00:37:11 · Chris Rolls
[00:37:11] S1: No, they're not. Although, if you've got the right CEOs, then they should be reasonably entrepreneurial and be looking for ways of of doing things better. You know, when it comes to implementing things in our portfolio companies for clarity, our business is run-in in a decentralized manner. So ultimately, the CEO is responsible for what they do. They call the shots. Their job is to generate profits and send us the cash. And so, you know, we largely leave them to do that, but we provide them with the opportunity to get help if they want it from people like Shelley. And so some of them run these programs internally, some of them don't. Some of our businesses are in the technology space. So, you know, those those businesses are often more advanced, you know, when it comes to take up of new technology than some of our others. But it really sort of it it it really depends like the use cases of a a very, you know, wide and and varied. I talked about the the invoicing one that we did in our exercise physiology business. You know, I'll tell you what we have done, which is just... It sounds so basic, but, you know, a deep deep dive courses around how to use AI. And that might sound simple for a lot of people who are, I guess, you know, open to the use of new technology. But if you think about some of these businesses, you might take a business like, say, our strata management business that has 50 or 60 people in it. They've been in the strata management industry most of their lives. It's not an industry that embraces technology. Just showing them how they can, you know, use, for example, artificial intelligence to decode strata management laws. So there's an entire, you know, government act around all of the laws that they have to abide by. It's hundreds of pages long, and it's not always clear how they should act in certain circumstances. And what they used to be doing was getting the act out and scrolling through pages and pages of PDFs trying to find certain sections that says, okay, in this case, here's what you need to do with the act. Now, of course, with AI, you can do that in a fraction of a second if they were using it. But if they're not using it, of course, they don't get the benefit. And so sometimes it's just running them through, did you know about tools like Notebook LM?
00:39:36 · Chris Rolls
Did you know that you can connect folders, you know, on your drive into co work and have, you know, Claude, you know, go through folders and and pull out certain contracts or certain information within contracts. All of those really basic use cases can save a lot of time and money in a small business. I mean, is, you know, every small business that exists, well, certainly in Australia have employment agreements in in place. And periodically, people would need to do things like, gee, I know one of my employees is thinking of leaving, how much notice they have to give me? And what historically they would do and everyone would do is they would find the employment contract and maybe it's a five page employment contract and go through the five pages and work out what the notice period is. Now if you've got all those employment and contracts in a folder and you just point an artificial intelligence tool at it, well, you can find that information in a second. So it might only save ten minutes each time you do it, but multiply it across hundreds of people across all of our portfolio companies and these sorts of incidents happening hundreds of times a week. It's it's many, many, many hours that you can eliminate.
00:40:52 · Mikk
[00:40:52] S0: Chris, when it comes to creating value, we cover three things. Increasing the prices, trying to reduce the cost, and number three was just simply selling more products and services. But there is one more. There is those add on bolt on acquisitions. How big of a fan of this are you and how many of those have you you done when it comes to portfolio companies and and growing them?
00:41:16 · Chris Rolls
[00:41:16] S1: Yeah. We haven't done many. It's not... I mean, when you think about it as as an investor, as a capital allocator, there's a handful of things that you can you can do when you have excess capital. I mean, you can return it to shareholders as a dividend. You can turn it to shareholders as a share buyback. You can make an acquisition or you can so make a fresh acquisition. So for us, a whole new portfolio company. You can buy a bolt on or you can invest in the growth of your of your portfolio companies, maybe putting more sales people on them. And they're really give or take a bit. They're your five options. And of course, you know, what you wanna do is focus on the one that gets you that the highest return on capital. So on the assumption that we can get a higher return on capital than our shareholders can, then we don't pay it out as a dividend and we don't. You know, so what is the best return on capital? Usually for us, usually, it's buying a whole fresh new portfolio company. And so that is generally our preference. But every now and then, the opportunity comes for a bolt ons, bolt something into an existing business and we've done that once again and we've we've used the strata management industry as an example. We've made two bolt on acquisitions in that space. And that's because the small businesses go for very low multiples. So you're buying those at a very low multiple which means your return on capital is high. And the reason they're low is because a very small strata management business doesn't make any profit. But if you effectively buy that business and what you're buying is the contracts to manage a strata management business and you put it into a business that is already operating, you can very often eliminate a lot of the cost of that and the revenue, a high proportion of revenue goes straight to the bottom line. So they're very value accretive acquisitions. But they're not without risk. And one of the things that is always, in my view under underestimated is the is the... You you assume that you're gonna make these... Have these synergies and what is underestimated is the risk. And in particular, cultural risk. Are the people in the business that you're buying gonna fit in with the people in the business that you're you're merging into? And if the answer is no, it can be a very expensive exercise.
00:43:25 · Chris Rolls, Mikk
So I look at them and say, a bolt on acquisition can be quite risky because you're faced with that that that the the cultural risk of merging the businesses together. But we've done a few. We've done... We've done three or four of them. [00:43:38] S0: Now when it comes to this building this long term holding company, obviously, lot of risk, lot of grind, lot of hard work. It takes twenty to thirty years. You mentioned maybe in in in the future doing an IPO. Now a bit like a personal question, like, do you sustain this energy and enthusiasm over such a long periods of time?
00:44:04 · Chris Rolls
[00:44:04] S1: Oh, it's a good question. I think think I just like it. It's fun. Now, it's not always fun. But I really enjoy creating something. I really enjoy building something from scratch. It's not... It's it's certainly not just about financial reward. Although, if you do a good job, you can generate financial reward. I also do it because it allows me to invest my own capital in a way that I think is relatively low risk in relation to the return. It's certainly a lot less risky than private equity or venture capital because we're buying businesses at lower prices, we're putting less debt in, they are much safer businesses to invest in. But it's no different to running any business. You have the ups and downs and not everything goes according to plan. But over life as a business owner, you just get used to that. And you always know that nothing is ever as good or as bad as it seems. So when things are not going well, can seem like it's the end of the world, eventually you turn them around. If you just keep going, keep making good decisions, keep trying to improve everything, keep hiring better and better people, keep moving out the people that aren't performing, if you just do that every day, you know, one step at a time, my experience is you almost always generate good results. The issue that most people have is that two things. One, they're not willing to learn from the mistakes they make. And we've made mistakes and we've learned from them. But I think the second one is the persistence. I looked at this and sort of said, Well, we promised our investors this is a ten year time frame. I look at this and go, Well, the point that we create liquidity, that's just the start of the next ten years. So I'll be doing this for a very long time. Well past that ten year liquidity, you know, period.