00:28:02 · Chris Rolls, Mikk
How can you help businesses collect their invoices faster, pay their invoices later, reduce their inventory, make sure it turns more effectively. Not that many of our businesses have a lot of inventory because they're typically capital light. But even just helping them with their working capital. There's often hundreds of thousands of dollars in businesses by just getting better terms with suppliers, paying them a little bit later, and collecting money from your customers a little bit earlier. You might buy a $5,000,000 business and immediately, over the first twelve months, pull out $400,000 of working capital that the business never needed. So there's lots of examples, but it is very, you know, on a case by case basis. [00:28:52] S0: Let's cover the third one as well. Simply selling more products and services. What's...
00:28:57 · Chris Rolls
[00:28:57] S1: So that's the hardest one. That's the riskiest one. So a lot of people kind of... I I I think most small business owners, particularly people that have spent a lot of time sort of in the startup world, in the entrepreneurial world, their their thoughts about how to grow a business is all about top line revenue. When in fact, the only thing that matters is the bottom line. And even then, not the bottom line, it's the cash that comes as a result of the bottom line. Ultimately, what counts is cash. But most entrepreneurial and entrepreneurial sort of courses and people talk about how to grow grow grow grow grow and they're almost always talking about revenue. And revenue is a terrible measure of growth because it doesn't necessarily correlate to profit. And so it's the hardest it's the hardest one of all. So when we look at a business, we make the assumption that we aren't going to significantly improve sales because that requires an investment which means... Which makes the business more capital intensive. That investment may or may not pay off. Sales in a business are often very heavily dependent on finding the right salesperson and salespeople are traditionally the hardest to employ because they're salespeople, they interview well. So we don't we don't go into a business on the assumption that we can increase sales all the time because that's a risky assumption to make. You can make much more accurate assumptions on things like putting prices up and pulling costs out. That said, we have plenty of businesses that grow but we take a fairly conservative approach. It's a rare scenario where we will go into a business and, you know, invest an extra million dollars or $2,000,000 on growing the sales team or spend on marketing or or that sort of thing. Usually what we're doing is having a look at at how have they grown historically and are there some easy levers to pull in that space. And sometimes there are very easy ones. We're looking at a business at the moment that generates referrals from an organization who sends them work in order for paying them a a a fee on that work. You know, you ask the question of, well, any reason why you don't pay them more and get more referrals? And I said, well, we just like to grow at a certain sort of speed.
00:31:12 · Chris Rolls, Mikk
And if you look at that particular scenario and you talk to that referrer of the work, they're open to sending more referrals. It's just never something that never happens. So once you know your acquisition cost, if it's less than the profit that you generate and most importantly the cash you generate, well you can spend more on generating referrals in that case from that particular source. That's probably an unusual one but it does happen. But if you look at the prices up, cost down, sell more stuff to more people, the prices up and the cost down are the easier of those two levers to pull. [00:31:47] S0: That's interesting way of putting it. Because when it comes to salespeople, you can have them like for a low fixed income and then heavily like, result based, like commissions. So that doesn't really affect the business that much as I've seen the ones I've I've built. So it's interesting approach. You you mentioned this.
00:31:47 · Mikk, Chris Rolls
[00:31:47] S0: That's interesting way of putting it. Because when it comes to salespeople, you can have them like for a low fixed income and then heavily like, result based, like commissions. So that doesn't really affect the business that much as I've seen the ones I've I've built. So it's interesting approach. You you mentioned this. [00:32:08] S1: Yeah. It is. I think, though, that you're right, you can have people on lower fixed basis but the reality is that good sales people know their worth. Sure, certainly some of their remuneration can be commission based but you've still got that risk, you're carrying the risk. And depending on the sales cycle, you look at some industries where it might take six or twelve months to close a sale. And now in those scenarios, you put a new salesperson on and they start to build a pipeline, you won't get any sales for six or twelve months. So you're carrying that base cost for six or twelve months. And of course, the problem with people is they can up and leave whenever whenever they like. So, you know, I'm not saying it's not a a good strategy, but it is a more risky strategy than than some other strategies to to improve profits and and cash.
00:32:08 · Chris Rolls, Mikk
[00:32:08] S1: Yeah. It is. I think, though, that you're right, you can have people on lower fixed basis but the reality is that good sales people know their worth. Sure, certainly some of their remuneration can be commission based but you've still got that risk, you're carrying the risk. And depending on the sales cycle, you look at some industries where it might take six or twelve months to close a sale. And now in those scenarios, you put a new salesperson on and they start to build a pipeline, you won't get any sales for six or twelve months. So you're carrying that base cost for six or twelve months. And of course, the problem with people is they can up and leave whenever whenever they like. So, you know, I'm not saying it's not a a good strategy, but it is a more risky strategy than than some other strategies to to improve profits and and cash. [00:32:59] S0: Coming back to this role, which Shelley has head of innovation. What's Shelley's background, and when did you decided to hire her? Because I think every holdco should have a person like this because we dis... Discuss AI all the time, and it's impossible that... It's not impossible, but I've seen the top top people, and they've been doing this for some people since 2018, 2000 and even '17. They're very, very good at it. So if you start learning this today, Chris, it will take a lot of time. So it's sometimes better to just hire this person. So what's the story behind the hiring Shelley?
00:33:37 · Chris Rolls
[00:33:37] S1: It's an interesting one. Shelley was actually internally within PieLAB in our business development team. And her role was to get in touch with businesses, start the conversation around are they interested in... You know, have they sorted out succession? What are they thinking of? Are they gonna hand the business down their children? Are they gonna sell it? So that it increases our dual flow pipeline. And in Australia, unlike a lot of countries, we don't have much publicly available data. So you look at, you know, some of the Nordic regions in in Europe where irrespective of the size of the business, they have to lodge their accounts and and those accounts are publicly available. That doesn't happen here in Australia. A business has to be a very big business in order to be required to lodge their accounts with the government. So... And and on top of that, we don't have... We have, you know, pretty strict privacy rules. So it's actually really hard when you see it... Have a business name. You might have ABC Proprietary Limited Business or abc.com.au. You know, you're trying to work out, well, who owns that business and how big is that business and does it make any profit and how long have they been around. All of those questions are very hard to find out in Australia. And what Shelley, did over the last couple of years is she really went deep on AI. Now she doesn't have a computer science background or a data engine... A data science background or anything like that. She was just inquisitive, which by the way is one of our values. We are... We have four values and one of them is around being inquisitive. And she was exactly that. And she spent her own time outside of work really researching, understanding how you could use various AI tools. She taught herself to code in Python. She basically eliminated hundreds and hundreds of hours on data research to find out who businesses were. She created a suite of tools that we're able to take a spreadsheet of say 500 business names and URLs, put it into the tools that she's created and come out with perfectly cleansed data. Even down to the level of detail of, you know, when was company founded, who are the directors, where do they live, how many employees do they have. And she did all of that with AI. And then we noticed that, well, actually that information can be very useful.