00:24:20 · Brett Kelly, Mikk
[00:24:20] S1: Oh, I just ask you, Mikk. I'd say, Mikk, do you have a great accountant? And most people would say, what's a great accountant? I don't think my guy's great. I go, what's his name? And they'd say, John. I'm like, okay. Well, you know, what a great accountant would do would be they'd give forward looking advice that was systemised at a fixed fee that'd be available to you twenty four hours a day six days a week and they'll change your life. Is that something that would be interesting to you? To which people would say yeah absolutely and then I would show them I'll show you here we have a system I'll just move my screen just there where we address in the people's personal business, wealth and estate. They get born, they go to business, they build wealth and they die. And then I've got a whole system which I will show you because it's secret that we roll out to the client. But I had thought about a system for the client that we give that to the client, sits in their study at home or in their office and it is cradle to grave and multi generational. I've never put even that on camera before. We have tons and tons of trade secrets that we don't share. Now we've digitized all that that's why I'm happy to show you. [00:25:42] S0: This is remarkable. I've never seen a person so systematic man, honestly.
00:25:46 · Brett Kelly
[00:25:46] S1: Well, a number of our investors have come here. I'm here in Malibu, California, and they've sat at my desk and they've said, how do you do this? I opened a spreadsheet where I have, you know, one of my business heroes is Michael Hill. He built Michael Hill jewelers in, in Australia. Remarkable man. He collected Stradivarius guitar violins he was a violinist that would have liked to be a virtuoso that wasn't so he started an international violin contest he built a super yacht called VVS one which is the best super yacht in the world at the time it was built. Built a golf course where the New Zealand open was and he was noted by the Queen. Incredible guy. But he wrote a book called Tough Enough and he he talked about having a thirty year plan. He told me that more than twenty years ago I read that. And so I have had it similar since I did my book, twenty five year plans. And since I opened a spreadsheet, I showed people the twenty five year plan for Kelly Partners, I show them my own twenty five year plan and how it's aligned in a spreadsheet and how that all moves together. And a number of my investors have seen that and have been like, right, okay, this guy's got a plan. You know, most people, as Jim Rohn would say, the great American speaker, know, he said be a meaningful specific, not a wandering generality. Most people don't have a clear plan for what they're trying to do and so they achieve exactly what they planned which is not much. So we took all of that learning and just pushed it into the business. We need clear business plans. We need ten year plans. We need partners with ten year commitments. We have to have a long term view. We need a deep system on the people side or the client office side and on the ops side. So it's really how do you do Walmart in the back, right? Walmart McDonald's. So my headspace was we would be Walmart in the back of the business and McDonald's in the front of the business, right? In terms of clear offer, Big Mac, Cheeseburger, etcetera. We would be Disney where people love to go and work at Disney because it's the happiest place on earth. We'd be Ritz Carlton seven you know the the seven star servers offensively in Berkshire and then we just took those ideas and applied them to our own business.
00:28:05 · Mikk, Brett Kelly
[00:28:05] S0: Okay, there is this plan, there is this system. What if things are not going as planned? [00:28:10] S1: Yeah, so the good news is things tend to go more to plan when you have a plan and then if they are not going to plan you just have to reconfigure your plan. And now everything that is the best about our system today, we've learned from plans that didn't work out. So every time we had a problem, we had to work out the problem and then we put that into our system. Now if you think that we bought into, we bought all or part of 95 firms. And so those firms have hundreds of years of cumulative experience. And so we've been able to learn from every one of those transactions, but also from their history. What happened that was good? What happened that was bad? How did you deal with that? How did you fix that? And we've built that into our collective wisdom of our organization. [00:29:06] S0: You have this 50 oneforty 9% partner owner driver model. You are reading a lot of books. There is this eightytwenty rule. Have you ever considered any models? Eightytwenty, seventythirty, why 50 oneforty nine?
00:29:06 · Mikk, Brett Kelly
[00:29:06] S0: You have this 50 oneforty 9% partner owner driver model. You are reading a lot of books. There is this eightytwenty rule. Have you ever considered any models? Eightytwenty, seventythirty, why 50 oneforty nine? [00:29:22] S1: So the reason 50 oneforty nine works is that the average EBITDA self reported in accounting firms in Australia, The US and The UK is 18%. I think it's actually about 15%. And so we knew that if buy half but we double their EBITDA, then the firm, the partners are making as much or more money than they were making before we got involved. And so that's a key part of what we do and why it creates great alignment. And I know that alignment's critical, so deep alignment. So, Mikk, if I come to you and say, Look, last year you made $100,000 Let me buy half your business, and next year you'll make at least $100,000 You get capital to go and diversify your universe off to a powerful house or put your kids through college or clean up your retirement planning. But you haven't lost your earning power and it's a partnership. It's not a top down model. It's a bottom up model. So you're like, Okay, this is good. Now I have a whole team to help me because I have all these things I want to do but I don't have a team to help me [00:30:32] S0: What was the reason behind going public?
00:30:32 · Mikk, Brett Kelly
[00:30:32] S0: What was the reason behind going public? [00:30:34] S1: Right so in 2020 again so Mikk I'm a big student of differentiation it's hard to be different if you're the same as everyone else. And there were no listed accounting firms in Australia, The US or The UK at that time other than CBIZ. And it was really not seen as doing what we did, which is partnering with accounting firms, was considered not the right thing to do. But I believed, with Charlie Munger actually, that public companies are the best form of a company to run if you run them well. I believe that it would attract talent, that would attract firms, that it would legitimise what we were doing. I wanted to prove in public our business model. Whenever you're a private company, everyone says, Oh yeah, that works in private, but it wouldn't work as a public company. I like the challenge. I really like the challenge of building the company in public to prove that we have what I think is the best model for professional services firms anywhere in the world. And I believe that that would help us build a global organisation. And our reputation is important. [00:31:39] S0: You're acquiring companies with 2 to 10,000,000 in revenue, right? Have you ever tried to acquire a larger one or would it still fit into the system?
00:31:39 · Mikk, Brett Kelly
[00:31:39] S0: You're acquiring companies with 2 to 10,000,000 in revenue, right? Have you ever tried to acquire a larger one or would it still fit into the system? [00:31:49] S1: Yeah, the largest is probably 15,000,000 Australian. It really the size doesn't really matter in that below a certain size of private equity groups don't want to buy them. And they also don't really larger firms often want to join larger firms. So we want to buy firms from founders that have had blood, sweat and tears poured into them and they really want to partner with a founder. That's a key insight from Warren Buffett. I wanted to position as the Warren Buffett of accounting, meaning that if somebody really valued their firm, they would want to join Kelly Partners because they would know that I'm an accountant and we would look after them. And that's really what Warren Buffett's offered. He's offered a high integrity environment where he will look after your business after you've got to a point where you can't keep doing it yourself. And so as a public company with permanent capital, I believe that that is a position that we can win and own and we can win and own that position on a global basis. And then that will give us real opportunities to partner with some of the best firms in the world.