns, bookkeeping, all that sort of standard stuff for want of a better phrase. Just in relation to the accounting and business. Yeah, we do the compliance stuff, but we feel that it's an important bit, you've got to get the compliance stuff done. You've got to get it done right.
And you've got to get it done on time. It's very much one piece of the puzzle it's what's happened historically, and that's what the tax office in various government departments need to know. That's not what adds value to a business. So, we're very much focused on providing those business advisory services that those services that allow businesses to scale up, to grow, to achieve whatever they want. Maybe it's not growing. Maybe it's a succession. Maybe they're trying to get out of business because they've had enough and they want to roll it over to the new generation. So, we've got the accounting, we've got our own legal practice on board. We've got our own marketing department, we've got our own people and culture, which takes into those consideration, all those sort of softer things and dealing with people, the internal team within the team. We do a fair bit of work in that real estate space, the real estate franchise space. So, we actually have a dedicated real estate agency, broking service. We have what we call is our advisory, which is a little bit more than what I was talking about with our business advisory. That's doing formal valuations, trying to work out how to best place a position for sale, if that's indeed what they're trying to do. We do business broking as well. What else do we do? I’ll offend someone if I forget them, we've just started financial planning. So that sort of dovetails neatly into our self-managed super fund part of our accounting business. We're finding from a regulatory perspective, you can't really say the word self-managed super fund without being a licensed financial advisor these days. So, we've sort of bought that back into house so we can provide that holistic service. So yeah, they're the main ones, but the premise is if we can't provide the service internally, our network will be able to provide that service. So, when we think about that, we don't do audit, but we know audit is that can provide that service. We don't do specialist R&D, but we've got some really good R&D people that we work with. So, we want to be a complete solution.
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Sean: [00:05:31] And then just from a typical client size, is there a typical client size, therefore that seems the perfect client for a business of your type, given you've got this sort of breadth of services and you're not just sort of doing one of these functional areas and you've got a suite of them. Does that suit a typical size of client or sector of client?
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Brad: [00:05:49] Sadly, not sector. I think we vary greatly in all the various industries and professions that we work in and our clients work in. I do a lot of work in with medical specialists. So, I do a lot of work on there. A couple of my other fellow directors, they work quite heavily in that sort of real estate agency space. but in reality, you know, I could be helping an orthopaedic surgeon in the morning and I can be running 1500 head of cattle in the afternoon. So, I don't think it's really sort of sector specific, it’s so far of size and scale goes, we always say that the perfect client for us is one that wants to be advised and wants to grow. You know, there are clients out there that really don't want anything other than just purely the compliance, what do I have to do to stay out of jail type stuff. We do that and that's fine, but personally I probably don't get as much satisfaction out of those sort of engagements because it's very process driven.
I don't feel like I'm sort of providing that value add. So, it's really the clients that want to grow and want to take advice that they're the ones that I think value from our service.
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Sean: [00:07:02] Yep. Got it. Okay. And so given our conversation today, which, you know, fundamentally you are going to have some views around, you know, some of the things that you think Founders really need to pay attention to. And I'm going to be asking you some questions about some of the stories, but I'm interested just for the benefit of the audience. Like how many clients would you have seen personally over the last year since you got into this game, what is the experience that forms your views?
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Brad: [00:07:36] The experience that I've formed is that the clients that take advice, the ones that seek advice, and preferably the ones that follow advice, are the ones who actually make it. And the ones that are also the ones that make it are actually willing to back themselves and invest in the business. The ones that are all big picture and don't sort of drill down to the detail, don't necessarily make it all the time. The one that drill down to the detail, but don't necessarily have that drive and big picture sort of stuff. They don't necessarily make it either. So, there's such a multitude of skillsets that you require to start, create, scale and build up a business that I don't think it's makes sense to try and be, you know, chief cook and bottle washer and everything in between and a business. I think you've got to back yourself, find out what you do, do it really well, and then surround yourself with other people that do what they do really, really well. Get a team and smash it out of the park. The ones that either sort of underestimate the value of that sort of support network or try and do it themselves, or try and do it on the cheap, or try and do it by the seat of their pants in so far as planning. Yeah, it’s no. Some of them work, but not particularly often and not particularly well, in my experience.
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Sean: [00:09:09] So we were having a bit of a chat offline about, you know, what are some of those stories? Well, we started with a question around, you know, fundamentally what are the lessons? If you think there's three or four things that actually typically trip Founders up as they going through the process of trying to scale up, what are those things and what are the stories that actually would be illustrative or instructive to people that would help to sort of draw some of that?
Where do you think we should start? Or what would be one of the key lessons and what would be a story that sort of would preface that?
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Brad: [00:09:44] In my mind, the foundation stone of any good business is the structure in which the business sits.
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Sean: [00:09:53] Okay.
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Brad: [00:09:54] And that's from a couple of different angles. So, you know, my spiel, if you like when a new client comes in or a client comes in with a new idea, I say that, you know, from a structuring perspective, we have to get this right, we have to get this right from the onset for two main reasons. And that's asset protection and legitimate tax minimisation. And for them, that sounds funny that I tend to sort of put asset protection in front of tax minimisation because you would have thought being an accountant tax minimisation would be my focus, and it is. But I feel if you've got a choice between having a structure that you don’t…you pay very, very little tax, but there is a risk that you could lose a lot, versus structure that you pay no more tax than you have to, but if things go to custard, well, at least you don't lose the family at home and all the sort of personal assets. I personally think that that asset protection part is more important to most people, because you sort of can have both, you don't have to sacrifice a lot one to get the other, and that's what people I think don't understand. So, getting that structure right in the first place is paramount for me. I remember, a client years ago and he was in manufacturing, he was only a young bloke. And he came to me and said, I'm working for this bloke, he's working me too hard, he's making too much money off my work, I'm going to go out and do this thing myself. You know, I'm going to use a shed at the back, I'm going to borrow old man’s forklift. I've got a mate that's going to help me and we just going to make a few ‘blah, blahs’ and that'll be my gig. I went right, oh that's a fairly detailed business plan. We'll go with that. And I sort of tried to convince him that if this thing scales up and gets bigger than you think, we probably need to have a really sort of solid structure in place. Yeah, no, no, no, no, it's not going to get any bigger than that. I don't want it to get any bigger than that. We'll just do this. So, I said, okay, we'll put the structure in place. Within two years that business was turning over somewhere between 7 and 8 million. He'd given back, he's given back his old man’s forklift and bought his own, like the business had just gone absolutely through the roof.
And then we're in a quandary where from an asset protection perspective, we were pretty good, but for my legitimate tax minimisation, it was an absolute nightmare and it was costing him far too much in tax. And in order to restructure to get him where he should have been in the first place was going to cost tens upon tens upon tens of thousands of dollars, almost a hundred thousand dollars, more than a hundred thousand dollars, just to restructure to get it back to where it should have been in the first place.
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Sean: [00:12:44] In addition to the sort of opportunity cost of the money that was going out in tax that could have been redeployed into the business. Yeah.
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Brad: [00:12:51] Absolutely. So, you know, in reality for an extra, and I think it worked out to be something like an extra thousand dollars from day one, the structure would have been perfect and this structure would have been perfect for a business that was turning around a hundred thousand dollars a year. It would have been perfect for a business that was turning over 50 million a year.
But it was that, I won’t say short-sightedness, but it was sort of a lack of ‘but what if this thing gets bigger and I quite like the idea of it getting bigger?’. You know, if we spend a thousand dollars on that structure that sort of gave him ultimate flexibility and it sort of stayed at a really small business, well that’s fine, there is no nothing, no fail, no penalty, but it's just that, yeah that lack of taking into consideration what might be, and then putting a few things in place just in case that what might be actually eventuates.
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Sean: [00:13:42] And could that have been, you know, it's sounds almost, you know, to the audience, it might sound binary. You're having to really double down, spend heaps of money at the start, knowing that it could stay small or it could get big, or how could, where there have been opportunities along the way in that first two years, even six months in where maybe it was starting to go much faster, would that have saved him money, if there'd been a sort of intersection at that point to say, actually, this thing's going better than I thought, now's a good time to get this in place before it gets any bigger. Would it have been less costly? Obviously, there would have been less opportunity to cost in terms of tax, you know, sort of forgone taxes, but would that have been a possibility or would he had to have got it right on day one?
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Brad: [00:14:27] He could have added, there would have been a fork in the road at some stage, whether that would have been six months, nine months, 12-months where the change, the restructuring could have occurred, it would have cost an amount of money, but not as bigger an amount of money, but again, my experiences in a business that's growing that rapidly, you don't have necessarily the time to sit back and look at it and go; well, this thing is getting a bit out of control, I need to do something now. So, you should always be consulting with your advisors to see how that business is tracking. But again, I just prefer the idea of if we can put something in place right at the beginning, which is flexible enough to work in this size, but flexible enough, and to work in this size, it just takes that issue off the table in the event that it doesn't get the attention at the right intersection at the appropriate time. But you're right, if we were having regular consults and regular advisory meetings to say, wow, this thing is getting bigger, we need to do something. Yeah, the pain would have been less, but there still would have been pain, is probably my point.
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Sean: [00:15:38] Got it. Got it. So, structure is number one. What next? What else do you, when you think about things that Founders really need to think about, and that often trip them up in the process of scaling, what else comes to mind?
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Brad: [00:15:51] Business plan
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Sean: [00:15:52] Business planning. Okay, and I think this is going to be so contentious too, because I love this because this is such a hot topic. When I talk to Founders those who think business plans end up in the top drawer and they're too rigid, they're too structured, and the go nowhere, others who, some just love to fly by the seat of their pants, some who plan and then replan consistently, constantly. And there's a question as to what's prioritisation versus planning.
So, talk to me about your thoughts on planning and what are maybe some examples of stories that might sort of illustrate that.
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Brad: [00:16:25] Well, spoiler alert. And accountant's always going to tell you that the most important part of the business plan are the numbers. So sorry for those, all those marketers out there, and probably to that point, when I say business plan, I don't necessarily mean a 40-page glossy document that has the vision and the a hundred-year cycle of the business, et cetera, et cetera. A business plan can literally be a fairly agricultural sort of spreadsheet. If you like working out what this business is going to look like in the first 12 months, three years, five years. Because the other thing that trips up so many businesses trying to scale is cash. Right? And you don't know what's going to be the issue with respect to cash flow, cash reserves, actually having any cash at all until such time as you bang some numbers on a page and work out; all right, if we do in fact, sell this amount of units of whatever we're selling or we're selling time, or we're selling whatever, what are the costs associated with producing that thing that we're selling, what are the other fixed costs associated with running our business and keeping the doors open and keeping the lights on? And at the end of the day, what is the bottom line? Is there black ink or is there red ink, if it is red ink, is it acceptable red ink? Because we fully anticipate that this thing is not going to make a profit for the first three months, six months, nine months, 12-months, et cetera, et cetera. And if that's the case, well, where's the cash going to come from? Not having a profit usually means that there's more outgoings and incomings, right. So how are we going to deal with that? So, when I say business planning, like I said, it's more succinctly, I would say cashflow projections or the cash planning of the actual business, and that can be from a day-to-day profit and loss perspective, but that can also be from a cash flows perspective. You can sell lots and lots and lots of whatever you're selling, but if it's on an accounts receivable basis, well, it ain't cash until such time as you collect. So, what does that look like? The profit can be there, but if it's not represented by cash in the bank, well, how are you going to pay your creditors? How you're going to pay your payroll? How are you going to pay your landlord, et cetera, et cetera. And so many businesses grow really quickly. But their growth exceeds their ability to manage their cash. And I've seen lots of businesses. I saw one, and unfortunately, I got to this one too late. It was a cracking business and the amount of money that it was turning over was, it was very, very healthy, but the management of the cash wasn't there at all. So, this business on paper looked very, very healthy, but unfortunately, because it didn't manage its cash flow, it ended up in the liquidators courts because the creditors just got impatient And said, no, you've got too much money outstanding, we're going to roll you up. And so that business basically went down the toilet because there wasn't enough planning with respect. Two, where's the cash going to come from in order to pay our bills.
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Sean: [00:19:44] And what do you think, you know, what sort of guidance do you give to your clients? I'm sure it varies by sector and size, but what is an ideal cash management practice for somebody who perhaps, you know, maybe they're running their business fundamentally on two things. One, the expectation that they're making some profit because they can see the amount of cash going out in their bank going up month by month. And the other financial metric is literally looking in their bank account once a day and going, yep, there's still enough cash in there. And that's the extent of their financial planning. How far out would you think is ideal for people to do cashflow planning in a way in a business that’s sort of scaling quickly, do you ask them to do 13-week cash flows or six-month cashflow, 12-month cash flows. What sort of discipline do you try to teach to your clients around the way they manage cash?
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Brad: [00:20:35] I like the idea of a 12-month, three year, five year. 12 months is very immediate. Like 12 months can go on a flash. Three years gives you an idea of where you're heading and five years might be a little bit sort of aspirational to sort of keep the fires burning to say, wow, if we can get to five years, that would be fantastic. But even from a 12-month cashflow perspective, I still want that broken down in a month-to-month basis. Because if you're talking about big numbers, if you're talking about, you know, 1 million, 2 million turnover per month, it doesn't take that much to make a business fall over if of that 1 million turnover, 850k of it is stuck in accounts receivable. And all of a sudden everyone's running 14, 28, 31 days behind their terms, because you might be in a position where you can't necessarily force those accounts receivables to pay. But they surely going to be some creditors, some accounts payable that are going to give you Merry Hell, if you don't actually pay things like, you know, the electrical company tends to turn off your electricity when you don't pay your bills, right? That can be problematic. If they turn up to work one day and the landlord's put a lock on the door, that can be problematic, right? So, you want to take all those things off the table. And the only way you can sort of take those things off the table, along with line of communication being open is have the cash flow to keep that problem off the table.
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Sean: [00:22:03] I had this conversation with another guest recently, who is one of our Founders who scale that was Kelly Broderick from Clean Works. And she said that the why that the discipline, they had probably 15 years where they really weren't looking at the financials in any sort of excruciating level of detail and about 15 years in, and it's like, their mindset completely changed and what they started doing, they had a 12 month cash flow, but what they would do is every time they were having a discussion about a major decision, taking on a new big client, like looking at a new product, taking on a new hire. They would go straight to their cashflow. They would plug that number in a, and they would look at the impact, making no assumptions that revenue would change as a result of that strategy or essentially the cost would move, but the revenue wouldn't and therefore the incomings wouldn't go up but the outgoings would, and would just do a sensitivity analysis on that basis. And then be even more conservative after that. And if they could get comfort with that model, it would be this sort a first line of defence in informing that decision
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Brad: [00:23:00] Well, that's the thing. If you take a worst case scenario and I know that sounds a bit negative, but you know, business can be a bit funny, right? If you take an, there's an opportunity and you go, alright, worst case scenario is we're going to make absolutely donut profit or even donut revenue out of this proposition for the first three months, six months, nine months, 12 months. What does that look like? Or more to the point at what point does it look really, really bad. And then you say, all right, that's the opportunity that we can give this proposal before we have to really sort of look at it in the clear light of day and say, we've got to cut it loose because if we don't cut it loose, it's going to take the business down with it. That's the worst-case scenario. You obviously go in thinking that this extra process, this is a resources, extra project, this extra customer is going to bring in revenue, but if it's the worst-case scenario and it still stacks up, or it still is within your risk tolerance. Well, then it's a goer. If you look at it and you go that's way too risky on a worst-case scenario, and it's not even particularly attractive on a best-case scenario. Well, shoot it.
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Sean: [00:24:15] Yep. Got it. Okay. So, we need to be thinking about structure. We need to be thinking about our cashflow management. What do you think is next, when you think, you know, things that people have fallen over on before? What would come after that?
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Brad: [00:24:30] Probably clarity of direction. I think sometimes.
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Sean: [00:24:36] Was this you, you know, I remember you saying something to me about, that sometimes people forget why they're in business in the first place. Is that what you mean by that sort of clarity of direction?
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Brad: [00:24:45] Yeah. Yeah, I do. Because anyone out there that started a business, knows that once it's on, it's on for young and old. And you know, it's lovely to see all these platitudes about, oh, you’ve got to work on the business, not in the business, et cetera, et cetera. But the truth of the matter is when you're starting up a business, you are all things to all people for a period of time.
So sometimes it's very difficult to step back and just remember why you're doing it in the first place, because it will get stressful, even if it's not a cashflow stressful type of arrangement. If you've got so many things going on, all of a sudden you think you're a good widget maker, but all of a sudden you're a good widget maker, you've got to be in sales, you've got to be in marketing, you've got to be in human resources, you've got to be in accounting and finance, you've got to be in IT, and you've got, you know, all of a sudden, there was someone else looking after all that sort of client interface previously. Now you're having to deal with human beings 12 hours a day, heaven forbid, that's a lot of stress, but if you don't take the opportunity from time to time and sort of draw yourself out and go, well, hang on, how am I going? But is this what I want to do? Is this what I thought I was going to be doing in the first place? If you don't have those conversations from time to time, it'll just become another chore and you'll lose your engagement and you'll lose your direction, and you'll lose your understanding of why you're doing that in the first place. But I think the take at once back, you've got to have that clarity as to why you're doing it in the first place, as opposed to, I just came up with this good idea in the weekend and I'm going to give it a crack. You know what I mean? So always have an idea of what the purpose was for going into business in the first place. A lot of the drivers are, you're either doing it for profit. You're either doing it for capital growth. You're either doing it for controlled. You're doing it for lifestyle, or you're doing it for passion or a sort of a combination of those things. So never lose sight of why you're actually doing the business in the first place, because if you keep the eye on the prize, that'll get you through those tough bits where you get home and you think, oh my God, what the hell was that all about? Why am I doing this?
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Sean: [00:27:04] And can you think of a story that would sort of illustrate, like, why that's so important from your perspective?
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Brad: [00:27:10] I've got it. Well, this is the current situation. I've just got a guy who's basically the business is doing really well, but he's lost his mojo, and the thing is at the beginning of the business, there was cashflow issues and there wasn't enough money coming in. He said I’m flogging myself and not enough profit, et cetera, et cetera. Now it's weird that he said, well, I said the money okay. Yeah, the money is good, could always have more, but you know, the money's good. I don't feel like I'm making a difference anymore. I don't feel like I'm doing my best work. Well, why is that? You need to think about why you actually went into business in the first place, what you were trying to achieve, and you need to get that back on track. And it was a matter of, I think, just talking to someone about it, you know, over a coffee or a beer, depending on the time of the day, it’s an accountability piece, but it's being able to sort of externalise what's going on in your mind. I don't know about you, Sean, but if I have a lot of stuff running around in my mind, it just gets all jumbled and I can't really sort of make heads or tails of it. If you can actually either talk to someone or put it up on a white-board somewhere. And that's what we do here at business department, all our meeting rooms are actually the walls of whiteboards. So, when we've got a problem with our clients, we basically just throw it up on the whiteboard and the amount of times I go and go, actually, yeah, that's where I lost my mojo, that's the point there. I gave away this particular role within the organisation because it made economic sense, but it didn't make engagement sense.
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Sean: [00:28:46] Yeah, I actually think there's a big piece in here about what gives you energy and what takes energy away. And I have that conversation regularly with Founders who are in the process of scaling, around how they want to design their roles in such a way that as the business grows, they can do more of the stuff that actually gives them energy and less of the stuff that takes it away, because that is, it's actually a significant risk. To your point, it may make economic sense to pick up X, Y and Z roles. Or as to your point at the starting point, you have to do everything. No question. You just got to do it, right. But finding ways to outsource those things that people often think about it in terms of strengths and weaknesses. Well, it might be about strengths and weaknesses, but it's also about what gives you energy, because if you run out of energy for the business and you, as you said, you lose your mojo, that's generally because you're finding the business draining. And even if the businesses is, it might be achieving all of the other things that you actually had as a purpose, it might be a great profit engine and that was what you wanted it for. Or it might be just, you know, creating the right lifestyle and it's doing that. However, it's actually starting to become a chore because you're thinking about you get to Monday and all of a sudden you go, I just hate doing that stuff. That stuff that I've got to do, I just actually hate doing it and it just draws energy out of me. But if it's giving you energy, that's where you really start to people, you know, that sort of fire up and they can usually do some amazing things in the spaces in which actually sort of juice them.
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Brad: [00:30:12] And interestingly enough, the accounting or bookkeeping function is part of that business where a lot of the clients that I have, they understand that they've got to do a component or they've sort of got to do it. I hate the term on the cheap, but they've got to do it economically when the businesses first starting up, but they're 12 months, 18 months, two years down the track when they're making really, really good money, it's almost because it's a habit of; oh, I've got to do this, I've got to do that, I've got to do the other. And I look at these people. You know what for 90 bucks an hour, you can get a bookkeeper in and do all this work that A) you don't like doing, B) all due respect you’re crap at, and C) it's not necessarily adding value where you could be adding value in other areas of the business, pay $90 an hour. You love going out and getting the clients, go out and get a new client. And from a monetary perspective, that might be worth 500 bucks an hour or a thousand dollars an hour. And it's actually what you like. And it's what, as you say gives you energy, but it's that sitting back, looking at the business and going, all right, this is where we were. This is where we are now. What's transpired. Where do we want to get to next? How are we going to get there, which is going to make economic sense, but it's going to make personal engagement sense if you like.
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Sean: [00:31:37] And I think, you know, sometimes that in my experience, working with all sorts of clients from different size businesses, quite often, it's a bit of a fear of letting go, like a bit of a fear of the delegation and the empowerment and so on. But what I would say to people is, yeah, I couldn't agree more. Don't all of a sudden just hand it to somebody with no controls, no KPIs, no visibility, no reporting, no nothing. Like that's as dumb as keeping it yourself. But if you're responsible for cashflow or, you know, you want to hand over the financial controls, I don't mean necessarily paying the bills or, you know, giving away dual signatories on a check kind of thing. But if somebody else is going to take something that you're scared of letting go, find an expert, but make sure you built controls in so that you know you can have comfort, you've got visibility, you got transparency, but you've done it to spend all your time on doing it because you probably, as you said, not that great at it anyway, and you're not adding a lot of value to the business.
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Brad: [00:32:34] And every time I accuse a client of being not so good at record keeping and bookkeeping and accounting, very rarely do any of them get offended, they say, oh, I know I'm crap, but I feel like I've got to do it. Well, no, my job is to convince you that you didn't have to do it. Spend 90 over here to make 500 over here.
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Sean: [00:32:52] Yep, it can be challenging when they’re scaling up, but you know, at a point in time, you've got to be able to get those things off your hands, or you might be focused on growing the business. What about, you talked about people not having the right team to execute. Have you seen that fail? Have you seen that sort of create problems? Can you think of a story that might illustrate, you know, I guess the importance of getting the right people around them and I don't necessarily mean the advisory side and the sort of experts on that, but actually from a team, internal team perspective.
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Brad: [00:33:28] I can give you lots of little examples. As I said at the beginning, I do a lot of work with medical specialists and when you've got surgeons and specialists coming out on their own for the first time, and they're sort of going into private practice, they’re still keeping a foot in public work without going out on private practice. It normally ends up that they might do one day a week using sessional rooms in the hospital. And then it'll scale up to two days a week, and then they realise that the session or costs are ridiculous and I need to. Get my own rooms and sort of all I need is one person demand reception for this period of time, et cetera, et cetera, but that poor person on reception, because those practices tend to grow exponentially. They at a very, very quickly take on the responsibilities of marketing, finance, and admin, IT, or just about every single operational function within that you'd have in a normal organisation, and this poor person is literally trying to answer phone calls.
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Sean: [00:34:29] Yeah.
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Brad: [00:34:32] But from the business person's perspective and maybe surgeons aren't the greatest example, but not having a clear understanding of all the various roles within an organisation, and what's involved in those responsibilities. You just keep on trying it over your shoulder until such time as you look around and there's just a mess behind it and no one's been catching it for the last six months. So, that's just a classic example of exponential growth within a small business, but not appreciating the various roles that need to be performed within an operation to make it run smoothly, efficiently, and be ready to grow. And I think that's probably the answer. So, there's those situations where… Yeah, that's probably the most common that I see is just that. Business that starts with the one person doing everything, someone convinces them that they need some sort of admin support, and all of a sudden that admin support is just being thrown absolutely everything, and no offense to that admin support person, you know, they feel they're obliged to catch everything and do everything. But it's not fair. They're not trying to do after stuff that they're asked to do, but that means that that person needs to have an understanding and appreciation of all those different functions within operation. Just the fact that someone is catching everything behind you doesn't mean that they're catching it and then actually doing it properly.
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Sean: [00:36:05] This is true. I know this is a very common, it's a very common, a difficult decision to make when you're growing in business is where do I really need specialist expertise and I need to hire somebody who costs a lot fundamentally to bring that expertise in the business. And when can I hire a junior and how do I get the junior to sort of pick up as much rope as I possibly can. And I always really liked to help people think about a kind of mix and match. I think it's great to be able to build internal capability. And if it's an important area, take marketing, for example, you can get some just unbelievable, unbelievably sort of creative diligent, loyal, hardworking marketers, straight out of university on relatively low wages who will work five days a week, and will bring all sorts of energy and creativity and ideas. Are they going to be the world's best performance marketing analysis execution SEO strategy? Probably not. And can they do a lot of the activities and the tasks that are required to advance those endeavours? Absolutely. But why wouldn't you get an expert in your corner on an hourly rate who reviews the strategy once a month, if that's the right rhythm review, you know, help set up and configure all the reporting, helps set up the strategy, has the younger sort of marketing assistant getting all of the work done, comes back three or four weeks later, looks at the outcomes, reset strategies, basically in your camp, but you've got high quality advice at a, probably a relatively high charge outright, but you've got a variable costs that you can control. And what you're building is actually building internal capability, but at a much lower rate because they’re usually great leaners, want mentoring, and if you're not the expert in that area, you're not going to be a great mentor anyway. So, trying to take on the expertise. So, it's a nice way sometimes to kind of mix and match your investment in key roles to make sure you're getting access to expertise but you're also getting a lot of the work done by someone who's sort of at a lesser cost.
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Brad: [00:38:08] And I think what you said about identifying those roles, that's important too, because a lot of people will expect and it's a crazy expectation. I'll get a junior, I'll pay them nothing an hour, but they'll do my finance and admin. They'll look after my IT, they'll look after my marketing, they look up and my brand, they'll do this and this and this and this and this. That's not fair. You're just setting the poor person up to fail. But if you find an admin person, because there are so many little bits and pieces that an admin person can assist a business owner in doing that will sort of take those little but massive pile of little things off their plate and allow them to maybe have that sort of headspace to even consider, all right, now, what are the key bits that I need within this business to make it go to the next level? Is it marketing? Have I even considered structuring from a legal perspective, my employment, my HR, my IR, that sort of stuff. If you take all those little bits away from the proprietor of the business, it does give them the headspace to either consider things that they know that they need to consider, or at least go and talk to someone that will put the fear of God into them to say, well, you haven't considered this, you haven't considered that and you haven't considered that. And I went, oh crap, I better do that. So, it's the right person for the right gig or the right person for the right function within the role, within the business, in my mind.
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Sean: [00:39:40] Excellent. And I'm conscious we don't have as much time as we'd like to chat today. I know that you and I have to have hours’ worth of stories to share, but if you think about one or two other things that you think are the most important things for Founders, really to consider that they have to get right or that you see go wrong when they're trying to scale, what are those?
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Brad: [00:40:02] If we're talking about plural ‘Founders’, everyone's heard of a shareholders' agreement. Yet another thing, that's a bit like business planning. They go, I don't want to have to pay for that. That's just going to end up in a filing cabinet and that just allows lawyers to go out and buy new cars, et cetera, et cetera. Shareholder’s agreements in my mind, one of the most critical documents that you will ever construct in starting a new business. And I say the word construct, not sign off on, because in my mind, the journey of the shareholder's agreement or the participation agreement or whatever you want to call it, the journey of actually discovering what that needs to include is actually more important than the destination of the document itself, because in reality, in a perfect. world, a shareholders’ agreement will never ever see the light of day because the shareholders’ agreement tends to say; well, what happens when it all goes to crap? But you do need, if you've got two unrelated parties going into business together, you do need to have the conversation of; we're really confident that we're going to smash this out of the park and it's going to go swimmingly, but we're going to hit some potholes along the way. And some of those potholes may be significant and there's money involved. So, that could make it even more significant. We should be having those difficult conversations before we actually kick this thing off. And I say, and I use this as an example because I've actually seen it with two people that came in and wanted to sort of get involved in a business venture. And I convinced them that you need to have at least the conversation about the shareholders’ agreement first, because if you work out that you can't work with each other, wouldn't that be interesting to have that conversation before you start. And so, they went off, had the shareholders' agreement conversation with our legal team and genuinely came out of it.
And a couple of days ago, we've decided not to go ahead with this business venture together because we've found that we're completely incompatible. You can imagine the carnage, if they actually established that 12 months, 18 months, two years down the track when they've got debt, when they've got factory, when they've got employees, they've got debtors and creditors, and you've got to try and unwind that. It's horrible and it turns very, very nasty. It's a business divorce. And nobody wants a divorce, let alone a business divorce. So have that conversation upfront, work out the ground rules, work out what the process is. If there is a disagreement on something, work out what everyone is bringing to the table with respect to money, expertise, skills, effort and energy. If one person is quite happy to work a hundred hours a week and the other guy thinks, I'm self-employed, now I only have to work 20 hours a week. Well, we probably need to be having that conversation sooner rather than later. So I regard that as a absolutely critical step in the process, because going out on your own is really lonely and you'd much rather go out with someone, but that someone's got to be the right someone. Just anyone? No, that's all bad.
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Sean: [00:43:23] Couldn't agree more. I've seen some major blow-ups myself over time from people that I've known. It's simple like what do we do if we don't agree on a strategy, on how to deploy capital on, whether we should hire somebody or not, all these constant day-to-day decisions they're going to be coming up on a regular, what do we actually do if we don’t agree, like does someone get to call, a veto or is there a mediation process or, yeah how do we deal with that? And it's hard sometimes when you're at the starting point to think of all the things that you might need to think about to ensure that they all get into the agreement. I guess the starting point is, you know, a bit of Google researching. There's a lot of, there's a lot of material on Google about partnership agreements. And I think the big thing is, you know, what are the questions that you've got to ask, you know, fundamentally end up with a whole bunch of things enshrined in agreement, but there's also this really critical conversation. I mean, do you direct people, if people aren't ready to seek advice and pay for it, do you send them to particular places for kind of their own research to really stimulate their thoughts?
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Brad: [00:44:26] I've got a bit of a cheat sheet of which I say, look, and if this can’t convince you the importance of the process, well, you know, I give up. But it's a real, it's basically, what's going to happen if this happens, what's going to happen if this happens and it is, it's just having those awkward conversations or asking those awkward questions before they're actually really awkward questions. And it's far more powerful if you have both people in a room and a facilitator of sorts, whether it would be the lawyer, whoever's preparing it. If they are trained in what they do, and they can really sort of drill down and go, all right, this is a scenario, you want to do this and you want to do that. And you're 50-50. What's that look like? You know, some of the best businesses in the world I've seen have got business partners or shareholders or stakeholders that have different skillsets and different approaches. Every car needs an accelerator and a brake, I reckon every business needs an accelerator and a brake as well, too much accelerator, you plow into everything and you crash, too much break you never get off the starting point, but brake and accelerator is not always going to get on beautifully. There's going to be some tension from time to time. Talk about that tension now, don't wait for it to blow up in your face.
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Sean: [00:45:49] Yep. Couldn't agree more. Couldn't agree more. Thanks, Brad. Well, I'm conscious, we've got a few minutes left. Is there anything that I have not asked you or given you space to talk about that you really want to get across to a community of Founders that are attempting to scale, any other kind of lessons or key pieces of advice that you think are critical for them to hear?
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Brad: [00:46:09] Look, I think we've covered the really important things. I keep on harking back to the two key points. Well, there's probably three key points, is back yourself, have the confidence to back yourself, but surround yourself with a great team of people that can help you achieve what you want to achieve.
And when I'm talking about a team, I'm talking about business advisors and lawyers and marketers and accountants and stuff like that, a great team that understands where you're trying to get to and wants to work with you and the other team members to get you on that sort of common goal, that's important because you know, no one's an island, and I just think it's so much harder and virtually impossible if you try and do all those things yourself, because not everyone's got all those skillsets. Yes, it costs money, I understand that, everyone listening or watching this saying yeah, but it's fine, but you haven't got the deepest pockets when you start a business. I get that. But maybe that raises the question. If you're not willing to back yourself and put that sort of money towards getting that right from the get-go, are you ready to go into business? And that's probably the key. The other one I'd suggest. And I actually have to read this one out because I always get a bit tongue locked on this one, and you might have to beat this out depending on the demographic, but it's the 6P's. Have you heard of the 6P’s? Prior, Preparation, Prevents, Piss, Poor, Performance. So, there’s various iterations of that, but yeah, it's have a plan, be organised, be prepared, you're not, not going to know exactly what is around the corner every single time, but if you can eliminate the majority of the road blocks in the speed bumps, you're making your life a lot easier.
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Sean: [00:48:04] Yep. Big time, big time. I love that, Brad, thank you so much for that. And I'd really like to acknowledge you and the team at businessDEPOT. You know, when I was introduced to you. Oh, a good couple of years ago from a colleague in YPO and the Young President's Organisation. And they really spoke very highly of the work businessDEPOT had done. And I remember looking at the website going, is there a risk that this business is trying to be all things to all people like, you know, the ones that you know, that sometimes. You know, when do you niche down and when do you try to add more services for a customer, but from everything that I've heard about your business and every person that I know, and I know numerous people who've used different elements of the services, it seems to be a great model. That's actually really extending the opportunity to deepen the knowledge of the customer and help them solve more problems, which I think is actually the point of niching in the first place is identify clients that you can really support, figure out problems they’ve got, do an excellent job of solving those problems. And if you aren't the right people to do it, make sure you go to network of people that you trust that actually can get in and help to solve that problem, so the client fundamentally has less people to deal with that they can, once they’ve established that trust. So, I really acknowledge you for the way that you built the practice there, and then the way businessDEPOT has evolved because I know it's really adding value to people's lives. How can people get in touch with you or follow up with questions? If they have those for you or follow the work of businessDEPOT, how do they find you?
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Brad: [00:49:29] Look, I direct them straight to the website, www.businessdepot.com.au. There's our stories there, all the various parts of our businesses there. My contact details are there. We believe it's a good website because it tells a really good story of what we're all about and what we're trying to do. I just use that as a first port of call. And frankly, if I didn't say that, my marketing department would kick my…
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Sean: [00:49:56] Absolutely well done. You can tick that box. I will look. Thanks so much for your time today, Brad. Folks, I really hope you enjoyed the show today. Big thanks to Brad Conn from businessDEPOT. A couple of things before you go. Of course. If you feel like you're getting value from the podcast today, I would be incredibly grateful if you'd leave a review on apple podcasts and particularly, in particular, it helps, the team reads every single one of them, it gives them a massive kick for all the work they do in producing this for you. And of course, it helps other people find it, in the future. If you'd like to know when new episodes are going to drop or you'd like to be notified of free tools and resources, please just jump on the website, www.scaleupspodcast.com. You can register your email there, or of course you can find us on the socials @scaleupspodcast, but remember, before you go today, the only thing that can absolutely guarantee that you won't scale is to give up. So, stay unshakable in your faith that you're going to get there, but remain flexible in your approach.
You've been listening to the ScaleUps Podcast. I'm your host, Sean Steele. Look forward to speaking with you again next week. Thanks so much, Brad.
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Brad: [00:51:01] Thanks, Sean.