Buyers and Builders
00:12:38 · Brett Kelly
[00:12:38] S1: that worked in those firms like me and for the clients of those firms and for the communities that they operated in. I genuinely believed that an accountant could make an enormous difference in the lives of their people and their clients and the community. I just knew that. What I had seen was that often the accountant was there but it didn't or she didn't really do anything. They just couldn't have a conversation, didn't really care about the person, didn't really want to get to know them, couldn't really help them as a result. So I thought, Righto, let's build a proper business. So you don't look at the accounting firms who get depressed. I said, Right, let's look at across people, process, clients and financial, the best firms in the world. Look at firms like Google that people want to work for, firms like in particular Disney that people want to work for. Then for process, I said, let's look at organizations that have great process like McDonald's. Then for clients, let's look at Four Seasons, Ritz Carlton, Apple, in particular Ritz Carlton. And then for financials, let's look at Berkshire Hathaway. And it's good to talk about it actually because big, these inspiring, formative. And I'm writing those down and I'll tell you why. So when I tell you that across people, process, clients, and financials, those big four companies, they had Disney, McDonald's, Ritz, and Berkshire Hathaway. They are all American companies, and they were just out and out heroes of life. I just thought Walt Disney was the greatest. I still do. Okay? I thought that McDonald's is the greatest business system in the world, and it probably is. I thought Ritz Carlton was just an incredible organisation because when I was about 20, Mikk, I was in the hotel auditing group as part of what I did because my father was in food service and I audited the Ritz Carlton in Sydney. I was just setting it up. I met the general manager. He was the youngest general manager in the world. And he told me about when he was recruiting that hotel, he saw a woman in the line for a job. And he said, I'm going to marry that woman. And he asked her seven times. And then the eighth time, he said, This is the last time I'll ask. And then he took her on her first date and he proposed and they got married.
00:15:04 · Brett Kelly
But they were famous for their customer service and their Berkshire Hathaway was my hero and still is. But in particular, Charlie Munger is my big hero. And and the reason I'm mentioning that in such strong terms is, you know, twenty years later, we moved to The US in January 2023 or seventeen years later, I always had a play to build a global business. I always, you know, kept that very quiet because people tend to mock your plans, particularly in Australia. My wife again saw that. She said, Brett, we have to go to America because all your heroes are American and the way you are will be more comfortable for you in America than in Australia. So I'll share that with you later as well. So I'm like, right, build a better business system based on these great companies. Life is better. One of my favorite sayings of my own, is that life is better when you're looking up. You know, when you're looking down, you know, people that are depressed, they look like this and people that are energised look like this. And so if you want to change your day, look up whereas most people's posture is they are genuinely bent over with their head up their own ass wondering why everything is so shit and smelly and dark and it's because their focus is on themselves Whereas if you can look up and out, you can see other people and you can see opportunity and you can have much more energy about what you are doing. So I looked up to these people. I looked up to their businesses and I said, Why don't we take this tiny little idea of the accounting firm and just try as much as we can, as humbly as we can to make it a bit more like these businesses and don't look at accounting firms because I looked at accounting firms and I was like, Oh, that's horrible. I want to be like this when I grow up. And so that's what happened. And so we've got a business system, not an accounting firm. A business system for an accounting firm. Everything I've read in all these books, said, right, the best type of client is a private business owning family with complex affairs. They stay with their accounts for thirty to eighty years or longer. They are long dated people. Buffett. Be long term. The type of client we want because we have got to spend a lot of time with those people is a long term client, somebody that shares our values. We've got to have clear mission, values and vision.
00:17:35 · Brett Kelly
So what's that going to be? Well, we've got to have clients that want to make the world better. They want to make other people better off. They want to be people for others that keep their promises, play as part of a team. Basically, I'll find it for you. But we built an assistant. I'll just get you a copy of it. So I've been quite relieved. There's normally one in my office, but I've this little thing called Progress Pyramid. It's in my new book called Progress which will come out later this year for our twentieth anniversary and this pyramid basically has 12 parts of a business from mission, vision, value, strategy, structure all the way through people, process, clients, financial, IT, risk, brand, growth and succession. And I said, look, you get the person right first based on Maslow's hierarchy of needs and then in here you work out the 12 plans for a business. Below here is the foundation. Above here is operations. We built a system. And then what we did was we relentlessly applied that to accounting firms. There's two zero four steps. Everything's documented, manualized, there are videos to help you do everything better. And the idea was just systemize a business at a very, very deep level. And then it was as simple as go around Sydney and go to secondary markets and try and become large before anyone notices that you exist. So basically Sydney is here, everyone goes to the centre of the city, I went north, north west and we basically following Jack Welch GE, buy the number one or the number two firm in each area. We'd buy 51%, the partners that own 49%, we'll double their profits, take two thirds of the working reduce the working capital needs of the business by two thirds, give the past 25 to 40% of their time back, and then just do it over and over and over and over and again. And so that's what we did in Australia. We're now into Hong Kong, and we're into we're actually about to start our first operating business in Hong Kong. But we've had an office there for ten years. We're in The Philippines with a BPO business. And we're in Ireland, and we've got four offices here in The US. And the opportunity in terms of addressable market across Australia, The US, The UK, all of Europe, South America, we can basically go anywhere because we have a business system that can help our professional services firm be much better.
00:20:06 · Mikk, Brett Kelly
[00:20:06] S0: This is an excellent overview, Brett. [00:20:09] S1: But I can give you to [00:20:10] S0: you. I'm sure. I'm sure. When it comes to this manual, this pyramid, when you first got started, when it comes to the maybe first five, 10 acquisitions, how much of this had you already prepared? Or I'm sure you have improved that over time.
00:20:28 · Brett Kelly
[00:20:28] S1: So on the very first day of the business I wrote this book. I wrote this book as a training manual for our accountants to tell them how they should treat the clients. One of the things I love about Charlie Munger and Warren Buffett is Warren Buffett, when he's asked what he loves to do the most, he really loves to teach. He's a learner, I suspect, and I'm very much that. And so my real talent is learning and understanding and then putting things in a way that we can teach them to people and share them. And so I had this as the way we wanted to do business And I built what's called a critical activity network of the business that I had learned about in another book based on how IKEA had organized themselves. And I just basically sat down like an architect and designed what the workflow should look like, what the firm should look like, where people should sit, how the store should be laid out, what the SKU is. So I thought about how to retail accounting, You know, what does the office got to look like so people feel good or are attracted to working there and can work together in a seamless way? So talent led for the office. What are the workflows of the major pieces of work we do and how do we streamline them so that they can give efficiency and not be annoying to the staff like the team to participate in. And it was all about how do you make the human experience of our professionals better and how do we have a better outcome for the client. So I was an inveterate, still am an inveterate team for a on the system on the software on the process to try and make everything work better. If I come to your house you know and you ask me how you could let your bookshelf better I'll probably have an idea I I walk into businesses and I look at them and think how could they work better.
00:22:32 · Mikk, Brett Kelly
[00:22:32] S0: That's why great, you know... The companies you first approached outside of Sydney, how was their reaction when you first knocked on their door and said hi, introduced yourself? [00:22:43] S1: I wanted to check. Yeah. So one of the insights, Mikk, was firstly, I was organically growing the firm that I started in North Sydney like this. So they could see that I knew how to to to win business. So they were like this guy is serious about what he is doing. I had done a couple of acquisitions in the first nine months, my old boss and a guy up the road and then I went to areas that were unattractive to other people. So those firms were like, you really want to come to our area? I was like, absolutely. And they were like, okay, great. So there was less competition to get involved in those firms, to buy into those firms because other people didn't really want to buy those firms. But I did and they just wanted the money so they were like yeah I will take your money and then I had all these big ideas and they just treat you like you are crazy and that is okay because then they leave you alone and then you just do the implementation and then they're like, oh, this is great. This is better. No problem. So if upfront you try to explain too much then people will argue with you. I didn't explain. I just said, yeah, we'll make things better. Then people don't really argue with you. They just, they don't really believe you anyway. So why waste time arguing? [00:24:01] S0: I