Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

What were you doing before Kelly and what was the original founding story?

I left school at 18. My dad's business had an accountant who embezzled money, so I was going to study law but instead chose accounting. I always had a great interest in business and believed it could make a difference for people. In 1993, I started at Pricewaterhouse where I spent four and a half years as an undergrad accountant, moving to graduate, then senior accountant. I left to join an investment bank in corporate advisory, but lost that job because I didn't fit in and didn't know what I wanted to do. My dad gave me two books: How to Win Friends and Influence People and Think and Grow Rich. After reading those books, it was clear I had no instruction on how to deal well with people and would do much better if I understood working with people is the way to get things done.

Our education system encourages you to learn and be individually intelligent, but big things are achieved with teams and groups of people. I completed my chartered accountant qualification, did a master's degree in tax, then got my tax agent license and Justice of the Peace. I went through three smaller firms who each promised to make me an equity partner, but when it came to delivering that, they had reasons that they couldn't.

I worked out the private businesses we were advising were not very organized. I thought if the accounts weren't organized, how could we organize our clients? Then Scott Elwin, a friend of mine up, asked me to help get him out of the firm he was in and start one with him, which I did. Months later, my boss promised one thing and delivered another, and I told my wife I no longer wanted to be in an industry where too many people lie, cheat, scam and carry on. She asked why I didn't start my own firm, and several of my colleagues and clients were surprised that I hadn't.

Recently, I realized, in addition to being asked by Scott, another friend Craig and two colleagues Ada and Joyce had asked me to do something with them, so other people saw things in me I hadn't seen myself, which was that I knew how to get things done in a business. I'd written two books by then. After losing my job, I interviewed 34 prominent Australians and asked them what made them successful. I self-published it and made it a bestseller. Then I wrote my second book called Universal Wisdom on seven people who had changed the world, including Nelson Mandela and Warren Buffett. I had an interesting set of skills and had done a lot of professional speaking off the back of the books. I had different skills to accountants, who noticed and asked me to do things with them, so I did.

Being driven, I thought I could improve the industry so that other clients and people in firms didn't have to go through what I did. I designed a better way to run a chartered accounting firm. I said it would be better if the partners didn't sit around politicking and pretending they were all in charge. I had a 51/49 structure which I thought was better for people and clients if partners signed a long-term agreement. My idea was that partners had a minimum 10-year commitment. I knew partners didn't like to be part-time marketing, HR and IT, as nothing worked, so I designed a central progress team to do that and gave partners 40% of their time back, to look after their team, clients and their own well-being. It's difficult to help other people if you're not well put together yourself.

I decided the right strategy was to go after private business owners who take a mortgage on their house to start a business. Unlike multinationals who get away from paying tax, these people are really committed to doing something and employ 70% of all people. There was a clear case that business owners were stressed about their money in their business and that we could build a better way to help them. I invented a 12-part way to run a business called the Progress Pyramid, which I've recently trademarked. It says you need to first focus on the mission of the business, the values, vision, strategy and structure, which is the foundation. Then you need to focus on people, process, clients, financial, digital, risk, brand, growth and succession.

If you looked at each part of a business in that way, you'd be able to help people get organized in their heads, to understand where their real issues were, and take actions to address them. The idea was to be a holistic advisor, helping private businesses get from where they were to where they wanted to be. They keep their accountants for 30 to 50 years so we provide a multi-generational cradle to grave solution to stop people being stressed about their money, be clearer about where they want to go and help them do that. If we got half of that right, we would do okay. I was inspired by the world's best businesses. In people, that was Four Seasons; in process, McDonald's and Walmart; in clients, Apple; and in financials, Berkshire Hathaway. If we tried to be like the best businesses in the world, we'd probably do okay. Most firms were only looking at other accounting firms and they never really become a business.

Why did you write the book so early?

At 22 I was put into out placement at Morgan and Bank, where I spoke with a room full of men who had lost their jobs. Somebody took their business cards; they lost their identity and their lives were a disaster. These were men in tears, shattered. This was 1997 and I decided I didn't want to become one of those men. I was living at home and had saved every penny I had worked for since I was 14. I had washed cars, mowed lawns and walked dogs. These men had mortgages in houses they couldn't afford, to impress people they didn't like, and kids at private schools. The full disaster was horrible and they had lost their identity. They didn't know who or where they were, and had no idea how they got there. It was quite traumatic to see grown men who otherwise you would walk past as pillars of society you would admire, had their whole worlds turned upside down.

Think and Grow Rich told me to seek people who had been successful, to find out what to do, but I wasn't Kerry Packer's son so I didn't know what to. If you spend an hour answering my 11 standard questions, I'll get it in a book and get it out to other young people who are keen to learn. I genuinely wanted to work out what life was all about. I bought 3,000 Simon & Schuster self-help cassettes which I listened to while working on the book. All these motivational and inspirational people were saying, read a book a week. If you want an education, it will get you a job, self-educational will make you a fortune.

Jim Rohn said, don't ask that life gets easier, ask that you get better. Steve Jobs said, once you work out everything you see is made by someone, you can actually do something. I thought I would write this book. The 12th person I interviewed was the former Prime Minister, Bob Hawke, who told me there was nothing better I could do in my situation. He said this learning would change my life, and if there was anyone I wanted to meet, he would help. Someone of that caliber showed me faith and encouragement, which is why I see myself as a student and still try to meet the great, who never make you feel worse about yourself.

My strength in the Gallup Strength test we use at Kelly Partners, is learning, which gives me energy. I wanted to make my life better and I knew I didn't know everything. I read 3,000 books over five years. I watched the BBC Seven Up Series where they filmed kids every seven years for 50 years. It is the highest performing documentary series in history, filmed in England. I saw that and though every seven years I would stop and write a book, the idea being not to become one of those 50-year-old guys who didn't know where they were and how they got there. It forces me to reflect where I've been, where I'm going. I choose a topic that is of interest to me, then interview or profile people to try to think.

Writing things down is hard, putting a book together is even harder, but that effort means you have to slow down, and I'm a very energetic, kinetic person. Toughen Up by Michael Hill, talks about having a 30-year plan. I read that in 2009 and I was running 30-year plans. Now I run 25-year plans on a spreadsheet, trying to work out who I want to be, what I want to do, have and give over those periods of time, looking at the age of your kids and wife to ensure you know where you are. That is great to do personally and it feeds into the business.

Where you see yourself doing this in 30 years?

I was on Twitter today doing a podcast and getting some gratuitous advice, one of which was don't quote books, quote people. I have been massively influenced by people I didn't know, so they are my virtual mentors. I watched them on YouTube or read their books, and they changed my life. When I was 18, I read Common Stocks and Uncommon Profits by Philip Fisher, which led me to Buffett and Munger. I'm grateful to those people who are my heroes. Charlie Munger was a Harvard lawyer who was in the Army, but went to California because he saw the opportunity to build a law firm. Then Buffett told him he would not get wealthy being a lawyer, he needed to be an investor.

I took those ideas of Munger and thought I could use my intelligence around accounting firms and create a holding company, improve as an active manager of accounting firms, an alternative asset manager of accounting firms. Use all of my gifts and talents to help accountants be better at what they do and create a structure where they can do their best work. I plan to do it forever. Without mentioning my heroes too much, one is 98 and the other 91, yet they're so coherent and passionate about what they do. I was at a big trade fair in Omaha and all I could see were companies bought 50 years ago, and thought why couldn't I have a room full of accounting firms who joined us years ago. One of them was nearly 100 years old. Why can't we be a permanent owner/partner of accounting firms who want to continue to serve their people, clients and communities, rather than be bought up, sold off and raped and pillaged by private equity or others?

Why wouldn't that happen with your structure?

If I die, it has a structure which can continue, with documented succession. I'm 48 and understand this is what I love doing.

Why do you love it?

I like helping people. I meet firms with succession or growth problems who struggle to attract people. They're doing their best, but they know they could do better. Most of them know what they should be doing, but struggle to execute. I like to see people succeed, which I got from my first book. If you help enough people succeed, you'll do well.

Munger and Buffett were both interested in money, wealth and success. Buffett seems to love the game when he comes across in speaking. From a young age, he was interested in money, but Charlie wanted to be rich. How do you think about getting wealthy and compounding capital?

Steve Jobs returned to Apple because he realized if he didn't run the business well, he wouldn't have the paint for his canvas. Warren Buffett said the same thing; he was working on this big artwork in his head, which will never be finished, but he loves the process. I'm a capitalist and pro profit, but if you don't like the profit, you can give it to a charity you are passionate about. Capitalism undertaken with the right intentions, is the best system for helping people make themselves better off, which is healthy, wealthy and wise, not purely financial.

When I interviewed these people when I was 22, many of them had sacrificed relationships for money, including marriages, broken families and problems with their children. Imelda Roche who built Nutrimedics in Australia was an inspiration to me. She and Bill had been married 60 years, raised a family and had four kids and 15 grand kids who all lived five kilometers from one another. She worked hard to build a family as well as a life and a business. Many people cut corners in the accounting industry, and I had worked with them and I saw them selling their soul for not much money, which seemed like a doubly stupid thing to do.

For me, the exercise of saying, could you conduct a business well and still have top of the charts financial results, which is what inspired me about Buffett, not only was he wealthy, he conducted himself in a way he can be proud of. A friend of mine who I encouraged to build his business, thanked me and asked what I was most happy about my business, and I told him I was proud of our ability to commit to ideas we think are good and stick to them. Dollars are more important to other people than me. I want to compound as much as anyone ever has, but I want to be the best in the world at whatever I do.

I was deeply passionate about the difference accountants make to private business owners. There is an economic model and I can be the best in the world, which is what Jim Collins says in Good to Great in his famous essay about the Hedgehog and the Fox. Say yes, I'm in the right place, so let's build the world's best business in this space. There's a great sermon from the 1,800s by Jentezen Franklin called Acres of Diamonds. It relates that most people are standing on diamonds, but they're always looking to the next field which looks greener, but it's mainly fed with bullshit. I thought I was there for a reason as a chartered accountant with a tax background, working with people I admired for their willingness to take a risk and build something, I wanted to help them. I looked at accountants the same way, who were trying to help people, but their businesses were terribly run. That's not what they're interested in.

As a young guy working in those businesses, it was horrible. I wanted to make the business better so that accountants could help clients be better off, which would have a positive impact on the community, given these clients employ 70% of all people. The flywheel effect of doing good stuff is you get rewarded with great feedback and you build relationships. You also make plenty of money so that's a good life. Munger doesn't like people so he likes to be financially independent so that he didn't have to put up with people who didn't operate on his intellectual level. Warren didn't fit in but he had these crazy gifts. He tried to do the best he could and found his place in the world.

Your Grow program looks interesting; do you still offer that today?

Two of my clients told me I was regularly on holiday, was fit and healthy, looked relaxed and had a good business, and wanted to know how I did it. I showed them what we do and they told me their family business forum did not teach anything like that, could I teach them what we did instead? I told them if they found 10 people who would pay $15,000 each, I would teach them how we run the business over nine half days. So that became the Grow Program which helps people grow their businesses. One of these had a business turning 500 million a year. At that time, we were turning 20 million, but they could see we were under control and had a system of growing. That was great because it brought more people to the business. Steven Covey says if you want to master something, teach it, so that forced me to teach our system to our clients five years in a row, which refined the system.

Do you still do the coaching today?

Kelly Partners bought a coaching business with 18 accountants in it and I've been running that for 18 accounting firms. I told them I would run it for a year and give them the opportunity to join our firm. We bought three of them so far, so there's 15 to go. I backed myself that I could coach them and they would all decide to join, and if they didn't, I wouldn't run it the following year.

You bought the company which is a coaching program for aiding firms, who pay an annual fee for you to teach them the Kelly system, which is an acquisition funnel?

A Melbourne-based coach was coaching 18 accounting firms and I told him if he wanted to retire, I would buy his business. I got the guys and said they could sign up for one year. I can use that as a funnel if I talk about how to grow your business, as people tend to find it compelling and duplicatable, because our system is well thought out into their private business. I've never coached an accounting firm that isn't part of our group. When people called me over the past 15 years and asked me to coach them to make their accounting firm better, I've agreed if they sell us 51% of their business. That initiative uses our Progress Pyramid system.

Did you buy this business last year?

Yes, we bought it in about March. I've done one session so far and we've bought three firms.

Why do you think companies like Stockford and WHK struggled to scale rolling up accounting practices years ago?

An academic in New South Wales actually studied these businesses and wrote several papers about them which I've read. I have seen these businesses come and go and I'm a reader and observer of life and business, so I build some ideas into our system. Your life is either an example or a warning, and it's good to study warnings because you often learn more from them than you do from the examples. None of those businesses were led by accountants; instead, they were led by financial planners buying accounting firms to sell financial products to the clients. The inherent reason for those businesses to exist was illegitimate; there were bad values at the root of them.

Were they trying to cross sell wealth management?

The only reason they bought an accounting firm was to sell to the clients. That's not a deep reason to be in business and unlikely to be rewarded by the universe. Business is hard, and to stay the course, you have to have a reason to do it. I worked 16 hours a day, six days a week for five years to build this from scratch. You have to want to do it and you have no sense where you will end up. A financial trade isn't a good reason to start a business. Those people were promoters spinning up a scheme to hope somebody else would buy their stock at a price higher than they paid. In the case of Stockford, they tried to centralize and integrate 50 firms the day after IPO, so it failed within 18 months as it's impossible to integrate that many firms simultaneously.

They used listed equity to incentivize opcos?

Yes, but money is not a good basis for a relationship. If the only reason for you to join a deal is money – come join my scheme and I'll give you equity, then we will sell it off to other unsuspecting people at an IPO and you will make a quick dirty profit – that's an illegitimate reason to be in that business. It's not love, it's money.

Why do your firms sell to you? What's the difference?

We're not in business for money; we want the best for other people. We're in the business to make other people genuinely better off. There has to be a genuine ethic and an ethos to make other people better off and build a flywheel of making a difference. If you're in a business like ours where you can make a difference, you will earn a profit, but not quickly. We want to be long term people in a short-term world. Those businesses were all promoters trying to make a quick profit. We're trying to get wealthy over a long time. As Buffett says, not many people want to do that. He was only worth 600 million at 56, and made all his wealth after 65. It took a long time, but you live a life on the way and hopefully behave in a way where you build relationships, make a difference and feel proud of the relationship with your wife and kids.

The three Australian firms, Stockford, WHK and Account Plus, were all conceived on bad ideas. Buying accounting firms only to sell financial products to was never going to end well. Once you build that culture, it's difficult to change that into a positive. I've had the opportunity to buy into businesses I feel have been conceived with the wrong ideas, but you cannot unscramble the scrambled egg. Rather than do that, we continue to pursue this programmatic acquisition activity with a 51/49 structure, where we double the profits and reduce the working capital by two thirds of the businesses we buy, and we make the owners, clients and people who work in those businesses, better off. The compounding effect of doing things well is substantial over time. Long-term behavior in a short-term world is not very sexy.

How did you come up with the 51/49 structure?

I had been in accounting firms since I was 18 and I realized five partners with 20% each all think they're in charge, which simply doesn't work. This way, I tell our partners they own 49%, run it and let me know if you need anything. The heart to leadership is making decisions, not putting things off, which most firms are guilty of. Our structure means if no one makes a decision, I can, but I don't have to because my partners are leaders. I saw that as a young guy wondering why they wouldn't swap the software to make my life easier and the client better off. Partners won't agree because they don't want to invest. It would go on for months and years in some cases, and partners would be running different systems. There were no synergies in the firms. They were all sole traders, sitting in their own corners doing their own things, acting like a co-op, sharing the photocopier, which was horrible to work in as a smart guy.

You are taking their capital out but how are they paid for the partnership?

51/49. Firms are partnerships, so they pay 100% of the profits out. There are no retained profits, they never reinvest. We have 6.5% on revenue fee and 2.5% IP fee, so that 9% of revenues are reinvested into the businesses annually. As we've grown, that means we can invest in better people, recruitment, software, systems and processes. The flywheel effect of that is next year that number will be $8 million. Think about the competitive position that puts a firm in. If we buy a firm doing two to 10 million in a region, when that firm joins us, they get $8 million reinvestment this year, plus the millions of dollars we've already invested over the past 16 years, immediately stuck under them as a platform to shove them forward.

Is that one of the reasons they join?

They join because that doubles their profits, returns 40% of their time and reduces the working capital in the firm by two thirds, so partner cash flows explode. Their accountants can see it, and we show them where we've done that 63 times.

How does the working capital change so much?

Standards matter in life and business. If you think you can't, you can't, and if you think you can, you can. If somebody like me can turn up with our team and say here's 25 other businesses, this is what they're doing to run lock up at 50 days versus 120 or 150 days, in fact lower most of the time, it gives people a sense of belief.

Do you bill more regularly, like weekly or biweekly?

We do 40 things no one else does. We do that daily and coach them into the people and it becomes part of the fabric of the firm. You first set the standard, then give people belief. You show them it's possible then they have to have faith and trust you they can try that at their firm. The average age of leadership at chartered firms of any size in Sydney – which is similar in the UK and the US – is over 60. These good men already know everything, which is the worst place to end up in life. When I turn up and say I could improve things, they start to believe, but it's still a bit of a conversation. Imagine a young guy in that firm trying to get them to change internally, good luck, they're not listening to you, and they barely listen to me. We can get to five times today's market cap before anyone realizes we know anything about anything.

Because they know everything?

They already know everything, so when your head is up your own ass, the only thing you can see is your own shit, and it's a very dark, stinky place.

Does that benefit you?

That's where our industry lives. I used to work for people that behaved like that and I resented it deeply. How is it that Apple, Four Seasons, McDonald's or Walmart behave like businesses, but we behave like we're in the 18th Century. I hated it as a young guy and couldn't stand the backward ideas that nothing can change or get better because I already know everything, so know your place son and shut up. When we built the firm, we wrote a shit list of all the things that were shit in the firms we worked in. We wanted to fix them because we no longer wanted to put up with it. We didn't want to be told that a woman who wants to become a partner shouldn't have a baby as that would interrupt things. We say, go have many babies and be a partner. I saw horrible attitudes towards my wife when she was pregnant in a firm and was asked whether she was going to keep it, then she was told to go part-time. We wanted to build an antidote to those stories. I was asked many times if I could build a better firm, and I wasn't arrogant in my response when I said no, but we can't build a worse firm.

Is there any limitation to lock up as you scale?

There's no limitation, only excuses. Will you get big, fat and miserable?

In terms of the work you do?

That's what people say who won't commit. We have some of the best clients in the country and these are the myths people who can't run their business tell themselves to excuse their bad behavior. I used to work for those people. If you are paying me $200,000 a year, you're a big client, but why do you get to set the terms?

Because they're one of your big customers.

Why don't I get another big customer? I don't have to accept any terms; it's our business.

Do you give the same terms?

You tell those clients to pay you on time. It's our business which we get to set the terms of, so why would we drop our standards as we get bigger?

Do the power dynamics not change for a top 50 Australian company?

No. It's our business. We simply say no, we don't need your work.

Is it unstructured as you serve bigger companies or is there more complex advisory work?

We have people who say they do more complex work, but if it's more complex, the profitability would improve, so what excuse do people tell themselves? They speak about our firm as if we do individual tax returns and they have no idea because we keep taking their excellent clients. If you are excellent at what you do and have standards, then you demand those standards from your clients. You tell them the basis upon which Kelly Partners does business, and they often tell us the other firm let me pay them whenever I like. I say that's good because Kelly Partners don't do that. That is leadership which our industry is not renowned for.

I used to work for some of these people and they tell themselves excuses. At our recent partner's retreat, I gave a presentation called Wives Tales: Myths, Hot Air and Bullshit our industry floats on. Our partner groups have been in the industry for hundreds of years. We've made a list of the things we will no longer tolerate as a business, and one is not paying us on time. We will not do work which isn't at an appropriate margin, nor with people who we find morally offensive. We have the benefit of having had standards from the beginning.

Can we walk through a hypothetical transaction? Let's say I run an SME accounting firm with $1 million revenue, I'm 60 years old and want to retire or cash out a portion, what is the typical transaction structure?

We offer dollar for dollar between 60% and 90% up front.

Is the revenue multiple dollar for dollar?

Yes, one times revenue, but we'll pay a valuation on terms we think are appropriate. We've done many types of deals including buying several firms from deceased estates and those who had nervous breakdowns. We pay a portion up front and another portion after a two-year retention. We plan to improve the profitability of that firm on a line-by-line basis the minute they join our group. That transformation plan is a key term of the agreement we sign because it's a genuine partnership.

Have those revenue multiples changed over the last few years?

They never change because we do deals with people who meet our values. We do that on appropriate financial terms, and if they want to sell to someone who will chew up and spit out their staff and clients, they can do that. Most people choose to join us with a firm they've spent more time in than they have with their kids. They care about their people and clients and prefer their firm to be in the hands of someone who understands how hard it is to build a firm and the sacrifices they have made.

Do you run an auction process?

No, we don't do auctions.

Do you get them through brokers?

Of the 63 deals we've done, two were from brokers and 61 were direct. They know we exist and that we know how to do this well and they have respect for us. We listed in 2017 so people could see the quality of the business transparently. They will call or send me a text suggesting we have coffee, indicating they are keen to talk. They come to my office secretly and I ask them if everything was as good as it could be, what would it look like and how can we help them get there. I don't care about the price and terms.

People think we buy groups but we form partnerships to look after these firms for the next century. They don't think they will get slightly more elsewhere, because if that matters to them, they can sell their soul or tell me why we should pay more, which me might do because we're not hung up on the money. They join us because they feel the passion and care we have for what we do, and see the genuine evidence of quality and want to be part us.

What is the average age of the partners who sell to Kelly?

The average age of the senior partners is 62, but the partners in those businesses are between 40 and 42. We recently did a fantastic two partner firm where they were 38 and 39. They told me they were trying to be like our group and realized it would be better being with us, because they shared our vision.

What if I'm a 38-year-old running my million-dollar firm?

If there are two, you will be doing £1 million each and killing yourselves. By the time you get to 39, you've built a good firm and your wife tells you the kids are six and four and you never see them, and you are never here and are always stressed. Those partners have a 50% chance of divorce, male or female, and are unhealthy. They struggle to engage with their family and are always stressed because they try to make a photocopy at work and do the marketing and part-time HR. They don't have a brand to recruit to, nor do they have anyone to help them. What was fun becomes a nightmare.

My central progress team would help them recruit better, introduce system processes, run their IT and finance and give them strategic advice on their client base to improve profit and cash flow. They will be part of a social network with some of the best people in the country to help them, whether they need a doctor, access to school or travel. Prospects tell me that sounds great, and that's how we get deals done.

With $2 million revenue, would you pay a million in equity, a million in debt?

No, we will buy 51% of £2 million, and pay 60% to 80% of that up front. We will borrow that and pay it off over three or four years, maybe faster if we're any good, depending on the growth profile of the firm, or five years if we're slightly slow. We will strengthen that business and find the next two partners, who we will train and step up, then find additional revenue and grow organically at 5% to 10%. I will do several tuck-ins and try get that firm to £4 or £5 million. We will try do that hundreds of times. We've already done it 63 times and think we can do it in Australia, New Zealand, Canada, US, UK and Europe. ETL and Constellation have proven that is possible.

Do you use any of your cash to acquire companies?

We try not to, but find intelligent ways to fund it. Having done the amount of deals we have, we're a good partner to our bank and have a high-quality reputation for the way we conduct ourselves, so we have a competitive advantage around financing and structuring. We have a deep understanding of how to run firms, which is a huge advantage to our partners who get access to better capital structure and people who know how to run their firms better. They don't have to change anything; their business simply runs better with our help. Our partners earn more owning 49% of the firm than they would owning 100%. Instead of financially engineering our way to success, we operationally improve the underlying business to be stronger, more profitable and more dominant in their region. We think that's exciting and I am hands on with my team in a way Munger and Buffett were not.

You raise a million from the bank and pay me and my partner cash for owning 51% of the business, and we earn more after several years?

If you're good, you pay off your mortgage and put some in your Superfund. If you buy KPG stock you will do well out of that in future. We give you cash which is tax-free in Australia, but in most jurisdictions, you pay a little capital gains tax. You have to commit to working with us for the next 10 years.

What percentage of those partners own KPG stock?

Most of them do and some are more enlightened than others. Accountants are skeptical about the stock market so they don't buy as much stock as they later tell you they should have. We don't pressure anyone to buy our stock. We're not a stock promoter. We frankly don't care if anyone buys our stock. We're not in the promotion business but I do interviews like this because it's helpful to meet people and share what we know.

How is the debt structured between partner and parent company?

The debt is guaranteed by all the operating firms.

Would the parent company guarantee that?

Generally not.

So the partner has debt on their balance sheet they have to guarantee?

The partner gets the cash, but also has to stand behind their great firm. I've committed not to take cash out of the business to pay off the debt, which seems fair.

Do they pay that debt off from their cash?

51% of the KPG debt is paid off by 51% of the profit share, so there is deep alignment in the model. If you tried to sell me a great firm but were worried about its future financial performance, I wouldn't want to invest with you.

Are they worried about taking a massive mortgage out on the business?

It's no different to a young partner buying in, where the other partners agree to them buying 10%; they have to borrow the money and pay it back. It's no different than taking a company public with three-year projections. If you're a director of a public company, you have to stand behind the three-year projections you put up. In our industry, they hide in the shadows and tell you a story, but don't stand behind it. We don't do that because that's not who we are.

What happens to the debt and value of the business if it doesn't go well?

With accounting firms, if you die, we're insured, what else can go wrong?

Does the insurer simply pay out for that?

We insure for the debt in the event of a catastrophe.

What if a partner loses all their customers for doing something ridiculous?

We don't partner with crazy people, nor are we aware of anything crazy you can do. You could have a nervous breakdown, become a drug addict, a gambler or a drunk. Most partnership agreements stipulate if you become any of those things, you have to exit the partnership. They're able to anticipate disasters but past behavior is a good precursor to future behavior, so we don't partner with people with those issues. We don't say nothing can go wrong, but we mitigate a lot of risk. We have so many partners that if someone was to leave or die, someone else will step in to look after those clients.

I have the mindset of a chief risk officer and our business is built on removing risk. I read the book The Warren Buffett Way, which taught me how to value a business using the two-stage dividend discount model. Use the 30-year bond rate if you're within your circle of confidence doing something you've already done 60 times without bearing the structure. I try to do risk-free deals which means not doing things we don't know how to do, or doing them differently. When people ask us to do it this way or that way, I tell them we've done it 63 times with predictable outcomes for all stakeholders. We'll keep improving it but never radically change anything.

When has an acquisition gone wrong in the past?

We have had situations where revenue was lower than we were told, but if we have 10% to 40% retention for several years, that's unlikely to make any real impact. The two or three which had 20% less that what we were told, had 30% retention, so we never lost any capital on any deal, which I'm proud of because we're very careful. We do due diligence on a million dollar deal as if it's a billion-dollar deal.

Would they misrepresent how many clients they had or lie about revenues?

They might have been told by a big client that client was going to leave, then they will do the deal and six months later when the client has left, you would go through the emails and see the client told them a year before they were leaving. People lie but very few who joined us have ever engaged in that behavior.

Have you ever lost capital on any of the debt you put out?

Not once, because rule number one and two in life is don't lose money. I am very aggressive about the idea of not losing money. When I started, I had no money, so I couldn't afford to lose any money. I'm very careful and very paranoid.

As you scale, can your bank continue to finance so you don't need cash?

Banks like us a lot and new risk banks would love to do business with us. We've had an excellent banking relationship since inception so we can fund growth. You have to treat your banks, lawyers and partners as partners, and treat them well.

What are you worried about when doing due diligence on deals?

I look if the person does what they say they will and if they are for others or self-centered. I look for patterns in people's behavior and if they believe teams can do more than individuals. We want people who are careful with and don't break their word. People who are unfaithful in little things are also unfaithful in bigger ones. If they are not attentive in small things, nor will they be with bigger things. People who have had a lot of drama with others are typically dramatic, so we don't want them. People who talk about everything they did being great because they did it, and everyone else was bad, worry me because businesses are built by teams. Quiet people make huge contributions so you want a person who notices and thanks others. How they treat their PA or junior people in our team doing the due diligence. Some of our people have been treated terribly.

I try to find people who care about others and who are fastidious about doing what they committed to, that believe together we can do great things. I look at their attitude towards money and see whether they rip off their other partners, because if they are unkind to their existing partners, why would they be kind to me? If they are unfriendly or greedy towards existing partners, they will do the same to me. If they are prepared to steal clients from another firm to come to us, they will also steal from us at some point. It's all basic but I've done so much that I have a good antenna. We've designed our agreements to be very aggressive and punitive in several areas.

Which areas?

If they steal a client or breach confidentiality or non-competition. People who want to retire and be part of our group, don't care about that so they sign, but those with dark hearts who scream and tell me I'm unreasonable, are triggers. They are deliberately antagonistic because we're trying to discover people's values. If you get between people and money, they often show you their value. Most people think we're trying to get every firm to join, but we're only looking for those who share our values and want to solve the same problem and be part of the same mission. I interviewed some of Australia's most prominent people when I was 22, including prime ministers, billionaires, heads of churches and comedians, and I developed a sense of people through those experiences. I wrote to Warren Buffett who replied with a beautiful letter. The second richest guy in the world could have ignored me, but chose not to. If you ignore me or treat me worse than he did, that doesn't speak well to your character.

Does that skill help understand who someone is and their value set?

That is my superpower; I'm a people person and love people.

You're neither a Harvard graduate, nor do you come from a wealthy family who is always at the top of these institutions, but you have had interesting experiences writing books and meeting people and found yourself in the accountancy business.

I was 22 and unemployed, trying to write a book, and I made 5,500 phone calls to get people to talk to me.

How did you come up with this idea? Why didn't you simply go find a job?

I read Think and Grow Rich and I was the kid who came first in everything, then I lost this job. I had the dream of being in an investment bank, but thought it was horrible. All these people obsessed with status and money are horrible. I was with 50-year-old guys who had their life destroyed, and thought there has to be a better way. Think and Grow Rich said find successful people and ask them how they got successful. I had six weeks of outplacement where they paid for my office, a clinical psychologist and a mailing service. I thought I would write to people and ask them what I should do. I knew I wasn't like other people but I didn't know what to do with my strange abilities.

Bob Hawke, probably the most successful prime minister in Australia's modern history, was a Rhodes scholar and graduate of law at Oxford, spent three and a half hours with me, an hour in the interview and two and a half hours chewing the fat. He told me this was the greatest thing I could be doing, and offered to help where he could. He later did a television interview with me which helped sell all the books. When they asked him why he did an interview with this young guy, he said because Brett's got Chutzpah. I thought if Bob Hawke believes in me and thinks I have something going for me, I'm not all bad, which made a big difference. I decided no matter who you are, you have an ability to impact other people positively or negatively, and you get to choose.

When you lost your job at 22 and were on track to be in investment banking, how much did that affect your ego, was it a massive reset?

Yes it was a big reset. I was in this bank with my The Warren Buffett Way book in my bag, and a banker asked me why I read books written by people to tell you how to make money. He believed I was reading this book written by somebody with no money, to tell me how to make money. I told him the book was about Warren Buffett, but he didn't know who he was. I knew I was in the wrong place because they were meant to be the oracles of all wisdom, yet they didn't know who Warren Buffett was. I was in a meeting with two other bankers, one was my senior but more junior than the director. He came out of the meeting with one of the wealthiest guys in Australia, and told me that guy is just a fucking green grocer, I admire that he built an incredible business, not that he was a multi-billionaire. It was a function of his vision. I knew I was in the wrong place because I wanted to be like that guy building something. I was being given advice on building financial models, listening to a clown thinking this guy is building something, but he is below him because he doesn't have the same academic training.

That was horrible and it hit me and I lost my job. I was rejected by the fish I mentally rejected. When I wrote those letters and called people daily and did some interviews, I discovered that the people at the top who had achieved all their hopes and dreams, were so generous to me. That was unbelievable. I'd mainly been around people who were telling me to sit down and shut up, you can't think that and you can't do this. It was transformative.

Then I saw these guys in this bad place and thought what do I have to lose if I play an authentic innings. I love cricket and loved Ian Botham as a young guy and thought if the ball's short and on your eyebrow, it's bowled at your head. Whether the first ball of the game or the middle of the game, Botham would hit the first ball of his innings for a six. I thought I needed to be authentic to who I was and build my career to reflect that. I returned to accounting firms and tried to share my ideas with the boss to improve the business I was working in. I was trying to run my team well and be positive about the difference I could make, but I was working under people who simply didn't care. They were negative and self-satisfied, and I thought I would leave the industry.

When you had that moment of rejection and big reset, then interviewed prominent people, you found yourself back in the accounting industry but eventually got out?

I thought I could become a partner but learned that if you want to achieve your goal, you have to focus on helping other people achieve their goal. I realized that I liked helping people in the accounting space because I thought of my dad's business and the difference a great accountant would have made to him. I found, through three firms, that the accountants were only there for themselves, not for their clients. Within each of those firms, 5% of people shared that ethos, but they were frustrated because nobody else thought that way. Finally, I set up a firm with my mate Scotty to help him, and that was going well. Then my boss came with a silly offer which wasn't what he had promised and I felt that I couldn't work with people who lie. Several colleagues asked why I couldn't start a firm for them like I did with Scotty. My wife also said I was good at it so I should start a firm.

What did you learn from your dad's experience with the accountant?

His accountant, who was recommended by an accounting firm, embezzled half a million bucks in the middle of a recession which damaged the business and dad's sense of self because he thought he should have known. When somebody commits fraud in a business, it's almost impossible to know. That affected me and I didn't want others to end up in that position. I learned from Buffett that doing things with the right motive and ethos, could have a better outcome than behaving like a miserable bugger.

Was your dad into Buffett and Munger?

Dad gave me Carnegie's book and Think and Grow Rich, which led me to read more. When I was at Pricewaterhouse in 2018, I found Common Stocks and Uncommon Profits at Dymocks, a book store, and that book was endorsed by Warren Buffett. This book changed my life.

Did you learn much from your dad about running the business?

Yes, dad was great with people and a very hard worker. He was a sales director of his business and was great at selling. He was English but came to Australia at 25, with very old-fashioned values. Your word is your bond and reputation matters. Do what you say you do, give people proper service, shine your shoes, sit up straight and do things properly. He had been in the British Navy and was a serious guy. He always told me I could achieve whatever I put my mind to. He told me if I put the effort in, I would achieve my goal if I kept working at it. He believed you could outwork most problems.

Looking at the future, how many companies could you acquire per year?

We think of how many firms we can meet who want to improve.

Are you making and leading all the deals?

We first have to find people who want to be part of what we're doing and believe we can help them make more impact through their business. We do a lot of outreach to people to share that message, and get a lot of inquiries. Lawrence Cunningham, the deputy chairman at Constellation, joined our board, and introduced me to some great people from Constellation who taught me a lot. I'm now incentivizing our partners to take responsibility for scouting firms in different areas.

By Constellation?

Yes, by Constellation. I'm not delegating the capital allocation or the final terms of the deal, but running that program to scout firms and bring them to us. This is what you should and should not discuss and this is how the process will work. That is working well and two partners who are scouting have come through with a million a year, half a million here and half a million there.

Do they get incentivized for that?

Yes, I'm putting a scouting program together for them where we're going to pay money into a pot and buy KPG shares. It won't be diluted and we'll give them that pot after 10 years. We think that pot could be quite large and it won't cost us anything.

Similar to Constellation paying out the cash comp and partners buy shares?

I can find a dozen partners who can be scouts. We will soon announce we are building a leadership council to help grow Australia and do more scouting. I think we can significantly scale our ability into the group, but we're not anxious about size, even though our industry is. We maintain high standards and get the people we want.

Are these scouts spread out and not only 60 to 65 year old retirees?

No, I've gone to the partners who have been partners for over 10 years. One partner told me he wanted to earn more money by spreading the good news and finding more firms. I gave him New South Wales as a region to focus on, we started doing the correspondence for him and made him the contact person. He's talking and meeting with the firms and has been well-received because he comes from that region. There are a dozen partners with over 10 years’ experience at Kelly Partners, who we can turn into scouts to help us find more firms and scale the acquisition and partnership engine within the business.

You might have to grow a long beard like Mark Leonard the next five years.

The plan is to be like Mark, who has done a lot to recommend him, including his cool beard, but my wife won't let me grow it any longer than this. We think they have a good model for what is possible for us in this industry, and we'll quietly go about doing that.

How do you compare the programmatic nature of accounting to software?

They are analogous if the depth of your understanding is the same. The fact that they know what they're doing makes the difference, more than the target. We have to play in our circle of competence. We might think medical market software is better, but that's not our mission. It's not the asset you buy, but your commitment to the journey of making that asset better. If you buy something that's no good, you can't fix it. We're not doing and we think we can do many hundreds of these deals over time.

In Australia?

We think we can do hundreds in each of Australia, US and UK, and we will share that imminently.

What is your 10-year revenue target for Australia?

We've doubled the business every three and a half years, five times in a row. We will continue to do that forever. We're at 80 million so we want to get to 160, 320, 640.

It's harder to scale when buying five businesses a year compared to 30?

PWC in Australia has $2 billion revenue, as do each of the big four.

They serve big companies though?

That's correct, but there is $12.5 billion revenue in Australia. The US market is 10 times and the British market is three times that. We think the TAM is $12.5 billion in Australia, $125 billion in the US and $35 billion in the UK. That equates to $185 billion excluding Canada and New Zealand.

Plus all the dollars spent on accounting?

That's dollars spent in our sector.

Do you target 5% to 10% of that, given they are SMEs?

The SME sector is $12.5 billion in Australia. If we wanted to acquire 10% of those, that's another $125 million. We think there's already 10 firms in Australia with over $250 million revenue. We're on a run rate of over 80 and will soon reach 100. We will grow out our finance, insurance and wealth, which are 10% to 15% of our revenues. Today's business is akin to $150 million, eventually, on a run rate basis. So many firms have grown, not only in Australia but globally, so there's no reason we cannot grow, nor is there a rush. What distinguishes us is we go slow to ultimately go fast. We will grow in a controlled fashion, and are keen to help private businesses in Australia grow into the UK, Europe and the US, in terms of export markets. We don't tell our clients to do things we're not prepared to do ourselves. Ultimately, we want to lead our clients to see the global opportunity because we think the world will increasingly become flat.

Do you target cash on cash return for acquisitions when training scouts?

We want to make 35% EBITDA after partner rem on every dollar we turn. We want to lock up less than 50 days and have 100% cash conversion. We're not big into IRR, but are big into cash-on-cash payback periods.

Do you include the debt used in the capital you spend?

I want to continually hire firms and have payback periods below five years. We operate in an area which is too small for the big guys to bother with, and they have to actually do some work. We have an advantage due to our deep understanding. I've been doing it for 30 years and I am an accountant who is heavily invested and aligned with my partners who own 10% of the listed company. We have done the same model repeatedly since inception and refined it over time. We have more understanding of this place than anyone we know, and most people who meet us acknowledge that. You should judge us on our ability to stay focused on our circle of competence.

In these international markets, it will be first bullet then cannon balls. We'll buy a small firm to test our play book, then roll out other small firms. We'll never do anything that bets affirm because we're hyper risk sensitive and don't like losing money. I have a lot of my money invested in the business. We'll try to get a capital structure which is appropriate for global growth and ensure we partner with quality shareholders over a long period.

How do you think about leverage and capital structure?

The big PE deals we see happening in our industry in the US are geared at three and a half to four times EBITDA, whereas we gear at less than one times EBITDA. I saw recently that buyers in a PE deal have $800 million revenue and $80 million of EBITDA. We have $80 million revenue and $30 million EBITDA.

One times EBIDTA but that debt is not necessarily secured with the parent?

Correct, it's with special vehicles with the opcos because that's where the assets leave. I believe in doing risk-free transactions and sticking to what we know.

It seems hard to lose.

You can lose in life through bad luck, ill health or calamity, but you shouldn't exacerbate your risk of loss by doing things you don't understand. We have to guard against hubris and believing we know things we don't know.

How do you keep your head screwed on?

By staying humble and hanging around people who are wiser than you. Today on Twitter somebody told me not to publish stuff about other books, but I am trying to hold myself publicly to the highest possible standards. When I say I admire Will Thorndike's work in The Outsiders, these are the eight greatest CEOs by stock market performance in history, and I'm trying to put my mentality in the presence of the people I admire.

Did some investors tell you not to say that or come across as promotional?

They think we're promotional, but I hold myself publicly accountable. These books I have behind me, Eli Broad built two Fortune 500 companies and I try to live up to his standards. I look at Michael Hill, Buffett, Schwarzman, 100 Baggers, all the blokes in The Outsiders, Imelda Roach. These are all great people I admire first as people, then as business people. That ensures I never think I know very much, because the beginning of wisdom is to know you don't know very much.

Is your strategy to keep your head screwed on rather than trying to sell?

No, I don't give a shit if you buy my shares. You can buy some hopeless company who doesn't care about what they are doing, where the CEO is a promoter. I'm trying to hold myself publicly to high standards. Some people think that's risky, but that's the way my psychology works. I'm trying to build something excellent and conduct ourselves in an excellent manner that we can be proud of long term. I could have stayed private and made tons of money myself, but my drive is to make a positive impact in our industry. I'm happy to do it transparently and anyone that wants to come along for the ride is welcome. In the meantime, I'm staying focused on hanging around good people who care about me, my family, our business and our clients, to do things the right way for the long term. I've seen many people get carried away with fast cars and silliness, but it's more important to be proud of your behavior.

What interests you?

I love to exercise, listen to podcasts and read. Will Thorndike's 50X on Teledyne is amazing. The reason I love reading books is it's like I'm in conversation with amazing people. Yesterday was Sunday, so I did everything I had to with the kids and went to church, but at three o'clock they had to leave me alone because I have to read. I read for three hours and am the happiest man in the universe. I challenge myself to be the best I can and encourage our people to be the best they can, and try to build a model and a business that helps people unleash their full capacity.

I noticed there's more cash outflow for capex or property; are you doing anything unique over the past 18 months buying property?

We've always believed the business is firstly about attracting great people. Like an omni-channel retailer, we spend a lot on our digital and physical presence. We've reduced the size of our spaces but increased their quality. At the beginning, pre-Covid, I wrote a hundred page note book describing how I want to have attractive places for people to work in, when they want to come to work. I'd have the best digital experience for our clients and people, and we're spending money on that. It's no more money than we spent in the past. We've probably done a lot of that spend 10 years.

I love Bernard Arnault, the LVMH founder, who says, long term, we will win by out investing our competitors. Our play is to continue investing in physical and digital infrastructure and our people offer in our team, and build out a global brand nobody can match. We're trying to build a moat by out investing our competition. It might scare a few people if we spend money on things that make sense, but our shareholders are banking on investments I made years ago. I went to Harvard five years in a row with YPO, and recently, I was trying to build a relationship with the bank, and one of the professors that coached me for years at Harvard is on their board.

Our shareholders never had to pay for that because I did years before we listed. For years I built global relationships which are proving helpful for the business because I've always had a long-term vision. We're trying to build a substantial business that can last 100 years. We give every person at Kelly Partners a copy of Good to Great by Jim Collins, but the book that most influenced me was Built to Last. We're only 17 years in and are still building the type of organization that can last 100 years. We have a deep sense of mission about what we are doing. We think that mission to have people less stressed about their money and more in control and confident about where they're moving towards in their businesses, is a universal mission applicable in all Western countries.

Do you see yourself 90 years old, chairman of KPG?

If I can inspire people to be the best they can, I'll continue what I'm doing. Charlie Munger was so sharp and inspiring at this year's Berkshire meeting that I was levitating on my way out. I absolutely loved it because of the person he is and his age. It's a blessing to have meaningful work and colleagues you care about who want you around. I spoke to a great CEO, pre-IPO, who told me when he was doing 100 million and writing 20 million on the business, he could move the dial on the business, but now that they were doing five billion, he learned that he could no longer do that. I had to rely on inspiring others to join the club and the journey.

Pre-IPO I could see if we wanted to build a major business, I would have to conduct myself in a way that would be attractive to people who were serious about growing substantially. That means being authentic to who you are and being driven to make a difference for people. I've been very good with our colleagues at attracting amazing people, which I am most proud of, and to the degree I can continue to do that, I'll do this forever.

In April, we were in New York where many amazing people wanted to do things with me, and my wife asked why I kept saying no, and I told her I didn't want to burden the family by being too busy. She told me if they want my help, I should help them because the kids are at an age where they love and respect what we're doing. They are 17, 15, and 10, so if what I'm doing is compatible with my family life, good for my health and continually energizes me, I'll keep doing it. I got asked today on Twitter about the key man risk, but I am confident in the structure of the team we've built. I met Tim Cook at the Berkshire meeting and he was very gracious, as the people at the top normally are, but I always reflect Apple is doing well even though the founder is absent.

Who would take over after you because you would be big shoes to fit into?

The board has a named designated successor I've been training for nearly a decade. It's documented in all of our partnership agreements to ultimately put somebody into the exec CEO role.

Is that public?

No, only that person and the board know. The only stipulation I have is it must be an operating partner chartered accountant who has come through our system, not some random executive.

A previous partner in your system who has run a business and is a chartered accountant, someone you are training in the background?

Three dozen have been with me for over a decade and all of them could understand what we do and don't do and why, which is important.

Are some of the Kelly kids going to be joining KPG?

I have no aspiration for my kids to be in exec roles in the group. Nepotism is unhealthy for a business. It's important I put myself in a position to help them do whatever they want to financially in other ways, but I don't plan on building an empire.

To last long you have to design your life in a way that allows you to get there and survive, how do you think about longevity and what makes it possible for you to have the potential to be 90 odd years old and still be involved in KPG?

I gave up alcohol on the 27th of December, so I no longer drink.

Last year?

Yes, I'll have a drink if it's important, but I've had three drinks since then. I've averaged 10,000 steps a day ever since I committed to doing that. I can also do it with my wife, which is great. I'm doing less heavy weight lifting and focus on flexibility. Mentally I make sure to read because I know reading powers me and gives me energy. I have a hard rule that I never work on Sundays and have always protected that time. It's incredibly good for mental health to choose one day a week where you don't work. I will make sure my kids and wife tell me not to work if I try. Those are the bedrocks of how to look after yourself physically, emotionally, spiritually and mentally.

The last rock is to get the right structure for the whole code, like Buffett has with his dual class, so that we can grow without losing control. If I didn't have control of the business, I would simply sell it because I'm not interested being stuck in a bureaucracy arguing with people who don't understand what they're doing. Today I'm a big listener, I engage in conversation and love to hear what people think. I never argue and wouldn't ever put myself in that position.

Do you currently only have one structure?

Yes, you cannot have a dual class structure in Australia. Some Scandinavian shareholders told me about Carl Bennet in Sweden who has a dual class structure and they were asking whether I would sell them some shares. My answer was, I wouldn't sell under 50% otherwise I would lose control. Their answer was to get a dual class structure which would allow me to sell them shares. We are investigating that and if I can get that type of structure, I could have long term control of the business, raise capital, do a sell down and improve the liquidity. Buffett returned to Omaha with $160,000 capital, and never had to pay 30 grand for a house and always lived off the money he had outside the business. I didn't do that so at some point I'll try get a Buffett style structure where we continually reinvest our dividends to grow stronger.

Would you liquidate some stock to have that buffer at some point?

Ultimately, I'll keep a controlling stake, get a dual class structure and do a sell down so that I pay no dividends if it's achievable.

Do you currently pay yourself dividends to give yourself a buffer?

I've paid myself 1% of revenue and haven't had a pay rise for five years. I've done that so people know I would never put myself first. I try to pay dividends monthly because it's tax preferred in Australia, but also wanted our partner shareholders to get paid on the same basis as our operating partners so people understand the structure and appreciate how strong the cash flow is. That's worked well because people can see more clearly. Buck always spoke about how a dollar flows through a P&L, and I was trying to attract quality shareholders who could see that.

EBITDA, net margin, then you pay out the minority interest and dividends?

We try to have transparent accounts so they can see it. We have a strong quality shareholder following who are asking why I pay dividends when I could reinvest at 40% ROE. One of the investors told us we have as good ROE as anyone in the world at this size. We will investigate that because they're an investor into programmatic acquirers, who were talking about the structure, so we're looking for the best way to run the company long term to be able to deliver a global platform and be the first choice accountants for private business owners.

Could you commute less in the US?

You could, and we're considering with the board the best way forward, but I wanted to prove the model for five years, which we've done, then work out how to go to the next level and become a Berkshire style business focused on our industry.

If you sell down part of your stake and keep control by dual listing structure, you have that Buffett buffer and don't have to pay dividends and can keep reinvesting?

That's what we are kicking around and those are my aspirations. At the end of the day, I have a publicly declared hero and I want a structure the same as his. We were too small when we started and I wanted to be publicly listed to be transparent with those joining us, that we were a properly structured, financed and audited group, so they could have confidence in what we were doing. That's worked well but when I grow up, I wanted to be like my heroes and have the structure that do.

Would you keep your salary the same like Buffett did?

The problem with that was when we listed, the investment bankers said I needed a market salary because if I die, it would affect the P&L when they would have to pay my replacement properly. These days, I'm less concerned about what I get paid, because when I was selling down a large chunk of my founder shares, I owned 89% of the business pre-IPO, so I was prepared to accept a low valuation to become public. I'm not part of the discourse of bankers and brokers who said I was an unproven public company CEO.

At the end of the day, whether you own a large stake in a company like I do or not, the company didn't give me my stake and I have not been given options. My stake came from my wife and kids sacrificing blood, sweat and tears. If shareholders want to retain me, the board needs to think about how best to do that. You do need to pay people like me because if you want to replace me, you will have to pay somebody, and because it's not normal not to pay somebody for the work they do. US brokers charge 5% of the value of acquisitions they make. I've made $40 million worth of acquisitions in the last five years for which I've been paid zero. I do lots of good stuff but I don't do the wrong thing by the company.

Going forward, the company will have to pay me on the same basis they paid me at IPO. You can imagine the conversations I had in the US as to what somebody would pay to do what I'm doing.

Will you take no dividends and get a normal market salary?

Yes and I'm compounding my equity. I don't think I could have done more to demonstrate my own values and commitment to the business. I own a massive amount of equity. I sold some cheaply so that I could build a free float to have a public company so that I could show the business model to the market.

You had 89%, but sold down over the last five years in the market?

No, we raised capital at the IPO, so I went from 89% to 51%.

Have you not sold a share since?

I've sold a million shares over the last five years simply to fund my lifestyle. I had to make up the gap between what I get paid and what a decent salary would be, so I can eat and survive.

You're not driving Lamborghinis around.

That's why I have weird share trading activity. I might sell the odd share here and there but I also might buy them back. People are always amused by my buying and selling activity, but I am simply managing my cash flow. I'm excited that we can get the business to a substantial level. If anyone doubts we've built a unique model we trademarked it. It's called Partner Owner Driver and we think it works and I will quietly continue to demonstrate that.

What would you say to people who misunderstand you and your mission?

I told someone on Twitter today that every dollar of revenue that came into this business I sold personally. I asked them if they have a have a great accountant and if not, we should talk. Accountants never give you forward-looking advice and tell you how much it's going to cost. Instead, they give you an estimate then charge more. You can never get hold of a boss. They don't have a system that proves it can make you better off, and you're not sure they're making your life better. Let me show you how we do that for you, and if that's of any interest, become a client of Kelly Partners. I did it over and over to get client after client in the door.

I sold $750,000 of new services in the first three months of the firm. If you walked past me, I would ask you to be a client, and I still do that today, because that's what founders do. I've tried to save us time as a group by publishing an owners’ manual and FAQs. We don't do investor meetings, instead we send them information and videos and ask them to send questions to us in writing which we answer and add to our FAQs. If they have more questions, we get them to put it in writing and we might meet with them. That so-called promotion is saving me time so that I can continue to run the business of helping our people find clients and firms. I don't do a roadshow at results time; I do an investor call and send out lists of things you might find interesting like an owner's manual or a deck.

It's almost like you can't win if you're not out there more?

If you're skeptical and bought our stock in the middle of a pandemic at 60 cents, that would have turned into $5, which is not so bad. I look at our partners and the underlying businesses and how committed and hard-working they are, and the difference they make to their people and clients, and I say don't get distracted by me. We have 15,000 client groups and have grown at 30% a year for 16 years in a row. Understand we're in the accounting business and governments aren't going to stop collecting taxes. They will be more aggressive in future and you will need tax advice which we're committed to delivering. If you meet an accountant with as much energy and passion as me, who is as well-read and thoughtful about what we're doing, and owns half the business and is prepared to be public about it and fully committed, buy that stock.

From my point of view, I'm trying to do publicly what we do privately in an effort to grow the business. There's nothing I wouldn't do that's legal and ethical to share what I think is a great story. I wouldn't be doing the right thing by them if I didn't share that story. I could go skiing and neglect the job, but look at the numbers. If you don't like the promotion, line up the cash I was saving over the last five years and have a look at that. Find something in the business that's fundamental for the business that doesn't make sense. At the end of the day, if you're skeptical, I'm going to make sure it costs you a lot of money over the next decade.

Is there anything about the business you think people misunderstand, the financials, structure or operating model you see investors typically trip up with?

Most people are lazy and not well-read. I ask investors if they have read The Warren Buffett Way, King of Capital, Snowball, The Outsiders, Common Stocks and Uncommon Profits, and most haven't read any, which is stunning. As a result, I don't have much in common with then so it's difficult to have an appropriate conversation. I get my CFO Ken to ask them that and if they haven't read those books, I don't talk to them because it's a waste of time. People who aren't that well-read work by pattern recognition. They call me an accountant, but I have written five books and given over 2,000 professional speaking engagements.

Most people want to put you and your business in a box and make out it is the same as something they have already seen. We all do some pattern recognition but it takes intellectual curiosity and genuine effort to get to know somebody and their business, and most people are too busy for that. This is not a promotional roller. This is a long term 100-year play to take 51/49 stakes in accounting firms and make them better at looking after their people and clients. We're going to do it relentlessly as long as have breath where we can make a difference. It's not that complex and we are very good at it.

We've developed a model which is deeply thought through and diligently executed. You can judge us on that over time as this is not a new business. We've been running 17 years and I intend to do this as a public company for a long time. For the next 12 months I can do no podcasts and meet no people, but the company was private for 12 years before we listed, and I did none of that, so that's no skin off my nose. If it helps, I'm happy to do it, but I don't want it to be a distraction to the business.

It's going to be a good journey for that long.

Lawrence Cunningham read one of my quality shareholders newsletters which was sent to him by someone in Spain. He liked it and sent me an email. Will Thorndike who wrote The Outsiders spoke at our AGM after seeing the same quality shareholders note somebody sent him. He sent me an email saying he would love to look at my business, and had already bought 500,000 shares at that point. If my promotion is seen as a bad thing, but it is actually communication which leads me to meet people like Lawrence who sits as a shadow director observing the board, then joins it, I will continue doing that bad thing.

That sounds good to me.

I write letters to people who write great books that influenced me and thank them for their book. Some of them do Zooms with me. I did a podcast with Sir Martin Sorrell who founded WPP. After watching his YouTube video, I emailed him and he looked up our company and said he would love to chat. He did a Zoom call with me, and I asked him to be on my podcast. If you can't learn from a guy who built a $14 billion business, then got turfed out and built a $7 billion business, you should give up. If being the way I am connects me to people who inspire me and give us great ideas for our business, I will keep doing that, but you can't win all the conversations or make everyone happy. We'll try to conduct ourselves in a humble and determined way for a long time; at the end of the day, that might work. at the end of the day, that might work at the end of the day, the end of the day, might work.