00:32:58 · Mikk, Brett Kelly
[00:32:58] S0: When it comes to capital allocation, you've raised only 17,000,000 Australian dollars over twenty years to build a business that could produce around 50,000,000 Australian dollars of EBITDA. So how do you think about capital efficiency in a world where we see many roll up strategies require far more external capital? [00:33:21] S1: Yes, I think what we did is we really mastered when you look at the best businesses, they have the best business model because the business model wins over time because it's the model that allows the scaling. And so what we believed was that we could develop a business model that was the most capital efficient of other business models. So while we may not you know, I've got another great book back here. This is for people that like books. This is a hard book to get, which is this book. This is Distant Force on Henry Singleton and he was based here in California which is really cool. Henry Singleton was it's about how far you get with the amount of fuel you use And so capital efficiency, because of my EVA background, valuation background, is just absolutely paramount from day one. Know, Norm, if you want to build wealth for everybody, it needs to be on a per share basis. So most people forget that. We've never forgotten that. So we built a business model in the way we do our acquisitions that is incredibly capital efficient.
00:33:21 · Brett Kelly, Mikk
[00:33:21] S1: Yes, I think what we did is we really mastered when you look at the best businesses, they have the best business model because the business model wins over time because it's the model that allows the scaling. And so what we believed was that we could develop a business model that was the most capital efficient of other business models. So while we may not you know, I've got another great book back here. This is for people that like books. This is a hard book to get, which is this book. This is Distant Force on Henry Singleton and he was based here in California which is really cool. Henry Singleton was it's about how far you get with the amount of fuel you use And so capital efficiency, because of my EVA background, valuation background, is just absolutely paramount from day one. Know, Norm, if you want to build wealth for everybody, it needs to be on a per share basis. So most people forget that. We've never forgotten that. So we built a business model in the way we do our acquisitions that is incredibly capital efficient. [00:34:30] S0: Now there are a lot of acquisition platforms and they talk about synergies. But you said when you buy into a business you can double profits. So what are the biggest levers that drive that improvement so quickly? So you can tell the dose. [00:34:48] S1: So we don't really tell, Mikk, we don't tell people what the biggest levers are, but I get asked every day. Let me just say that the biggest lever, yeah, they all ask, the biggest lever is leadership. [00:35:01] S0: At least I asked. At least I asked.
00:35:01 · Mikk, Brett Kelly
[00:35:01] S0: At least I asked. At least I asked. [00:35:03] S1: Because even if you had a list of things to do, you have to lead that organisation and that change. And so most people are focused on software, we are focused on the people, the leadership in the businesses. [00:35:18] S0: What about AI? A lot of people talking about AI to replace accountants. [00:35:23] S1: Well, let's think about it. Today, people are probably more ignorant and more arrogant, and they have the toxic combination of that than people have ever been because our education system is particularly narrow and particularly shallow. So if there's less intelligence than there used to be, it's not a surprise that there's a great demand for artificial intelligence. But that doesn't mean that that's the solution to all the world's problems. I still believe that you're ultimately going to have to be able to lead people and inspire them to make a difference. There's a great article shared on Twitter by Marc Andreessen yesterday that shows that technology has typically grown economies and that this idea that AI destroys jobs is just not right. So our view is that accountants should be doing about 80 things for a private business owning group. Typically they do about eight. And the reason is that they don't have the team, the system, technology or the money from the clients to actually do everything that the client would want. So there's a lot more to do. A lot more.
00:35:23 · Brett Kelly, Mikk
[00:35:23] S1: Well, let's think about it. Today, people are probably more ignorant and more arrogant, and they have the toxic combination of that than people have ever been because our education system is particularly narrow and particularly shallow. So if there's less intelligence than there used to be, it's not a surprise that there's a great demand for artificial intelligence. But that doesn't mean that that's the solution to all the world's problems. I still believe that you're ultimately going to have to be able to lead people and inspire them to make a difference. There's a great article shared on Twitter by Marc Andreessen yesterday that shows that technology has typically grown economies and that this idea that AI destroys jobs is just not right. So our view is that accountants should be doing about 80 things for a private business owning group. Typically they do about eight. And the reason is that they don't have the team, the system, technology or the money from the clients to actually do everything that the client would want. So there's a lot more to do. A lot more. [00:36:28] S0: I've highlighted on my notes when doing research on you, I'd like to know more on your take on permanent capital versus traditional private equity and the seven to ten year fund mandate. Your thoughts on this.
00:36:28 · Mikk, Brett Kelly
[00:36:28] S0: I've highlighted on my notes when doing research on you, I'd like to know more on your take on permanent capital versus traditional private equity and the seven to ten year fund mandate. Your thoughts on this. [00:36:41] S1: Yeah. So I don't think private equity mandates are seven to ten years. I think that's fake news. I think they're three to five years. And importantly, what's most important about the capital in a business is that the capital will drive the velocity of the business. So if you've got fast money, the business has to move fast. And not all businesses are really designed to move that fast. So when you've got a lot of people like we do in accounting, you can't move faster than those people can change. So I think there's an inherent mismatch between the velocity of private equity money and the velocity of accounting for it. And I think that's... [00:37:20] S0: What are some of the biggest headaches for you at this stage? You have this extremely clear system when someone has a question, you send them a document or a book, they'll get an answer. [00:37:33] S1: Just financing. So now our challenge is to get the financing in a corporate structure that allows us to grow the full potential of the business. So I spend a lot of time on financing trying to work out the best way to finance our growth that is capital efficient and isn't dilutive to share. [00:37:53] S0: And on the HoldCo level, could you describe your hiring process?
00:37:53 · Mikk, Brett Kelly
[00:37:53] S0: And on the HoldCo level, could you describe your hiring process? [00:37:58] S1: Well, we a 17 step process to hire people. It's a system that is firstly values oriented and we look pretty rigorously at people when we get it right. We don't always get it right, but when we do, we follow our process and it all works out pretty well. [00:38:16] S0: Do you need to be a former accountant in order to [00:38:20] S1: know? Definitely no. It might not be an advantage we think because often people come with the prejudices and the bad habits of the businesses that they grew up in. [00:38:28] S0: We covered past, we talked a little bit about the present on how you run the business. What about the near future? How much do you need to expand outside of US considering them in The US because there's so much opportunity there?