Podcast Transcript

Sean: [00:00:00] Well, 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 that they can create in the world. I'm your host, Sean Steele. And I'm joined today by Stipe Vuleta, managing director of Chamberlain's law firm. How are you today,Stipe?

Stipe: [00:00:25] Oh, I'm fantastic Sean. Thanks for having me today, very excited.

Sean: [00:00:28] Fabulous mate. I'll have been looking forward to this interview for a number of reasons for just, a bit of a background for our audience.We have four types of guests on this show. One, is the scalers; the people who you know, successfully scaling their organisations. Two, is the experts on scaling.

So, they might have, it could be authors with tools, frameworks, content, stuff that really helps people, with the from the business model perspective or from a leadership perspective and first-time Founders where we will be following a group of first time Founders over the next five years.

But a category that I really wanted to get stuck into was, the people who see the stuff that doesn't work and the people who see the fails and the people who see the partnerships that blow up, and the people they say, the IP, the lawsuits, the over capitalisation, the running out of money, the problem side, because of course we all have access to podcasts and content that you know, are instructive about all the things to do. But what about all the things that we shouldn't do or the things that we should avoid, or the things that we can learn from the stuff that didn't work out? Because that happens all the time, but no one is telling those stories. So for me Stipe, what I love about this interview and why I'm so excited to chat to you is because you actually cross two of the categories, which makes you some kind of a unicorn or a enigma or something.

I'm not sure what it is because you’re both scaling an organisation in terms of Chamberlain's but your technical background and sort of experience has been in insolvency and restructures, which is where are really wanted doubled down today, but I am going to come back and ask you some questions about, the scaling.

So, for those who don't know who Chamberlain’s is, full service national law firm, offices in Canberra, Sydney, and Newcastle, Perth, mid-tier firm with a sort of boutique feel and everything. It sounds Stipe, you guys are covering a lot of ground, right? From, from private wealth advisory through to multinational M&A and with a real focus on that, under-serviced and overlooked mid-market customer, which you know, having been in mid-market companies. I know what you mean by that. So, welcome aboard. Can't wait to get stuck into it today and maybe we can actually kick off with you and we can just hear a bit of the story of Stipe and how did you get into this field of law and particularly then insolvency and restructures.

Stipe: [00:02:40] Wow. Well, thanks again, Sean. And look quite flattered and excited by that intro. Look, it's an area that I've always liked because failure in my view is what defines a person and a society and so, I'd grown up with a family that was in small business and a lot of friends, who were entrepreneurial and we were immigrants to Australia. So, you came to Australia, to live the Australian dream, or you know our Australian version of the American dream. So growing up with people, getting out there and trying their hand at new business and frankly often failing for a number of reasons, some good, some bad made it an easy choice, when I was a little kid, I always thought I wanted to be an architect because I love beautiful things and I loved going to the museum with my father. But, but once I got old enough to really experience the human process of business success and failure. I don't think there was anything else for me left. I just had to get into restructuring, sure.

Sean: [00:03:50] Wow. How about that, and when did your family move here?

Stipe: [00:03:53] In the mid nineties. So, we moved over from former Yugoslavia, but, yeah look it's always been small businesses, always been a part of our family dynamic, even now my parents and my youngest sister, and a lot of our relatives are still involved in business now. So,

Sean: [00:04:11] It gets into your blood, doesn't it? Like, it sort of becomes part of the collective consciousness of the environment in which you're operating in, keeps us sort of absorbing and makes my assumption, like why wouldn't I be involved in that? Because I think what that conversation and that exposure does is it reduces the fear you know, you think about why don't people, lots of people have great ideas and stuff they'd love to do but why don't they go after it? Well, usually it's fear, right? But when you're overexposed to it and you get around it all the time, the fear dissipates because you see some fails, but you see people pick them back up and pick themselves back up again and you see some wins and you see some joy and you see people living, quite often with real passion in the world. So, I love that was part of your upbringing and that even now that you're in a much larger organisation than one would call a small business, you get to bring all of that personal nature to it, which I know is formed part of the way that the culture is building Chamberlain’s.

Maybe you could just in the context of, I guess the experience and the views that you might have on what you think would be instructive lessons for Founders, you know, some of the we're getting it to get stuck into stories and your perspective on some of the things that Founders should do or should not do, but what is it that informs that? Can you just tell us a bit about your experience might give, help people get a sense of, you know, of numbers, sectors you've worked in or sizes of clients, or how many clients would you, what are the things that are informing your experience and your view today?

Stipe: [00:05:46] Yeah, for sure. Thanks, Sean. Well look, Chamberlains started off as a pretty small firm. We've got a long history and we've been part of some multinational law firms in the past, but in 2014 we had about 11 staff. Our revenues were not substantial. We weren't quite a startup, but we were turning over just over a million bucks a year and struggling with profitability and understanding our identity and knowing who our clients really needed to be.

And then obviously since then we've spent a lot of time refining, what we're actually good at and for us, that is just mastery of the middle market. We're here to help clients, whether they're private individuals, usually wealthy private individuals, businesses, or government, or quasi government entities that, you know, they're not looking for a giant behemoths to look after every aspect of what they do, but they're looking for a business is competent and excellent, but has a human and personal approach to the delivery of its legal services. So on any given day now we would have a hundred to 120 staff working across our offices. We'd be delivering solutions, both digitally through online automated services, as people on project-based matters and also through prosecution. And we'd be looking after clients, everything from an individual who has a couple of duplexes that they're selling in the suburbs all the way up to a large multinational company going through a restructure or dealing with a major workplace incident. So, yeah I guess we do see the breadth of society in doing that and we get to share a lot of successes with people, including a lot of successful startups, who are now much more than startups on the books, as well as a lot of failures and a lot of personal crises.

Sean: [00:07:54] So, maybe you can give us a sense, given that how many failures would you or your teams see I mean, because you obviously getting informed by your own experience, right? The stuff that you, practices and the experiences when you grew up in the specialisation, as well as, of course now with you know, 120 people working with, or for you. All of the experience that they're getting, because of course it will that sort of floats up and bubbles up and you get your experience through their experience as well.

So, how often would you see fails? How often would you see insolvencies or restructures like, how common is this in your experience?

Stipe: [00:08:29] Oh look Sean, every day at the moment and that's not just because of the financial circumstances of COVID or what's happened with fires in the last 18 months, but historically we would have anywhere between 30 and 50 business restructures going on at any one time and as an extension of that, we might be looking after the legal work on over 100-150 different external administrations have failed companies. So, if you're talking about the ratio, you know, we might be trying to help 30 to 50 groups of people in businesses and mopping up after a 150 or so at any one time and so by the time you extend that out over the course of a practicing life, it's a lot of failure but it's also a lot of learning.

Sean: [00:09:22] Oh, big time. Yeah. It's fundamentally, it's thousands of examples right, of that you get to sort of distill and go, there's going to be some commonalities here. There's going to be things that happen, there's gonna be patterns that emerge and things that you can sort of draw out and learning, and so not to genericise them and, and to dilute them as such, but there are going to be some common threads.

So, keen to spend some time today of course, on the top three or four things that you think Founders need to pay attention to when they're trying to scale a business. Wwhat are some of those things I really need to pay extra attention to that maybe sometimes I don't. And I'm of course interested in the examples or the stories, or some examples of stories that have made you come up with that conclusion, because quite often it's the elements of those stories that people can resonate with either because I can see that coming on the horizon or they've got a bit of smoke starting and they're like, okay the fire's not burning yet, but I can kind of just smell it in the distance, and it sometimes help people navigate around them or they could be right in the center of it and going, wow, actually, this is exactly how I got here. So, maybe which story do you think we should start with?

Stipe: [00:10:30] I think everyone gets excited by culture, but one aspect of culture that I think people overlook in the startup phase is actually the very intimate, personal relationship, the culture of the Founders themselves. And so I actually, you know, I'm reminded of a story about a business actually in the construction services sector. I was able to work with them for a number of years, a few years back, and they were in a pretty competitive sector. They were in effectively scaffolding, form work and all of the related labor services associated with that, the labor services side of that sector is incredibly difficult. The margins are low, there's a high risk of credit defaults from customers. There's a lot of issues with supply, there's a lot of logistical problems with managing a lot of stuff in a lot of different locations,the intervention of unions. But what people forget is actually, they're also low leverage businesses, so people can create these pretty successful labor services companies in this sector without ever having to necessarily engage in that development of that organisational culture. You might have two Founders; one doing, the finance, the other one doing the sales, and they can build a 20 million business from scratch in a short period of time. And that can really cause problems when they start to have divergent views on what it means to be part of that business, what they want from the business, whether it's on a daily basis or how they want to exit the business, whether it's through succession or IPO or sale. And so, in this particular instance, there were effectively two friends, who had just started as, one had dropped out of university to help a friend who was a carpenter. They decided to get into this sector and they develop these fantastic digital tools, for pricing and managing labour in the sector. So, they were able to actually operate at a much lower margin than their competitors grow very, very quickly and develop a very strong business. However, the problem with the business initially was because of those low margins, they insourced a lot of the work that a lot of other startups would start to develop teams around. And they very quickly became used to working incredibly hard and not paying people for advice, and not paying people to implement changes. And so a few years in, the two Founders effectively were forced into a situation where they needed to make a decision around the re-investment of a couple of million dollars in digital infrastructure and a new yard and an additional staff. And the non, I guess, financially-driven individual was used to this, you know, relatively exorbitant income because he just spent the last few years effectively doing the work of three or four people and when it came down to having the conversation with the other Founder about well, what do we truly want out of this business? Is this going to be just a very successful small business for the rest of our lives and we're going to make a lot of money, but we're going to work really long hours doing things we're not expert at? Or are we going to genuinely start investing in infrastructure and scaling this business and listening to it and thinking about what we want at the end? This other the Founder just decided actually this was his end. He just wanted this for the rest of his life for, until he was burnt out and exhausted. And unfortunately they didn't have a shareholders agreement. They didn't have a partnership agreement, they didn't have a clear business plan, they didn't have a vision on their exit and the whole thing fell apart. So, actually after many failed attempts and mediations, we ended up having to physically separate the business in half and ultimately both of them were not particularly successful afterwards because they no longer had unique control over… effectively they created competitors for each other and they got into a bidding war and they'd spent all this money on advisors, and the scale was all wrong. And now you don't see either of them participating in the sector anymore.

Sean: [00:15:33] Wow that alignment, you know, it's interesting as to when should these discussions take place? Because of course in a perfect world discussions would be well thought out, well detailed before anything started, but you know, naturally people sort of go, hey, this is an amazing idea and everything's going to be great. It's going to be really exciting and we're just going to go, just going to kill it. It's going to be wonderful. And it just sort of creeps up on you, doesn't it? And then all of a sudden. The values misalignment or the directional misalignment can really start to cause problems, and if you think about it, not only did those Founders not end up getting what they wanted in a long-term, all the other people that were involved in that business who are then the consequences, you know, the sort of the collateral damage of that misalignment, because that effort wasn't put into, to find the alignment, in the first place. So, if you think about one or two of the key lessons from that story? What practically should a Founder, who's in a, let's say they're in a sub 10 million business. They've got a business partner, things at the moment are going quite well. There might be a few little, bits of smoke coming out maybe and bits of misalignment, but they don't have, maybe they got shareholders agreement, but they actually have no partnership agreement.  They haven't really talked about values, direction, exits what they want, what style of life they want to have all those sorts of things. So, therefore capital allocation is going to get ugly at some point because people want to spend money differently. How should they think about how to tackle that?

Stipe: [00:17:09] That is a really a good question. And I think on the startup side. So, before considering exit, I always speak to individuals about their pyramid of personal values. You know, ultimately some people, they have an upside-down pyramid of personal values where their values are their business. So, you might speak to a Founder and they say, you know what, I don't have strong personal relationships, I don't have a family, I love my work. Like, I want this, this is my life. And when you meet that Founder, you know I call them, the upside-down-pyramid Founder. Well you know… that individual, they want everything out of their business and they might even make poor personal choices or make good business choices at the expense of personal choices. And then I compare that to the iceberg Founder, the Founder that, they have that little bit of drive and it may manifest itself as the same level of intensity as the upside-down-pyramid Founder. They may still be saying, I love this business. This is everything to me. But when you start scratching below the surface, you start hearing about that one day they want to take their father on a rail journey through Siberia, or they've got a child who has special needs and they want to go on a campervan holiday or they have this hobby that they are very interested in or they love reading. And so, I always see those two little, I guess, markers as indicators that the Founders are very different and it doesn't mean that diversity isn’t power, but my first tip would be “be honest with yourself” because it's only after you're honest with yourself about what you want, that you can be honest with your business partner about what's important to you and only after you've really spoken about what's important, can you then start working on your values both financially and non-financially.

Sean: [00:19:26] Wow. That is so true because there's also this sort of archetypal, egoistic, exit is everything, scale is everything. And to your point, lots of people don't want it, but they might think that they do actually, because there's a badge of honor that comes with it. But actually some of that, to your point, they just want to make half a million bucks a year, take family on nice holidays. They're very happy with that lifestyle, they don't want to scale it. They don’t want extra people that just want to keep a small but highly profitable business. And they're happy to do whatever they need to do. And others really want scale. I saw this, this really reminds me of a story, of a couple of IT services guys, that I know one who built a really successful practice with a very unique culture, which was, IT sort of security consultants, highly skilled, highly qualified, highly paid, and all of them really valued lifestyle. So, they'd go on skiing trips together and he was all about, you know, we don't want to have to manage lots of people, just a group of guys who are all sort of tackling it together and big clients, but you know, high expertise. Ended up taking on a business partner and if there was any profit left over at the end of the year, it was like just distribute distribute, distribute like, just take it all out we don’t need to build for tomorrow that's not the game. Took on a 50% partner and neither with actually no mediation clauses, no how do we deal with a problem when it comes up? So, 50:50 partnership, no deciding vote and the other partner, I'm sure they were talking the same language at the start about what they both wanted, but the reality was the other partner valued, building an organisation they wanted with as low cost individuals as they could. Because they didn't mind managing people, they were quite happy to, they wanted to keep the profits in the business. They wanted to keep cash in the business, they wanted to have a big army of lower skilled people and to take on different kinds of jobs. So unsurprisingly, this business fell apart, having been successful for a very long time and both Founders were incredibly unhappy with that outcome at the end. And neither of them got what they wanted. But I think to your point. Having that conversation with yourself about what's actually truly important here if I separate ego and I think about even my family or loved ones context, you know, like, I might think I want this, but what does that mean for the family, is that what they want? Like, what's the implication of me wanting that on, what it requires of me and how's that going to turn up in my family life? Because there's potential misalignment on that side. That's really interesting. So, okay. What else, when you think about, and I love the fact that you've got these archetypes for these Founders, and maybe that's a nice segue into your next story. And maybe there's an another story in there about some of the other archetypes that you've been thinking about, the sort of style of Founders, where would you take us next?

Stipe: [00:22:28] We'll look, I guess you probably raised it in your story as well, which is capital and obviously, you know a subsidiary of that is cash flow, but really views towards capital, and one of the challenges that I've seen with a lot of startups, and I'm sure you've discussed it already on the show Sean, is initially what someone values the kernel of their ideas, round one or stage one funding is the most emotionally fraught process. And we see it a lot as lawyers when you're discussing it with individuals about their original shareholders agreement, their original cap chart, and their original plans for what they want to do in year one or year two. A lot of people are very good at imagining where they might be at this stage, but not very good at being honest with themselves about where they are right now, and what they need to do to achieve that. So, I guess looking at stories of individuals and you've raised it, you've got the empire builder, and then you've got the farmer. And so the empire builder at the early stages is the type of Founder in my view, that is comfortable not taking money out of the business, reinvesting money in the business. You normally see them, you know, the stereotypical Steve Jobs, or even Steve Wozniak type person they drive, you know, not a flashy car. They dress like your average guy at the pub and they just love their business. And those people so often are not good at communicating what they want to necessarily the other type of Founder, which commonly arises at this stage of a startup, which is, you know, the charismatic, creative sales person that you need to help create relationships and help deepen investment in the business. And those individuals often have a very different view on, what they want in the short term, out of their capital and they can have long-term ramifications for the individuals as things continue.

Sean: [00:24:50] What do they usually want? The sort of sales lead creative one? What are they usually thinking about from a capital perspective?

Stipe: [00:24:58] well, they're normally thinking about an exit, they're normally thinking about a grandiose exit. They’re normally thinking, at least in my experience when there's a failure, they normally have very, very high expectations about what the value of their contribution is at an early stage. And it's funny because it's usually that salesperson who ends up creating a problem before the sort of technical driven Founder. But as you know, and there's a lot of listeners will know. It's quite often that, if those two individuals can not align within five years of startup, neither of them may have a job in their own business because it's only through both of them coming together and growing that they often can develop the right skills to continue to be effective leaders in mid-size organisations.

Sean: [00:25:58] Wow. That is very true. I can imagine there's been some, I mean, when you see this, let's say that you're seeing this happen, at an early stage, capital rising round or something, they haven't come to you and said, can you please analyse our personalities and tell us what's wrong with us?

Because obviously that's not what they're there for. They're like, hey, help us raise money. We're going to put this thing together. How do you respond to that? Do you feel compelled to go.. “I know you're not asking me for this advice, but just let's just bring something to the surface.” Like how, how do you respond to that when it's in front of you?

Stipe: [00:26:33] You know, that's a really good point. And I guess I'll answer it by way of an example. It often comes out once you start talking to people about intellectual property because intellectual property as a lot of the listeners may know is not just your trademarks, not just your branding, it's not just your patents or any innovative ideas that you have or some unique design. A lot of it, particularly for services and technology businesses, is going to be the inherent knowledge of the Founders. So their copyright, their natural rights to ideas when they go from, you know just two or three or four individuals just working informally together on a project, to then starting to create business structures or separate legal entities or companies, etc. And so very early on, you start having this conversation with individuals and you say, okay well, we're going to start talking about your capital structure and we're going to start talking about your contributions and before we even talk about value, I want to know what you did. So Sean, you know, I'll say, I know normally you play the role of the professional CEO and Advisor, but in this case, I'll say, well you're the tech guy. So, Sean, tell me about everything you've been doing for the last 20 years that's taken you

to the point where you've made this contribution to this business, explain it to me. And they say, okay… and then I go to the next person around the table and I say, explain what you've done and what you're bringing to the table. And then I get their capture and their general ideas. And I say, well, I'm going to need you all, I'm going to recommend you sign, deeds of assignment for all of your natural rights and all of your intellectual property. And I want to actually quantify that. I want to make sure your capital structure from day one reflects an appropriate level of goodwill and intangible property. It's something that's going to help investors understand where you're coming from. It's going to help your financial advisors in the future. It's going to help you overcome maybe some bias that you've got about your own personal worth. And the second you ask that, the answers to those questions very quickly start to give you an opportunity to say, hey, maybe you're getting ahead of yourself? Maybe your contribution in bringing everyone together is not worth a billion dollars. Maybe this business will never be worth anything, but right now, what do you value it as? So, I think the opportunity does come up. You just have to be brave enough to let people know your opinion.

Sean: [00:29:20] To tackle it. Wow. I can imagine that would be, for many, a soul crushing conversation and, but on the flip side if you think about the conversations that have, you know, probably really changed you in your time are the ones that people required a bit of courage to have with you and, you know, we're willing to go, I can see something here. I'm just going to raise it to the surface because actually probably no one's telling you this, or no one's really asking you to reflect in this way, but just separate yourself from the emotion and let's just talk fact.  That's a such a beautiful, factual way of getting to actually, what is the contribution to these parties and how do we encapsulate that in an appropriate way. So, people are being fairly remunerated for what it is they're bringing, that's a great model. So, when you think about the practical things, if I'm again, a sub 10 million Founder, you know what are the practical things that I can do off the back of the lessons from those experience?

Stipe: [00:30:21] Well, that is, I guess it depends on the sector, but if we're going to talk generally, as a Founder, I would be willing to share my contribution openly and to take feedback on it. I think that it's only through the reflection of our actions, that we truly appreciate the impact. And so, as a Founder, you're going to have people that come into an organisation, either as managers or the c-suite or advisors, both internal and external, who are going to start building on some of the things that you've brought to the business. And in my view, you need to be prepared to acknowledge and celebrate that and ultimately not being too selfish about the value of your own contribution, because people respond to sincerity, I think in any negotiation.

Sean: [00:31:26] Yeah.

Stipe: [00:31:27] People just genuinely know when you're trying to take someone for a ride and you don't have to backstab everyone in your business to end up with a great majority control and to put yourself in a position to be a very wealthy person, you can be honest with people.

Sean: [00:31:46] And as I'm always saying to my children, teenage boys, you have to be willing to go first. Because if you're waiting around for the other person to go first, you're going to be waiting an incredibly long time. Like you always have to be willing if you're hoping to get something back, you have to be the first one to offer it up. Like, that's the way the world works. So don't, don't die wondering. So, I know we've only got a certain amount of time. Are there any other stories that you'd really like to share? Beause I would like to chat to you also, about the lessons that you've been getting from scaling Chamberlain's. But are there any other kind of key stories that you think are really have lessons in them that are instructive for Founders in this stage?

Stipe: [00:32:29] Yeah, look, I guess probably extending on the idea of cashflow and I’ll use a bit of a sexy story around cashflow. So, I'm not going to talk about all the finance driven, ratios and liquidity problems. We talk about these a lot on insolvency discussions, but I will talk about just contingent liabilities and risks.

A lot of businesses you know, we talk about this.

Sean: [00:32:58] And sorry, Stipe, can you just make sure that you explain what does a contingent liability mean for those who haven't come across it?

Stipe: [00:33:03] Yes, Sorry. So, I guess a big thing that happens with businesses, they enter into an arrangement at an early stage or at a particular stage in the course of its life. And that may not, that arrangement may not necessarily come with any immediate downside risk or potential liability, but then what ends up happening is certain circumstances arise where you've got this effectively, a looming threat of a liability, maybe a legal claim that is about to be advanced against you, or maybe a risk, which has for example, a there's been an accident in a site. And you know, that you're liable, but you don't know for how much maybe you've picked up this really, really big contract, but you didn't have the right skills to do it, you didn't get legal advice on the engagement for the contract and, you know you've made an error up and you're waiting to be sued by your client, or there's a lot of these sort of contingent risks, which can come up and they actually come up in the first few years of a business more often than later, because as your skills and your infrastructure and your organisational capabilities develop around risk management and due diligence and procurement processes and implementation and quality control starts to develop then you start defining your exposure to these risks and they happen less and less, even though you're a lot bigger. And so, what can end up happening is people get very excited. They say hey, you know, I've started on my exponential curve of growth, not fully appreciating that, if you zoom into that curve, there's actually a lot of bumps, you know, spikes and falls there and sometimes I guess those falls can be really big. So I'm recently working with a client who, is outside of Australia has access to the backing of a really large organisation, but in Australia they're effectively a startup and they're there in the defense infrastructure space and they started with a very small operation and then they've acquired another business. And in acquiring that business, which was also effectively our startup phase, they've also acquired all the problems of that business. And unfortunately they didn't provide accommodation and risk mitigation buffers for potentially some of the things that could happen in that business, that they've acquired.

That could really smash their growth potential. And unfortunately, there was a major incident in the business that they've acquired shortly after acquisition, which is going to cost them millions of dollars. And so there's probably no way for them to get out of paying it. Their insurance is not going to respond. And so that makes me think about cash flow and risk mitigation because I say should actually be if your genuine goal is scaling and this is from a how to avoid failure perspective then you need to be building that capital. You need to be managing your cashflow to deal with the peaks and troughs, because it's not true that exponential growth is this smooth curve. It's actually a jagged line and sometimes the falls are bigger than everything you’ve earned from day one and you don't want to lose the business just because you can't handle a short-term cashflow issue, even if it's major.

Sean: [00:36:48] Wow. That's such a true, and I recently interviewed, a guest Kelly from Cleanworks, who was having a conversation about this. Every time they were thinking about making a major decision any kind of investment of any, like a new role, a new bit of equipment, whatever they didn't just sort of look at the P&L, pontificate and go, yep, we can afford it. They went straight to the cashflow forecast for the next 12 months and they plugged that decision in. And they said, assuming there's no further growth, like we've got the revenue we've got coming today and we're increasing these costs and let's just say we lose 10% of our revenue, can we still afford to make that investment? So that we're constantly checking that without optimistically going oh, but we're going to take on a sales person and they're going to add 3 million of extra sales. Let's just take on five salespeople because they're going to give us 15 million in sales, you know? I think that understanding of your working capital, but also being able to scenario plan for some level of risk is key. I guess you can't plan for all levels of risk, but in the absence of doing any of it, it creates a significant amount of exposure, doesn't it? And, do you think is there a certain stage of business where actually you think it's more important than others or, you know, businesses in certain sectors or businesses that are growing at a certain speed? Like where is it more important than others to make sure that that level of planning’s taking place?

Stipe: [00:38:16] Well, I guess you could have from two different perspectives from the purely financial perspective, I would say it's most important for businesses that are pre-maturity phase because they have less retained earnings. They also have more stakeholders to engage in when raising further capital, they may have less established capital structures, so they can't always go to the market or existing networks to say, hey, we need more cash, we've had a problem. So, I guess start up phase but then from the other hand, you might a look at it from sector to sector. So, if we look back at the last 20 years of business failure if you're in construction, if you're in tier two education, if you're in retail, if you're in hospitality, you're in a high risk sector. So if you're in any of those sectors, then you need to be hyper-conservative with your risk hyper- conservative with your cash flow. So, I guess probably balancing an environmental analysis versus I guess a purely financial analysis when making that call.

Sean: [00:39:19] We’re actually seeing that right now, because I do a fair bit in the education space around M&A and I'm seeing right now, with international providers that have been very successful in the past year, fundamentally overexposed to a single customer type. And, no one's usually thinking, well, we're going to have a pandemic and the borders are going to get closed in that way. International students who've been around a long time, but literally, you know, taps being turned off and some who had, who were just uncomfortable with that level of concentration of anything in their businesses, were building, domestic student revenues, different kinds of maybe some government funding elements, maybe some online courses, not just, you know, international student flows and those who protected that cash, saying you know what, there's some good times here so maybe we should just be protecting in case anything does happen. Those ones actually 12 months after being able to enrol no students, they're fine. They've been working on pivots of their business. They've had capital to get them through. They've been able to downsize and had to keep their students in play and they are going to come out when the borders open back up and the international students, throw themselves back into Australia, given it's still such an incredible country compared to many areas of the world in terms of their perceived level of risk and ultimate lifestyle, they are going to be okay, because they are able to get through this period.  But many of them who were overexposed and had not been preserving, they're already gone and we're not hearing about them but they're just slowly exiting the sector and leaving the market opportunity for others. So, it's a very challenging but important part of growing a business right.

Stipe: [00:40:54] Absolutely.

Sean: [00:40:55] I would love to hear a bit about, Chamberlains. Maybe you could just give, I'm not sure what the best metrics are, the metrics that you would generally use when you think about, Chamberlains. But Chamberlains, had some pretty impressive growth over the last three to five years. Could you give people just a sense of the, how this business is growing and then I'd love to know what you would consider a couple of the keys that have changed the nature and the sort of trajectory on your growth whether that's decisions that you've made, strategies you've put in place or key moments.

Stipe: [00:41:25] Yeah, sweet.Thanks, Sean. Well, I guess probably the most traditional metric for a law firm is head count because it is a services business. So without the people there to provide the services you know the revenue doesn't come. So, from that perspective, we've grown 10-to-11-fold in four-and-a-half years. So, we started, 11 people and actually downsized after starting with 11 people. And now we've got anywhere between a 100 and 120 full-time equivalent staff working between our offices. But I guess to round that out, we've always taken a pretty broad view as to what legal services are. So in that time we've also expanded the, scope of legal services that we offer. So, we were traditionally just a specialist property firm. We looked after wealthy private individuals and development companies and government in the property sector. Whereas, now we've got 13 divisions, which look after the entire life cycle of a wealthy, private individual, a business or a government entity.

And that's from effectively inception to death to rebirth. And so, you know, for an individual that's going to be, all their legal needs from once they start engaging with the business world till their estate planning their death, the renewal of their estate through succession planning, all the way to the administration of failed government entities and the shutting down of indigenous corporations out in the bush and the shutting down of museums and the re-vesting of their assets to new operating entities. So, I guess we've gone from doing a very small sliver of work to doing almost everything. And so, I think from a capability perspective, that's probably been the best measure about growth because ultimately, dollars and people are a little bit egotistical. We're here to help as many clients as we can, and so we're able to help a lot more clients today, not just in number, but in variety and diversity than we could four to five years ago.

Sean: [00:43:46] Well, but also the same clients.  The thing that I love about that and that journey is it's shifting a business from fundamentally transactional to relational, which I think is such a missed opportunity in so many businesses that I see, and that I come across where they've spent the money acquiring a customer. They're probably doing an amazing job in servicing that customer. And maybe the end game is, hopefully that customer will tell some other customers and that will reduce that cost of acquisition. But in the absence of that let's just keep finding more customers who can buy this as opposed to you going, who is the real customer, what problems are happening before they get here? What other things are going on in their life or their business at the same time as them being here? What happens when they leave here? And what are they trying to achieve? And what problems occur then, and thinking about the relationship of the customer as a sort of a lifetime partner, how do you become a partner of the customer and solve other problems? Because if they already trust you to solve one well you're not having to go out and find new customers. So, you've just got a greater opportunity to provide service and value for the same customer. I really love the way that you thought about that transition, and so what do you think has been one or two of the things… I mean, I'm sure there's many, but one or two things that you think have been the most impactful on the ability to sort of change the dial on the growth of the organisation to provide that service to your customers?

Stipe: [00:45:12] Sean, I think one of the things that has been instructive and probably pivotal in being able to do that successfully with our customers has been to work, to diminish the individual influence of individual senior people within the organisation, and to really focus on developing, a brand and an experience and a values message and a culture for the firm. And so, if you even look at our name and our motto, it's Chamberlain's Law Firm and it's “we’re with you”. And that sounds cheesy. But if you look at what a lot of law firms call themselves, they actually call themselves blah, blah, blah lawyers. And in their own name, they're almost acknowledging that they're just a collection of lawyers.

They're not one entity that's working together. And then that flows through the way the individual owners and the partners of those businesses interact with their clients. They try to take individually ownership of those clients rather than working together to create genuine goodwill in an organisation that’s there, to support their clients together. So for me, I don't have personal clients. I just have a job in an organisation to do the thing that I'm best at which outside of my opportunity to lead the firm is restructuring. And so our systems are built around, you know, this is not Sean's client, this is not Stipe’s client. And a lot of people outside of the services sector may not realise how much of a pox, that mentality can be to growth. And so, I think that idea has probably been the most pivotal for us in developing genuine client relationships and value.

Sean: [00:47:10] And it changes, I think it changes everybody's perception of their contribution and their ability to contribute to the success of the customer does not because you think about, you know, that big shift, that massive disruption that Cirque du Soleil like I'm in a pretty different segment, right?

Everyone had traditional circuses, which were full of, you know, there was always a couple of names, have to have a few draw cards and they always had animals. They always had a few stars and they always had high risk and always had fun. And then, Cirque du Soleil.. zero stars. There is this brand of Cirque du Soleil. This is an experience we are here for you to perform as a team, no one is better or worse than anybody else. We all just have different jobs as part of creating this experience for you. I really, I love that, that you've tackled that. Anything else that you would like to share, in relation to the Chamberlain’s story?

Stipe: [00:48:06] I guess probably the only other thing I'd like to share note in time constraints. I think for all Founders, you need to be brave in tackling the cultural challenge and you need to be prepared to make difficult decisions. You need to be prepared to make financially costly decisions to preserve your culture.

And so if you look at even that in the context of, Uber, for example, and the cultural issues that they've been harassed about, and rightfully so, by the media and industry over the last few years you need to avoid that at all costs. And so, we've like any startup or growing business have had those opportunities but I can say that, we took those opportunities and they are expensive and that was stressful. But now we have such a better business and such a better culture for making those decisions and, and ultimately the ASIC forms when you go into liquidation, give you options about why your business failed. And, the conduct of the Directors and the owners is one of those options. And so getting your culture right at the beginning is such an easy way to avoid it, regular pitfall of business failure.

Sean: [00:49:26] Is culture, one of the options on the form?

Stipe: [00:49:29] If only!

Sean: [00:49:31] That'd be an interesting data point, right? It'd have to be assessed by somebody else. Well, I would just love to talk to you all day. You got such a fascinating story, such incredible insight with such a different perspective in the businesses and we just rarely get to hear these kinds of stories. So, I'm incredibly honored and grateful that you've shared that with us today. I'd really like to acknowledge you, I mean, I can't believe that you're not a 70 year old man. I mean, the amount of life I've experienced that seems to have been jammed inside this young go-getters head is just really inspiring.The way that you are taking a very human-centered, very values driven approach to an industry that's not always known for that, and that's really, clearly creating positive waves, positive experiences for clients and I'm hoping and setting sort of new standard for others. So, thank you so much for sharing some of your journey with us today and for the sharing, some of the instructive lessons for our sort of first time Founders, how do people get in touch with you or follow what you're doing or follow the work of Chamberlain's?

Stipe: [00:50:41] Well firstly, thanks a lot, Sean. And, right back at you, it's been illuminating chatting. But if people want to reach out, they can find us at www.Chamberlains.com.au or they can just Google me online. I'm on Tiktok, LinkedIn, I'm on Instagram. They can reach out whatever way is convenient.

Sean: [00:50:59] Love it. Well, folks, I hope you've enjoyed the show today. Huge, Thanks, to Stipe and a couple of things before you go, if you got value from today the greatest thing you can do, to tell us about that is actually to leave a review on Apple Podcasts and the reason for that is we read every one of them the whole team gets a huge kick out of your feedback. And it helps, of course the algorithms find it's way to get the podcast into the hands of other people so we can share these lessons with others. If you'd like to know when new episodes are about to drop or you'd like to be notified when free tools, or resources are available, just jump onto the website, pop your email there, or if like Stipe, you're a social animal you can just pick your favorite platform actually, other than Twitter. But you can find us on Facebook and Twitter and LinkedIn, and YouTube and Instagram and all over the place, the handle is @ScaleUpsPodcast. But remember, that the actual the only thing that can guarantee that you won't scale, is giving up. So, you have to stay unshakeable 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 Sean Steele and I look forward to speaking with you again next week.

Thanks, very much.

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