Ken Matthews, founder of Matthew Steer, successfully grew and sold a mid-tier financial services firm. He talks about the importance of scaling & the three distinct stages of growth, the challenges of transitioning from a sales-driven mode to an operational mode and the huge upside of finding the right buyer.
@Ken Matthews, founder of @Matthew Steer, shares the long but successful journey from growing to selling a mid-tier financial services firm. He talks about the importance of scaling, the three stages of growth and the challenges of transitioning from a sales-driven mode to an operational mode.
"Stepping back and becoming a CEO is a significant step and not an easy one for any entrepreneur."
Ken and I talk a lot about the process of selling, and what he sees as the most critical for getting a successful result;
Ken has dealt with many business owners over many years. The triggers for them seeking his services can range from;
Key Takeaways;
Michael (00:01.786)
So welcome into, I think edition 142 of Small Business Banner podcast. I'll have to check on that, but welcome in Ken Matthews today.
Ken Matthews (00:04.43)
Thank you, Michael. Welcome to you. Thanks for...
Michael (00:14.746)
Yeah, look, it's, yeah, look, the reason you and I, we've known each other for a fairly long period of time. I'm gonna get you to tell your brief story in a minute, but Ken was, is the founder of Matthew Steers, which is a Melbourne -based or Victorian -based.
financial services group started as an accounting group, but really broadened out, you know, much more to focus on, you know, family businesses, particularly. So, Ken, thanks for taking time to come in and chat on Small Business Bandit podcast. Do you want to kind of just set the scene with your brief history? It's not a brief history, but, you know, a couple of minutes on you and Matthew's steer, and then we'll delve into some
of your experiences working with business owners closely to help them get set to sell and also your own exciting news of the last few years where you also went through some mergers and acquisitions and really redeveloped your business as a much bigger, broader financial services platform looking for your own acquisitions to grow. So over to you Ken.
Ken Matthews (01:21.516)
Well, thank you, Michael. I think we first met at EO, Entrepreneurs' Organisation, going back quite a few years ago.
I suppose that's probably where I started was in the garage at home in East Keeler as an entrepreneur, really starting from scratch and then, you know, taking in Jeff Steere as a partner in 1990. And then we, you know, we had a vision to, to basically grow a mid -tier firm in the northwest of Melbourne, which we've done over, you know, 33 years. It's now, we've got 50 people, four in the Philippines.
Michael (01:56.186)
Yeah.
Ken Matthews (02:19.051)
And as you said, not just accounting and tax, but we do business advisory. We have financial, a large private wealth financial planning division. And we also, which is interesting, which is a bit different, we have an innovation and grants team. So we're doing R &D and export marketing and capital grants. So, you know, even though we're an accounting firm, we've actually got three PhDs working for us doing R &D clients, which is a bit unique. We've actually got them based in a lab.
Michael (02:43.194)
More like a lab.
Ken Matthews (02:49.035)
sort of a lab at Melbourne Connect in 700 Swanson Street, part of Melbourne Uni, which is a fantastic site. So that's sort of what our journey's been. It's been a great journey. I wouldn't have swapped it for anything.
Michael (02:54.938)
Yeah. Yeah.
Michael (03:07.066)
Yeah, it will get into in a lot more detail, but when you began in the garage, it was you had in mind at that time to grow a successful accounting firm. Was that kind of where you saw it then or did you have eyes on a bigger play 33 years down the line?
Ken Matthews (03:30.667)
Oh no, we'd never envisage that it'd be as big as what it is now. But when I started, I came from an accounting firm over in Ivanhoe and I saw the quality of that firm in Ivanhoe and I didn't think there was really much in the north west of Melbourne that could service businesses in particular the west of Melbourne and I wanted to provide that service.
taking in Jeff Steer from Arthur Andersen. So I mean, Jeff was a senior tax manager. You know, we were, and I did a post -grad in accounting. You know, we were delivering pretty high -end, you know, tax and accounting advice even back in 1990. And so we sort of had, a vision was to create a business of the size and scale that gave,
Michael (04:15.226)
Yeah.
Ken Matthews (04:25.864)
all of our people the opportunity to grow and also have the service offerings to our clients so that they could grow and thrive. And I'll come back to this later. I mean, we're aware of the view that you do need scale in the financial services sector now.
Michael (04:36.346)
Yeah, yeah, yeah.
Michael (04:45.914)
Yeah. The client you were referring to then, did you take an early focus on business vis -a -vis, you know, individuals? Like, was that an early...
Ken Matthews (04:59.943)
Look, I have a philosophy that I picked up from one of the chaps at through EO. You go through three stages of growth. The first stage is sales driven. I mean, you take everything that comes through the door and we were no different, right? So we took salaries and wages. We were capable of doing high end, property developers, manufacturing.
Michael (05:06.458)
And EO, by the way, is the entrepreneurs organization. Yeah.
Michael (05:18.33)
Yeah.
Ken Matthews (05:28.55)
at that time, just from both our backgrounds. But we then realized that doing $50 salaries and wages returns was clogging us up. And we had to make a decision to simplify the business. So one of the first things we did was to let those go and focus on the more substantial clients. So you start off at that sales -driven mode where
It's like a family environment. Everyone knows everyone. You do everything. Yeah. And then you move into a more of an operational mode where you, the CEO, appointing a CEO was a big deal. I mean, cause it was originally Jeff and I, we made all the decisions. Actually for me being appointed CEO was a pretty big decision at the time. And then I delegated a lot down.
Michael (06:00.794)
Yeah.
Ken Matthews (06:23.654)
to an office manager who then became a general manager. And then, you know, you have divisions and you have proper systems and processes that you don't have when you're in a garage at home or, you know, in a small environment. And then you get into this sort of the third stage, which is the transformational stage, which, you know, you do need external help and you need to surround yourself by really good people, which we're able to do.
Michael (06:52.73)
Yeah, it sounds like for you to step out and become a CEO, just purely in a, even in a fast growing or well established accounting firm, to establish that kind of position is a real statement about where you're gonna be off the tools and focusing on the business, the accounting firm, the business, as opposed to just, you know,
clients day to day, that's quite a significant setup for what you just described, which is a base for innovation because you're running it like a business as opposed to a practice where you're in it.
Ken Matthews (07:32.644)
Well, we established a board, a company board, you know, 20 years ago. So we were one of the first accounting firms to do that. So we ran it as a business, a company where a lot of businesses and accounting practices more so run as a partnership where, you know, your worth is how much food you generate as a partner.
Michael (07:42.17)
The innovative, yeah.
Ken Matthews (08:00.451)
It is a significant step and it's not an easy step for any entrepreneur to let go, to put in place, you know, office managers and HR managers and to, you know, and to then focus on your people, growing your people, but also getting in front of your referral partners and you and bring in the work. So you get to a stage where, you know, someone has to...
Michael (08:24.474)
Yeah.
Ken Matthews (08:29.667)
you know, focus on actually running the business. And that's, that's the, that's that sort of probably the, the operational stage, the second stage, I think of a business development. And the third stage is probably you get to you, you then need a board, a board around you, an advisory board around you and good people and mentors around you to help you. Cause you don't know everything. I mean, you, it just, it's a long process of, of trying to, you know, um, understand what the,
Michael (08:39.226)
Yeah.
Michael (08:44.698)
Yeah.
Ken Matthews (08:59.267)
the opportunities are and also the weaknesses and threats that you've got in your business.
Michael (09:06.17)
Which I imagine being a CEO as opposed to a partner focused on producing more fees, it does become a bit clearer that, you know, you've got an eye across the business rather than just on your, you know, day -to -day activities. So it sounds to me like that was, it's a huge investment to step away to, you know, create these, this organizational structure that is about setting up for future.
growth. I'm sure there were trade -offs along the way that you'd want to ensure that you get the right return on later, but it was innovative for sure.
Ken Matthews (09:43.168)
Well, it was scary, I can tell you, because when we did it, the foods dropped, yeah, because you're off the tools, you're not generating enough. So it's actually one of my very good friends explained it to me who helped us do our strategic plan and at the time and he said, look, it's a hockey stick. You do take a hit, but then it's just accelerated growth.
Michael (09:54.298)
Yeah, yeah, yeah.
Ken Matthews (10:13.919)
Because you're growing, you're actually getting off the tools and doing the work that can be delegated down to young up -and -coming people and giving them an opportunity to become associates and partners within the business. And that's where you get this hockey stick effect and accelerated growth. But I can tell you, it's not, unless you've been through it, it's really difficult to explain to people. And it is quite frightening, I can tell you.
Michael (10:30.746)
Yeah.
Michael (10:39.866)
Yeah. Well, there's a couple of attributes that there's one is just letting go and handing over responsibility and believing in people that they're going to grow and do the job at a level that you're happy with. But as you say, the financial hit, like you could, I think there is, there's a lot of businesses out there, accounting firms, all sorts of businesses that are in that middle phase where they're just about sales and what can I,
Ken Matthews (11:06.11)
That's right, and there's probably no value in them. I mean, there's not a lot of value. So you basically, it's just, you know, the goodwill is the person. You take the person out of it, there's not a lot of value. So if you can actually step back, I mean, the CEO is replaceable.
Michael (11:09.786)
create today and that's fine if that's what you want to do but when you know when they stop the business stops.
Michael (11:19.674)
No, not a lot of value.
Ken Matthews (11:36.157)
Partners are hard to replace, believe it or not. Yeah.
Michael (11:39.034)
Yeah. And if, but if, you know, there, if you're in a mode where you're, you're driving and working hard, collecting more fees along the way and you bank them and do something else with the money that I think that's a, you know, it's certainly a pathway, a legitimate model for some, but you know, what, what we're saying here is, um, you know, you've early days seen the opportunity and it.
It might be a good time now to talk about where the business is at now and what you've been through in the last few years, because that is really the result of work that started way back in the garage and continued on through that phase of stepping aside and becoming CEO. So where is the business today and what happened in the last few years? Yeah.
Ken Matthews (12:12.637)
Well, if I could just maybe step back one step before that. You know, we were approached at least twice before we actually did a transaction three and a half years ago. And I think that...
They were great. Look, they're disruptive to your business. I mean, in one case, we were 12 months talking to someone, a listed entity. But we learned so much about them. We learned so much about the market. We learned so much about ourselves because they actually put the microscope over us. So we knew what our weaknesses were and where our opportunities were. And when someone actually values you, that's when it really hits home to you.
Michael (12:48.634)
Yep. Yep.
Ken Matthews (13:10.365)
You know, one is, is it the opportunity or are you leaving too much on the table? Um, so those two, twice it happened to us and we thought, yeah, that they approached, they approached us. Yeah, they approached us and, and, you know, it's quite humbling when you get a phone call from someone and they say, you know, look, we, are you interested? And we're, my comment is you were always interested for the right buyer, but.
Michael (13:19.066)
They came to you, essentially, yeah. Yeah.
Ken Matthews (13:34.909)
you know, you've got to get through a number of gates before it's the right deal. And, you know, probably the biggest gate for us was the culture fit with the organization that we were. So having those two experiences prior to the phone call we got from, you know, we were part of Macquarie Van Network, which is a boutique organization with Macquarie Bank. And,
you know, our contact there said, look, we've had a phone call from Paul Barrett from A's at NGA. And I said, well, who in the hell's Paul Barrett? And I've never heard of A's at NGA. And they did their research and come back and they said, Ken, we think you should talk to them. And we ended up having a breakfast. My chairman, I had a chairman of my board, Graham Billings, who was ex -partner at PWC. Him and I met with Paul Barrett and Barry McGee, who was the
General Manager of Accounting at the time. And we just, you just connected at the breakfast. And it was, the connection was that we had a clear vision of where we were going as a business. We'd prepared a strategic plan three years earlier. And we realized through the work we did with Macquarie Van and our own research that we had to get scale. After the Hain Commission,
into the banking sector and financial planning, we just realized that we needed to be bigger, to be able to have the resources, to be able to attract and retain people, and the service offering for our clients going forward. So that was very clear in our, and how we were going to do that. And one of the ways was through acquisition and to build this innovation and grants area. There were two of the...
Michael (15:31.578)
Yeah.
Ken Matthews (15:33.245)
two of the areas that we wanted to do. Now, Paul Barrett's vision is to effectively take a strategic interest in accounting firms and financial planning firms and basically support you to grow. So, we don't have to deal with banks anymore. If I find a target business that I need to do, provided it's a proper business case, they'll back us. Now, there's a lot of work to do to get to that.
Michael (15:58.618)
Yeah, okay.
Ken Matthews (16:02.941)
can tell you, but you know they've done you know over a hundred acquisitions. So having that comfort that you're dealing with people that know what they're doing it gives the shareholders and partners at Matthews Steer a lot of comfort that we're you know that we're not going to get ourselves into trouble which we did you know 15 years ago we bought an accounting practice and it you know it was a mistake completely mucked it up so.
Michael (16:27.098)
Yeah. Yeah. Yeah. Cult was it culture or was it just a whole range of things?
Ken Matthews (16:32.669)
Yeah, it was a cult, the guy was a lovely guy. But we thought it was only a small, it was really a tuck -in type business. And we thought, yeah, this will be easy. Well, it's a bloody nightmare, all the staff left and the quality of his clients compared to ours was dramatic. And we couldn't believe just how his clients treated him.
Michael (16:41.946)
Yeah, yeah. Yeah.
Hmm. Hmm.
Michael (16:55.578)
Yeah.
Ken Matthews (17:01.661)
It was terrible and we couldn't have that treatment with our staff. It was just terrible. So you know, he's a lovely guy. We probably, you know, he's a good person, but you know, culturally when he came in, he realised he was out of his depth, unfortunately, and left.
Michael (17:02.81)
Yeah.
Michael (17:09.306)
Hmm. Hmm.
Michael (17:22.074)
Yeah. The, uh, yeah, I understand deeply why, you know, culture is so important in a people business. It's people internally as staff and people as, as clients. And, you know, so that, that, um, beyond numbers and synergies and, you know, it's gotta be, it's gotta be a, you know, the new merged or bigger organizations got to have compatibility around, you know, vision and, you know, the way things are done and, you know, the
the type of people that are, you know, that work in the organization and that you want to have stay there for a long time. It was just interested you. So you had a you had a couple of approaches. The third one came along, Paul, Paul Barrett, and was the. And you had this acquisition that didn't go so well 15 years earlier. So by the time Paul came around.
Ken Matthews (18:07.581)
Yep.
Michael (18:19.514)
you'd probably be in a position where you're able to say, to make a really informed assessment that this is a good move because you've looked closely at a couple of others and that's invaluable, although it can be a costly investment of time and money.
Ken Matthews (18:38.013)
It was very time consuming, those two. And the final one was it took us six months to do the transaction. But we were ready. I mean, we had, our numbers were fantastic. I mean, from a preparation, going through the two transactions or potential transactions prior, we were ready. We knew what to expect in due diligence. We knew what a term sheet looked like. We knew what...
Michael (19:04.922)
Yeah.
Ken Matthews (19:07.965)
contracts look like. So we, you know, we made sure we had, you know, competent advisors supporting us and good lawyers, which was really important as well. But, you know, it's funny, the numbers are the numbers. I mean, you'll get a range. I mean, you've then got to be able to articulate, you know, where you're heading as a business to get an uplift. And we were fortunate we were able to do that.
Michael (19:15.13)
Yeah. Yeah.
Michael (19:35.354)
Yeah, yeah. Yeah.
Ken Matthews (19:38.013)
And we got a good deal and it's proven a good deal for A's at NGA as well as Matthew Steer.
Michael (19:44.154)
Yeah. Yeah. And it sounded like it, it, it, there was fairly you and the chairman went to breakfast and, and it sounds like immediately there was a, you know, a sense that this is, this is a real opportunity. It was that fair to say, uh, it happened quite, you know, you got that connection feeling.
Ken Matthews (20:01.085)
It, it.
Yeah, so we were very comfortable with the two guys that we met. Barry McGee was the third generation accountant from West Wyong in New South Wales. I mean, he, you know, lovely guy. Paul Barrett, you know, we connected with as well. And over the six months in the due diligence, I got to know Paul really well. The thing that you've got to look for is consistency. What they say they'll do. And that's what we got.
And so other transactions that I've looked at, if there's any inconsistency, I walk away. I'm just not interested in dealing with people that are not consistent, that not saying they're dishonest or whatever, it's just if you've got problems that initially you're going to have problems if it's a, you know, later on down the track. And I can say that we didn't have any, look, we had issues. I mean, we had...
Michael (20:56.026)
Yeah.
Ken Matthews (21:03.421)
you know, in terms of you always do it a transaction, but our advisors were fantastic in working their way through that, you know. So.
Michael (21:11.354)
But this organization had a track record of doing lots of other acquisitions. So, you know, that's where consistency comes. You can see that because they've done it before and you've been through a few to a few dancers yourself. And, you know, so it's not like first time for either of you.
Ken Matthews (21:14.941)
Yeah. Yep.
Ken Matthews (21:29.213)
And I really do think that, you know, to maximize the value of your business, you need to do a couple of, I think you need to at least, you know, be ready. And we're ready. I mean, we were absolutely ready, investor ready, but we weren't looking at that time. We were on a growth phase. And basically what this enabled us to do was to de -risk ourselves. We were able to take some money off the wheel, which was important.
You know, we've got young partners in the business, young shareholders. It enabled us to have a shareholders agreement that if something happened to me, my wife got a check on an agreed formula. That was worth a lot to us. And young partners coming in, they funded them. You know, they were able to effectively organise with the bank to, for them to buy in. So, you know, a lot of the issues we had.
Michael (22:12.314)
Yeah. Yeah. Yeah.
Michael (22:24.762)
Yeah, I can.
Ken Matthews (22:28.719)
were taken away from us in terms of we just had to focus in on the business and growth.
Michael (22:33.594)
And it sounds like you personally, and probably, you know, at least you personally still had Runway. You were excited about, you didn't need to sell out at that time totally and go and play golf or whatever you do. You sounded like to me, you had Runway and, you know, they painted a vision that you could stay involved in a really exciting, innovative, growth -orientated practice.
Ken Matthews (23:03.053)
They basically backed our strategic plan. That's what they did. And they said, can we want you to help deliver it and execute it? So, I mean, you know, if you, you know, we sold out 51%, right, effectively. And, you know, someone says to you, yeah, we're going to back you to double it. Geez, I mean, that's a pretty exciting proposition.
Michael (23:06.234)
Yeah.
Yeah.
Michael (23:30.138)
Yeah, sure is. And, you know, this is where I'd love to get to kind of parlay into a chat about your, as an advisor to small business owners as well, let's talk about what you'd advise them to do based on your own experience. But yeah, it's, you know, this pathway, there's a total, you can sell out your business, some, you know,
And then you can enter these joint ownerships, shared ownership models where you're still involved. And I think the level of complexity there, the upside when you get the two good partners, one with all the capital or the experience, you with your infrastructure, one and one equals seven, but you are then, you're no longer the sole owner and you're no longer...
Ken Matthews (24:15.085)
. . .
Michael (24:28.186)
exited and, you know, free to do whatever you want. You're in a partnership. I mean, it's not a formal partnership, but you're working with another organization. So that's, I think there's a lot of opportunities for owners out there to consider something like that, because a lot of businesses do have potential. They don't have the capital, the know -how, the people, that there's a range of constraints on them to achieving that. Sellings,
kind of they feel like they're gonna get short change because there's so much potential. But you know, if you can't do it and you can't, it's hard to get value for it. So it does open up the world of bringing in a shareholder, but it's enormously tricky.
Michael (25:16.922)
So in terms of your, you've been heavily involved with Family Business Australia, you know, and as an advisor day to day to, you know, other significant, you know, SMEs or private businesses. So what are your reflections on your own experience that you put into practice with, you know, with clients now about getting them ready to sell?
Ken Matthews (25:34.125)
Well, you know, we've got a couple of projects on the go at the moment where we're doing a strategic plan as the first step. So we go in as part of the, we do a deep dive into the client.
From a financial perspective, we look at their last three years accounts and really do a deep dive. And we run it through a program we have called a financial canvas, throws out all their KPIs, calculates free cash flow, which a lot of people don't do. And at the end of the day, if someone's buying your business, they're going to look at what cash is actually generated from that business to be able to see, well, how can we pay the debt back and what's our return?
So we take the clients down that process and we do a strategic plan which gives them actions, accountabilities and timelines. And that we then usually most likely go on to an advisory committee or board and we hold them accountable on a quarterly basis. And we drive those actions and hold them accountable. What we find is that a lot of people...
We see a lot of family businesses in particular that they've got lazy balance sheets. Because they're making good money, and the family's doing very well, they don't push the business as hard as they need to. So their inventory could be too high, their debtors could be too high, or even their pricing's probably...
hasn't been looked at for quite a while. So they're the sorts of things that we look at. And we put structure and corporate governance into a business and give them a vision. Where are they now and where do they want to take it? And a lot of the times they're just treading water. We've got one at the moment. The father is not well. He's the founder.
Michael (27:32.89)
Yeah.
Michael (27:49.818)
Yeah.
Ken Matthews (28:00.774)
And the kids are in the business, they've got three kids in the business. The amount of work they're all doing is ridiculous. I mean, they're burning, he's burning his family out as well. And, you know, we need to restructure that business. He needs to put in a general manager and he needs to step down as CEO and become chairman of his board. I mean, he's in his late seventies, he's not well. So, you know, that's some of the things we do.
Ken Matthews (28:32.294)
Have I missed you? Have I lost you, Michael?
Michael (28:40.335)
Can that, I don't know whose internet it was, it just, yeah, it dropped out. Yeah, we're back on. Yeah. So, yeah, you were just, I'll fix this.
Ken Matthews (28:43.078)
What happened?
Ken Matthews (28:50.566)
Are we back on?
Okay.
So we get them ready by actually giving them strategic focus and putting in place systems and processes that will drive them.
Michael (29:01.167)
Yeah.
Michael (29:04.655)
Yeah. Is this the owners of the businesses that are your clients coming to you saying, I'm not sure what to do or I've been approached, where's it seeded that they start to work with you to go through a very proactive plan?
Ken Matthews (29:24.613)
It's what usually happens, they get to a size where what they've been doing in the past is no longer working. So communications is a big issue usually in a lot of businesses. The communications are breaking down. They've got to a size where they don't know every client, they don't know every customer. So they need to actually become a more sophisticated business to run it.
run it more professionally. They don't know how to do it. That's why they come to us to cut through that barrier.
Michael (29:56.847)
Yeah.
Michael (30:04.111)
So is it the triggers could range from, I know there's more in the business to I don't have a succession plan. I'm a bit concerned that, you know, what happens if something happens. But I imagine being, for you being close to them as the advisor that you start to have those more intimate conversations.
Ken Matthews (30:28.003)
Well, I can think of two or three situations at the moment that we're having those discussions, we're putting in an advisory board at the moment because they're concerned if something happens to them or who, what happens to the business? And at least if you've got an advisory board there, you can then go and find a CEO to replace them or you've got, there's some accountability there, there's some structure there, which doesn't exist at the moment. So that actually happens quite a bit that they're concerned about.
The other issue is this, well, who's going to take over? And, you know, we're having those discussions with a number of family businesses at the moment. I mean, the businesses are too good to sell, believe it or not. They're making really good money. And, you know, an option is to sell it in one case, but...
Michael (31:11.727)
Yeah.
Michael (31:17.455)
but on terms that are acceptable.
Ken Matthews (31:22.082)
acceptable and the family saying well why don't we continue just to work it for another five years and that's what they're doing but they need proper structure because they...
Michael (31:26.767)
Yeah, yeah.
Michael (31:32.431)
Yeah. And, and yeah, and to be, and to be ready because I think there's a lot of, there's a lot of activity that I'm a part of now, which is these unexpected approaches. And so you know, this, this idea of it's a linear thing. I'm at a certain age at a certain stage, I'm going to, I'm going to get the business ready to sell in three years time. That's one pathway, but.
If you've got a good business, the probability that someone is going to knock on your door in any industry, because a bigger competitor or someone else in the supply chain, they know who's going well, that probability increases all the time. So, yeah, being actively ready. I do want to just go through that some more, but I also wanted to just reintroduce some chain with...
Ken Matthews today on Small Business Bandit podcast. Ken's still the founding partner and CEO of Matthews Steer. Oh, you have, yeah, yes.
Ken Matthews (32:39.456)
And no, I'm not. I've stepped down as CEO a couple of weeks ago. So, so I've got David Reeds now the CEO of Matthews Steele. So I'm sorry to pull you up. It's only happened a couple of weeks ago, three weeks ago.
Michael (32:47.183)
Yeah, okay. Sorry David.
Michael (32:52.879)
Yeah, yeah, for sure. Now that's, we've got to get all the facts right. We've had this in the planning for a little while, so yeah. But yeah, that's, you know, I'm fascinated with this, I think somewhere in the notes, you talked about the level of unpreparedness for sale or the issues around businesses transitioning to
Ken Matthews (33:01.024)
Yeah.
Michael (33:21.423)
to new ownership and the risk that is there for the owners of those businesses and more broadly the economy if we don't have a good pathway to transition good businesses from one owner to the other.
Ken Matthews (33:21.887)
Yeah, you're talking about this baby boomer tsunami that's happening with family, with businesses generally across Australia. I mean, you've got a lot of baby boomers in their 70s now, late 60s.
into their 70s and the businesses, unfortunately, in a lot of cases are just unsaleable. They're completely dependent upon the founder or the person that owns the business. And it's not, it's other than the, you know, the customers and the plant equipment, there's not a lot of goodwill in the business. So it's personal goodwill rather than
rather than business goodwill, which happens a lot. But there is a way forward, but you've got to want to do it too. And a lot of small business people don't want to make that investment. The other thing that I see which is fascinating is people don't know what they need to retire. They don't know the number to retire.
Michael (34:50.063)
Right, yeah.
Ken Matthews (34:50.877)
And that's an interesting process to go through too, which we take the clients through. What's the number they want? And quite often...
Michael (34:58.863)
It doesn't, but it doesn't go, whatever that number is doesn't equal the price of you or the value of your business, right?
Ken Matthews (35:07.292)
It may, it may, it may. I mean, you actually get some people that, you know, I had a client that had five million bucks sitting in his bank account in his business. And we did an analysis and we said, look, you don't need that amount of money. It's a risk having it in the business. And he just looked at me and he says, what am I going to do with it? You know, what am I going to do with it? So I mean, you get the exceptions.
Michael (35:10.159)
It may, but yeah.
Michael (35:26.511)
Yeah, yeah. Yeah.
Michael (35:33.359)
Yeah, no, you do. And like I'm being a little bit cheeky, but you know, there's, you know, the small business owners, there's hundreds of thousands of them. I think a lot of them have, the business has been okay to good for them. As you say, there's a lot of personal goodwill in there. To move from that to something that's sellable to somebody else, it's an opportunity for somebody else, does require...
an investment and, and I, you know, you do that work with significant family businesses. I do that work with a lot of owners and, and it's, you know, it is an investment of some money and some time, but the payback, you know, is that you can at least, usually you can establish a baseline for if you had to sell tomorrow, what would you get? And sometimes that is a bit of a shock, but also a Philip to say, well,
know, what can we do to because I need I need X dollars to retire and I thought I had it covered I don't.
Ken Matthews (36:38.652)
Yeah, look, you've spot on. So part of that process, when we go down the track of putting an advisory board in place after we've done the strategic plan is to get evaluation, get an indicative value. And then we look at, you know, we'll ask the valuer or the business consultant, what do we need to do to increase that value? And it quite often it will mean we need to restructure the business in some way to...
to appoint a general manager or someone there to replace the key person. So it is transferable to another business or to other investors. So.
Michael (37:20.303)
Yeah. Yeah. Yeah. And I think the really healthy part of that, if any of that diagnostic or pre -selling work is to also look at the business internally, but also map where that business sits in the broader, in its broader industry. And there, there are some industries that are really alive getting approaches. There are others that there might be an obvious home for it even. And you just need to.
You need to establish some of these things. And it doesn't mean you're not, you're going to knock on their door straight up, but it, it, it's, you know, it's taking, putting a line in the sand by saying, this is what your numbers say. This is what you, this is where you're short. And here's some options to maybe increase value, maybe to get a sale away on a, on a, you know, on some basis, at least frees you up to do what you want to do personally.
Ken Matthews (38:12.12)
I think you should get your business ready for sale all the time. You should be ready to go and that takes an investment but it also sharpens you up in terms of what you need to do in your business. It could be simple things about your trading terms, those sorts of things. Trademarks in place, all those sorts of things that if you do get a knock on the door you need to be ready. So...
Michael (38:21.263)
Yeah, yeah.
Ken Matthews (38:41.624)
I think an investment in terms of getting evaluation done, getting indicative value and saying, well, what do we need to do to increase the value? Where is the low hanging fruit to do this? I mean, if you don't sell it, you're going to make more money. And quite often, you're de -risking the business as well at the same time, which is a great outcome.
Michael (38:59.823)
Yeah.
It is a great, you went through that, you know, twice in terms of a dance where, you know, and you came out better for it. I mean, you spent a lot of time and effort, but you probably would say you came out better. And I think that's the, it's the same logic, you know, that this work that we might call exit planning, we might call business sale readiness, whatever you, it's about.
improving the sellability of the business and therefore it's also, as you said, it improves, it de -risks the business. It probably, if done well, introduces the opportunity that maybe I can hold this business and put a manager in or do something or to keep it because at least the business is running a bit more closer to its potential.
Ken Matthews (39:54.934)
Yeah, and that's basically what we did. We basically brought, we were able to bring quality people and share equity with them and kept them. And then we grew the business, we grew the pie and was able to create something that was quite valuable by doing that. Whereas if we had have just kept it, the two of us, it probably would never have reached the size that it is now.
Michael (40:23.406)
Yeah. But would you have been, I suspect not, that you wouldn't have been satisfied just to run it like that? You probably always had a bigger vision for what you wanted to do?
Ken Matthews (40:37.877)
Yeah, look, it was always, I'm an entrepreneur more than an accountant, to be honest. I mean, I just look for the opportunities in terms of creating assets and wealth. And this has been a great outcome for me, as it is for most business owners. I mean, someone said to me, if you're not growing, you're dying. And I believe that. I think you need to grow and you need to create an exciting environment.
for people to work in, for them to grow. And if you can create a business where people are growing and thriving, servicing your customers, it's a pretty good environment to work in. Whereas if you're just doing the work, and you need to do that when you're starting, you just need to do the work. You're just working, we were working seven days a week, hard work, but we...
Michael (41:21.263)
Yeah. Yeah.
Ken Matthews (41:35.701)
We don't work seven days a week now. I'd say we work differently. But it's more of a corporate structure than a sole practitioner structure.
Michael (41:46.351)
Yeah. So for an owner listening, thinking I'm in the woods, I'm in the weeds, and I can't see any other way out than just keeping on working, what would you say to them about how to poke their head up? And you talked about using mentors and advisory board, but what are other ways to...
Ken Matthews (42:11.122)
I can't believe the quality of the people I've been able to attract to mentor and be on our board over the journey. I mean, you know, if you look around for the best people you can find that are in your industry or just good business people, approach them and say, well, you know, would you mind mentoring? Can we catch up once every three to six months?
pay a fee if they want to charge you. It's the best investment I've ever made. Probably the biggest mistake I made is that I didn't do it early enough. I've probably only done it over the last 15 years. Probably, you know, we put our first business coach on 23 years ago and he helped transform our business.
Michael (43:00.079)
Yeah. Yeah. So, so you've used coaches pretty early on in the, in the business life, right? So you've, you've, you've appointed yourself a CEO, you've engaged and used advisory boards. And if you don't know what an advisory board is, it's, you know, it's a, it's a less structured board that you might, you know, you might, public companies have boards and to, you know, for governance and strategic direction and advisory boards are being increasingly used by
smaller private businesses to help guide the business towards bringing some external counsel and an external perspective without the formalities of a board.
Ken Matthews (43:30.193)
Thank you.
Thank you.
Ken Matthews (43:44.592)
Look, it's pretty lonely being a CEO. It's probably one of the loneliest jobs you can have. And I think that, you know, I'd have, you know, I have mentors and I also have a board and I've had advisory boards. I mean, the advisory boards usually go into a statutory board. But basically what you're doing is you're just increasing your network of people around you that you can draw on. So a problem...
The problem that you have in your business, you're sharing it across your whole advisory board and those people are advising you. They're not making the decisions. They're just advising you of what and guiding you of what you should do. And I found that invaluable and it's been able to really accelerate our business. And as a CEO, I've grown by having those people around me, but absolutely without any doubt.
Michael (44:40.783)
Yeah, to open up, to share what your aspiration is and to realise it to others that can add value to that. I think even outside of a formal board, an advisory board, and even mentoring and coaching, just I think sometimes putting yourself out and talking to other business owners,
There's a lot of forums where you can go and do that. Now, I'm not saying they're all the right forum, but there are a lot of other business owners out there that can just share their own experiences, which you can get a lot from. And it could be just pure in a pure business networking environment.
Ken Matthews (45:21.262)
Well, I was nine, nearly 10 years with EO, Entrepreneurs' Organisation. I got incredible support from them and Family Business Australia has a forum group just specifically for family business members. You know, look, I look back, I mean, I'd go to those meetings once a month and I'd be flood as a tack because of...
you know, staff issues that were, you know, normally are the, you know, everyone's got them. If you're a CEO, that's what you're doing. You're dealing with people issues a lot. But to be able to air them with other entrepreneurs, it's incredible. And they don't give advice, they just share experiences, which is fantastic. And, you know, I love, you know, I still very good friends with the guys that I was in EO with.
Michael (46:11.407)
Yeah.
Ken Matthews (46:18.509)
who had with me going back a while ago.
Michael (46:18.575)
Yeah. Yeah, yeah, that's right. Yeah, yeah. And, you know, because there is a, you know, a shared understanding, as you say, it's lonely as a CEO or a business owner. It's very challenging to, to talk to staff employees. It can be really difficult to take those issues home and talk about them. Not, not in every case, but yeah. So another business owner, CEO will, you know, likely have experienced.
some role of what you're going through and better to try to look for a way to tap into that.
Ken Matthews (46:55.052)
We've all got similar issues. It's family. You're dealing with family issues at times. You're dealing with business issues, which quite often are staff issues, how to deal with personalities, partner issues, shareholder issues. I mean, you're able to share that. And then there's your own personal health and wellbeing that you need to be mindful of as well. And...
You know, if you're not well and you're not fit, you're not eating healthy and keeping fit, you're not going to be able to perform as a CEO. And a lot of people forget that. So that's what an EO brings. It's a total sort of support mechanism. And I, you know, I got enormous benefit and I'd recommend anyone, you know, CEOs or if you're in a family business, family business forums.
Michael (47:31.951)
Yeah, yeah.
Ken Matthews (47:52.203)
You don't have to be a CEO to be in an FBA forum. You just need to be in a family business and you're going through the same issues as what we all do.
Michael (48:02.607)
Yeah. And even if you don't call yourself a CEO, if you're running a business and you're responsible for all the decision -making, you are, you know, for all intents and purposes, the person in charge. And we use that term CEO, you know, very broadly, but it's applicable because you cover sales, marketing, operations, finance, everything really. And to, you know, I love the step you took out of being a partner to being a CEO with a
and having an eye across the whole business. And there's more to it in any business. It doesn't matter whether it's an accounting firm or a manufacturing firm. There are departments or divisions or units and you've got to give attention to them all.
Ken Matthews (48:47.497)
Yeah, the step from being an owner operator to a CEO is a big step, but really one is internally. I mean, when I appointed my office manager or general manager, I basically delegated all the internal operational areas to it. It freed me up enormously so I could just focus externally on the business and on our people. And that was a massive step for me and I think the business.
You know, it's an important step to make. So you're asking in terms of what you do as a transformational for business is probably that step in a lot of cases.
Michael (49:24.687)
Yeah, look, just, I did want to also, a lot of owners have their current trusted advisors, be it an accountant, a lawyer, a financial planner, a coach, but what's your, it seems to me that there can be situations where that advisor, trusted advisor may or may not be the right.
advisor through a stage of planning and getting ready to or considering your options around selling? What's your comment on that and the need to potentially shake things up and talk to specialists or different advisors?
Ken Matthews (50:11.911)
Well, the question that I'd ask if I was a business person looking at an advisor is just ask the advisor what experience have they had in particular circumstances? Have they acted in mergers and acquisition area? I mean, you know, what transactions have they been personally involved in? I mean, it's one thing being an advisor, another thing actually living it. You know, a good advisor will understand.
the trauma that you go through when you're selling a business and not many, you know, unless you've been through it yourself and you've run shotgun with your clients through that process. I don't know how you can read it in a book. You've got to actually live it. You know, I used to get a phone call 4 .30 every Friday during the transaction that we do with AZNGA from my advisor saying, how are you going, Ken?
Michael (50:40.975)
Yeah, yeah.
Ken Matthews (51:09.094)
because he knew that, you know, it's your baby, you've got a lot of, you know, you've got 30 odd years, blood, sweat and tear tied up in a business. You need someone that's watching your back and watching you personally, because you'll go through enormous, you know, emotional troughs and oh, it is incredible. And you need the right people in your corner. Not only from an advisor, you're good accountants. And...
Michael (51:27.215)
emotional ups and downs.
Ken Matthews (51:38.501)
good lawyers, you know, you need a whole and it's not so much getting the best price. Yeah. I mean, the price should look after itself if they know what they're doing. It's getting the deal done and getting the terms of the contract that are acceptable to you. I think that's what a good advisor will bring. Because quite often, you know, you'll get approaches. I've seen businesses, you know, where, you know, we've brought being brought in too late.
and they've fallen over and the advisor really didn't know what they were doing. And they'd approached a potential purchaser that were just sharks and it was never going to happen. You know.
Michael (52:13.167)
Yeah.
Michael (52:23.055)
Yeah. I think there's, it's the biggest untapped area for improvement is manage as an advisor, understanding what a good outcome for your client looks like financially, but also personally for the team, for life after. And, you know, your advisor checking in every, you know, every Friday at 4 .30 is an example of someone who understands what an emotional...
roller coaster it is and they understand the games that get played to put you off and to test you and when to buy it, when to not buy it. So yeah, invaluable but beyond it's a good price, is it a good deal? Is it still the deal you want to do? So it's vitally important to be able to talk to someone who can give you that perspective as well.
Ken Matthews (53:18.723)
It is a fair bit of preparation to get to that point before you even enter into a transaction. And I think we've discussed that you need to be ready. You need to know what the number is acceptable to you before you get into that transaction. Otherwise, you're wasting a lot of time and you're wasting everyone's time as well.
Michael (53:39.823)
Yeah, yeah. Ken, look, it's been a rich discussion. I particularly like you're able to bring to the discussion your experience as an advisor, but also as an advisee. You've been through the ringer a few times and you've completed a very significant transaction. And so you have seen both sides of it.
Ken Matthews (53:56.61)
Ha ha ha.
Michael (54:09.871)
podcast, my reason for doing it is to try to encourage the owners out there who are, for better or worse, are chugging along and know deep down that they're not doing something they should do about considering the impact if they don't prepare to sell or be ready to sell. It doesn't mean we're going to...
Ken Matthews (54:25.442)
you
Michael (54:37.679)
prepare and sell tomorrow, but just to have that sense of readiness and awareness of what your options might be, you got any closing?
comments, suggestions, advice about how to poke your head up out of the weeds.
Ken Matthews (54:55.265)
Well, I would say start with, you know, getting a trolling to identify who a corporate advisor is that can help you at least understand what the value of your business is and what you can do to improve the value. I mean, that would be the first step, I think.
Michael (55:09.967)
Yeah.
Michael (55:14.223)
Yeah, so a quality broker, a corporate advisor, someone who deals in that stuff day to day. Yeah. Yeah.
Ken Matthews (55:17.664)
Cobra to thaws, yep.
Ken Matthews (55:22.432)
And start with evaluation. What's it worth? I mean, and you know, that'll either shock you or you, and in most instances, you know, people overvalue their businesses, what they think they're worth. I mean, that's just what happens. But then you then you go down a track. Well, what can we do about it? What can we, how can we, how can we improve it? And that's, you know, it's a two or three year process to do it properly. And it may well be that you need to, you know, you definitely need, I think.
Michael (55:34.511)
Mm. Mm.
Michael (55:46.287)
Yeah. Yeah.
Ken Matthews (55:52.351)
The document will sell your business as your information memorandum, which comes out of your strategic plan. So you need a good strategic plan. You need to know where you're going. I mean, that's your roadmap for the future. So there's steps that you can take. You don't need to be in sale mode. But that investment's well worth it.
Because you'll get, if you're not getting increased profit and increased cash flow, then you're doing something wrong. Just by having someone externally look at your business. We were fortunate, we did it twice where we were approached and we were forced to do it. It was disruptive, it's very disruptive, but just I look back, it gave us credible understanding of what the market was and...
and what we could do with our business and how attractive our business was to others. I mean, that was the humbling thing about it too.
Michael (56:52.111)
Yeah.
Yeah, yeah, yeah. Well, yeah, humbling and also very informative, right? Because it really painted you a picture of how someone else sees the business. All right, Ken. I think that might be a good point to finish on it. You know, I said earlier, Rich, you know, discussion on really, you know, pragmatic.
Ken Matthews (57:01.469)
Yep. Yep.
Michael (57:23.471)
issues and that we all need to deal with. So I really thank you for your time and wish you well, you know, under the, with the, you know, as what's your, what's your role?
Ken Matthews (57:38.877)
Well, my role now is mergers and acquisitions and sitting on advisory boards. So I'm on a number of advisory boards and that's where my focus is, is really business development, but mergers and acquisitions for Matthews Dear. Yeah.
Michael (57:43.823)
Yeah.
Michael (57:51.311)
Yeah, yeah, okay. Well, I wish you well. If someone wants to reach out to you, Ken, are you happy for them to do that? Yeah.
Ken Matthews (57:57.405)
Just yeah, reach out for me through LinkedIn or you can get me through the web page at Matthews Dear, Edison Fields. So happy to take any calls or point people in the right direction. Happy to do that.
Michael (58:04.879)
Yeah.
All right.
Michael (58:14.127)
Yeah, yeah. All right, thanks so much for your time. Cheers, Ken.
Ken Matthews (58:17.884)
Thank you very much. My pleasure. Thank you.