Starting, Building and Exiting Your Business

Full Transcript

Note: the following transcript was generated by AI and therefore may contain some errors and omissions.

So the big picture is again, how long do you wanna be working for? What sort of lifestyle do you want? Do you wanna provide for your family? And how do we get you there? So that’s probably the conversations definitely to have with your accountant. And once you sort of have that worked out what you wanna achieve, then the questions come in, how are we gonna achieve that?

G’day and welcome back to the Coast and Commerce podcast. I’m Ben Amos from Innovate Media and on this show, we bring stories and inspiration from Sunshine Coast business leaders and beyond for you guys listening and watching this show. So today, one of those business leaders we’ve got is Jodie from Mulcahy & Co -accountants. So Jodie, thanks for being here. Thanks for having me. Awesome. Well, it’s great to have you here. So you’re actually my accountant. So there we go. So.

I brought you onto the show here today because I think there’s some really interesting stuff that we can dive into that’s helpful for anyone listening and watching, regardless of the size of business that they’re currently in. But before we get into that, I’d love for people that haven’t come across you before or met you before here on the coast, tell us a little bit about your story. So how long in business? What got you into where you are today? Yes. So, um…

I’ve been in business, had my own practice for about 20 years now. So I’ve been doing it a long time. And it’s something that I always wanted to do as many people, you know, have that dream of having their own business. And I had an opportunity to, with two fellow colleagues to buy into an accounting practice here on the Sunshine Coast initially. And yeah, that’s what we did and haven’t looked back. It’s been great. How many years ago was that?

Yeah, about 20 years ago. And since then, your own company there is the company that you bought into has been through name changes and business structure changes. Can you talk us top level kind of understanding of that? Yes. So, yeah, we’ve gone through lots of changes, as many businesses do as they grow, which we’ll be talking about today. So, yeah, we bought in and we pretty much reinvented the business that we purchased into because,

you know, it was a change in industry, a change in how businesses were working. So we took that opportunity to do that. And then over time, we had one partner leave. So we’ve gone through that process. And we’ve also recently, in recent years, done a merger with another firm. So I’ve been around all sort of aspects of it. Okay, cool. And obviously in your role as an accountant and a business advisor for your clients, you would have seen a lot of different.

changes and movements and business structures and restructures and things like that as well. So I do want to dive into that today. So before we do though, I’d love to know what is it about business or about accounting that you love? Yeah, I guess I really love the challenge of it, good and bad. There’s always something happening. There’s always ways that you can plan and grow. You don’t have to be stagnant in there. So that’s what, yeah, that’s my love about it. Awesome, cool.

So I do want to explore like the different stages of business growth and development, because I know you’ve seen it all, right? So, you know, everyone starts in business, I think, particularly if you’re, if you’re starting a business from scratch, right, founding a business or as a startup business, usually starting a business because of something, some sort of passion, right? Something that you, you want to do and get paid for. You want to, you know, be your own boss, right? That’s why so many people get into business in the first place.

you’re usually not thinking about the business structure and like the growth plan and all of financial stuff. Yeah, that’s right. As an accountant or a business advisor, what are the common problems that you see or the situations that you see those early stage businesses that are just getting off the ground? What do you commonly see there and what would you say to those businesses? Yeah, I think a common one that we may have seen over the years is someone who

feels that they can do better than their boss or they’re in a trade or something like that that wanna start out on their own or someone who might be good on the tools but haven’t really got any management experience or anything like that. But saying that, I still think probably the biggest issue that or problem that you come across is poor planning. So the concept of the idea sounds wonderful but when it comes to practicality of planning what,

how does this business need to look, how does it need to perform, that can be lacking. So getting some advice around that or guidance and talking to people is vital for that. And at what stage do you believe a small startup business should be speaking to an accountant? Oh, immediately, yeah. It’s a bit of a loaded question. Yeah, it is. Yeah, very much so. No, I don’t, whatever you’re thinking of doing, you need to have starting those conversations because…

as I was just saying, you need some of that guidance around, well, what sort of planning do I need to do? What does planning look like? What are the things that I need to consider? So there’s a big conversation to be had, even in those early aspects. And I think many people don’t though. No, no. They go a bit too far down the path before they get the right advice. Yeah, that’s right. Maybe I’m just speaking from my own experience. So 15 years ago in business, I made those mistakes. Yes. But…

Which most people do. Yeah. But definitely, you know, once you do start to get a few runs on the board as a business and you start to bring in some income and maybe start to hire your first team and things like that, it becomes a new challenge. It does, yes. So there’s also this saying of like, you know, next level, next devil, right? Yes. Which I think in business, you’re constantly going through that up -leveling, which comes with new devils. Yes, that’s for sure. So let’s…

as we move out of that kind of startup stage and we move into, I guess that getting established, that early growth phase of a business where maybe you are starting to bring on some team or you’re building more consistent revenue, you probably also have higher expenses and outgoings and things. So what do you see there as an accountant and what are the biggest challenges that we’re seeing in that space? Yeah, the challenges just widen. This is just…

they multiply really as you’re getting to that stage. You might have started out by yourself, but as soon as you’re getting team on or there might be an expansion stage or new products and services, there’s a lot more to consider and take on. And I mean, I think every business owner who has staff will say that that’s often their number one challenge is finding staff, keeping staff, training staff, managing staff. So, you know, having those key personnel with those,

right skills is very important. So if you’re hiring people in, have a real good think about what the skills are that you need and look for those people that you can do. You may have to, if you don’t have that, the right position that there, you may have to outsource a little bit, you know, use someone external to the business till you build up, do you have enough capacity to take on a staff member.

But yeah, definitely staff is an issue. Again, coming back to if you’re going through expansion or growth of a product or something like that, you still need to do that planning. Planning is constant. You know, you’re constantly looking, well, you know, if we are to take, we need some new premises, we’re growing out of this, but if we’re to take those premises on and we’re going to have this additional expense, what needs to happen?

Do can we afford it? Do we need to increase in sales? How much do we need to increase by? How many customers does that mean? Does that increase the average sale? So there’s a lot of things that you can take into account to consider how you can afford to fund the growth, because that’s a big one. Having the capital keep funding that growth. Yeah. So with planning, you know, and particularly at this stage of business that we’re talking about here, I think most business owners are probably doing some sort of planning at this stage, but because they are still,

you know, probably the sole operator as far as like the business planning stage, you probably don’t have, you know, a CFO or something like that in your business at this stage, right? So you’re probably doing that planning yourself. You know, I think one of the challenges you can do is you can plan, but then the reality doesn’t meet the plan. And then you need to, what, change the plan. You need to be nimble. You need to, like, how do you guide people through that? Well, to take a step back in reality,

a lot of businesses don’t plan. They wing it. They hope for the best and they wing it. And sometimes they pull it off and sometimes they don’t. But yes, if you have got some planning in place and things change, well, the biggest thing is, I guess, reviewing it regularly, looking at how that month went. Did we make what we needed to make as far as those key performance indicators? Did we meet? Did we have?

the number of customers, do we make the amount of sales, what’s the average sale, all those things that you need to measure to be able to know if you’re improving or you’re not improving, because that’s a key step as well. But if you look back and go, okay, if we didn’t meet that or something changed, what’s the impact of that? How can we mitigate that going forward? So you’re doing, again, you’re having those thought patterns around it so that for next month or the next quarter, you can put something in place to react to it.

But if you don’t reevaluate and look at the plan that you’ve made, you don’t know how to react. You don’t know that you need to react. And so much of the numbers on a spreadsheet that typically a small business would go to their accountant at the end of the quarter or the end of the financial year and they’d look back at the numbers. And there’s not much you can do when you’re looking back at the numbers. It just tells a history. Right, exactly. So…

when you’re thinking about planning, you’re talking about looking forward, of course. But then it’s important to also then evaluate and look back and then adjust as you go, right? That’s right. I think the looking back, you don’t want to dwell on it for a long time. It’s really just a snapshot in time, like a photograph. So you just want to look at it, go, well, that’s what happened. Consider the reasons why. But then the majority of the time should be looking forward. So I like using a rolling, like 90 day plan.

to go, well, what are the three actions we’re gonna do in the next 90 days? What are we gonna achieve out of that? Who’s responsible and what needs to be done? And then that 90 days is up. What were the results of that? Did we meet them? Yes, no. Do we continue doing that or do we continue doing something else? Yeah, awesome. What role do you feel that your accountant should play in that planning? Because a lot of the time people are just bringing their accountant in.

at those end of quarter or end of year things? Yeah, where I think the accountant can give really good value is in accountability. So whether the accountant’s involved with the planning or not, whether the business owner does that themselves, but I find a lot of value is given in just having say that quarterly catch up, doesn’t have to be for a long time, but looking at exactly that what’s happened and the accountant can,

challenge you or ask questions or, because sometimes it’s really hard as a business owner to separate yourself from the business and be able to look holistically. So the accountant can really step in and help with that and just motivate you and push you to go, you know, to consider everything and where you’re going to go to next. Yeah, awesome. So some people, you know, they have an accountant and then potentially they have a bookkeeper as well.

So, you know, and particularly at this middle stage of the business we’re talking about here is really where that bookkeeper role starts to become important as well. And I know, you know, you guys also, you know, have a bookkeeping service as well. So how do you see that? What’s the difference between a bookkeeper and an accountant? And where do the lines cross? So bookkeeper traditionally is the person that does the data entry. So they’re processing bills, they might be doing payroll.

they might assist in making payments, whether the business owner does that or not. So they’re really the record keepers. So they’re getting everything ready to produce results. So hopefully a meaningful profit and loss or balance sheet that or some sort of reports. Where the accountant takes that further is hopefully if you’ve got a good bookkeeper that knows what they’re doing, they add value to that. So.

they will take that data that’s been entered into and review that for various purposes. It might be business reporting, it might be your compliance at the end of the year to the tax office, or the banks, or QBCC, or wherever it might be that you need to report it to, and format it so that it’s quite meaningful. And then give you advice, of course, in relation to where to from there. So you need both, really? Yes, definitely.

And I think in my experience as well, the sooner the better. Yeah, it’s really important to have up to date reports. So in our bookkeeping service, you know, the latest that you really want to have those reports is probably, you know, two weeks maximum from the end of the month that you are given, you know, some sort of report to make business decisions on. It’s actually scary how many people may even have bookkeepers, but they’re not getting any reports. They’re not understanding. They don’t even know how their business performing. The data is just going in.

but there’s no interpretation of that data at the end of the day. So that’s somewhere where the accountant can be helpful too if the business owner doesn’t know how to do that themselves. Excellent, cool. All right, let’s move this journey on now. So the businesses have grown, they have expanded, they have established themselves quite strongly. And at this stage, potentially the business owner starts to think, where am I going with this? So what’s next? Is this just a…

a retirement play, do I just keep going until I keel over and die in this business? We start to think about, often called succession planning or exit planning. So at what stage do you think a business owner should be thinking about that? Oh, look, when you think of the business life cycle, it’s a bell curve. You’re starting out, you’re growing up and then a mature business, you’re sort of hitting the top things of flatlining. But when you’re thinking of,

getting out or succession planning or mergers, it could be any point along that path. The important thing is once you hit maturity, that there is some decision on what you’re doing, it could be that you just need to reinvent the business to get back into that growth, because the danger is that you’ll head down into decline. And no one wants to be selling a business in that decline stage because everything’s going downhill. And…

if you’re a business owner in that decline stage, you’re often tired. You’ve had enough, you know, once you hit that. So you really wanna be looking at it before that stage. Because anyone say buying in, or that you’re in your succession planning to maybe another staff member in the business or family member, they’re looking at what they can do with that business. So you wanna have a future there, you know, whatever that may be. They might wanna reinvent it, they might wanna keep it growing, whatever it is.

So yeah, anywhere sort of in that growth to maturity stage is a great time. So let’s talk about the couple of potential pathways here, because the idea of acquisition being acquired from another source, taking on your business, and then there’s the merger idea as well. So can you help us understand the difference between those two? So if you’ve got, I’ll go through with succession planning.

that’s often that there is someone in the pipeline that’s known to you, such as a staff member or a family member that you will be passing the business over to via sale or many other different methods to slowly hand that over. You might sell to a completely third party person, so someone coming in. And then a merger is that you’re staying in that business and another business that’s very similar, you might…

do the same thing or maybe you complement each other so that the business can be bigger, stronger, better. So you’re bringing the two businesses together. So that’s a merger. Yeah. With that merger idea, when would you say that’s, what are the things you’re looking for to say that’s a good idea? Depending on which, well, generally those elements of your like for like. So you’re coming to, if you’re the same, you’ve got the same values, same beliefs, same goals.

that you can come together and you’ll fit nicely together with a few compromises and you’re stronger together. So, and with a merger, sorry, and with the, if it’s complimentary, so say for example, someone might produce something and you might have someone who has transport so you can help get the product out. You might come together because you’re complimenting each other and you can save on costs or get a greater reach.

you know, that way. So. Do you think they need to be similar sized businesses or are there benefits to like small business merging with a much larger business? Yeah. Any size isn’t really an issue as whether they both have to be big or one big one small. You’re just really looking at what it brings to the table. Like how is this going to be a benefit? Yeah. To both sides. To both sides. Yeah. And what are the detriments? What are you going to, cause sometimes people get excited and they’re not looking at, well, what does that look like to me?

So as a business owner, you might go, oh, this is great. I’m gonna do a merger. But once you get in there, you go, oh, hang on, I don’t have all the power now. I’ve now got to share that with others or there’s a greater, you might have a board, bigger decision making that needs to happen. So understanding what that looks like and how your position will change in that process. Yeah. And then an acquisition would be.

you know, that other company coming in and completely taking over the founder sometimes would stay there for a period of time. They might have in a contract that they stay for a year or two years or three months, whatever it may be, just with the handover and cementing if they feel like they want to secure some goodwill, or they might be just, you know, handing over all those skills. But yeah, they they could go straight away or they could stay around for that short period of time. Yeah, awesome. Cool. So as a business owner, you know, thinking about,

exit thinking about that planning, even if it’s decades away. What are some of the things that you really should be doing or looking at in your business to really establish whether or not it is something that potentially could be acquired or sold? I think the important part with looking at your business is what is this business going to look like down the track? How long do you want to be in business? And what does it look like at that point? So,

What’s your revenue going to be? How many staff are you going to have? What services are you going to provide? What are your customers going to look like? And with that end goal in mind, you want to work towards that and put everything in place. So it could be systems and processes. It could be, how does this business look without me? Do I need to get some grow to get some key staff in here so it’s more attractive? Because if you’ve got things in place that the business can run without you,

then it’s more value to your business, isn’t it? So anyone else can come in and it’s not dependent on you. So, you know, they’re all sort of the factors that you need to consider. Okay, cool. And are there any rules of thumb around valuation? Obviously very varied, right? Yeah, very much so in relation to industry turnover, is it, you know, a mum and dad business compared to being under management? There is so many factors that need to be considered. So there’s, there’s,

Generally you can sort of get a bit of an idea with a particular industry, but it’s so wide that there’s not one case for everyone. Yeah. So that’s where your team, like as far as your accountant, but also then a business broker or something like that. Yeah. Yeah. So we will look at a business broker. If you’re going through someone like that, we’ll assist in that area. And, you know, we look at valuations or appraisals for any other sort of internal restructures or whatever that might be. But,

Where we often look at the value is if you are looking at, you know, retiring or getting out of the business in a time period is what does the value of the business need to be to get you there? So often we’ll work with clients to say, well, your business is worth this now. And in 10 years, when you want to get out, you need it to be worth this because that’s the income you want to live on. So what’s that gap and how do we get it from here to there? So,

businesses like a business sale or an acquisition or some kind of successful exit, successful and inverted comments like that, depending on how it plays out, is one option. But when you start a business, I guess the reality is there’s also the decline in just closing a business, right? Which no one really sets out to aim to do. But is there also an option where you can have a successful ending of a business that doesn’t get sold? Yeah, definitely. What does that look like?

Well, it often happens where a business is dependent on the principal. So they might have a skill that’s not easily transferable. So it really comes back to them. So in those cases, when they look to retire, it is just a closing down or a liquidation of the business. It really was earning them. They might’ve hired a number of staff to help them achieve it at the time, but it’s not something easily passed on. So that’s very common.

It could also be a, you know, there might be a business that, you know, sometimes we can’t, you know, they can’t find a buyer and, but they want to stop. So, yep, they’ll just go on this date when my lease finishes, I’m going to shut the doors and I’m happy with that. So, yeah. And then they, and we, we do planning around that. What does that closure going to look like? Cause it’s not just, I’m walking out the door. If you’ve got a company, there could be lots of factors.

like tax implications, retained earnings, how do we wind the company up? So there’s lots of things that need to be considered. So still needs planning around that strategy. Yeah. Yeah. But not necessarily a failure. Just another pathway. That’s right. Yeah. Awesome. Cool. So hopefully that’s helpful for people who are, you know, depending on the stage of the business they’re in, but I’m really interested from an accountant’s perspective, you know, what would you say is the key questions that a business owner should be asking their accountant?

they typically don’t. Now it’s a bit of a curly question I’m trying to use. Give you a moment to think about it. I’m sure there are some common questions that you’re like, you need to be asking this if you’re not. I think it comes back to that bigger picture of where do they want to go in life? Because, you know, as an accountant, we can give them all sorts of advice, but if it doesn’t fit in with where they want to go, it’s, you know, they’re not going to be happy at the end of the day. So the big picture is again,

you know, how long do you want to be working for? What sort of lifestyle do you want? Do you want to provide for your family? And how do we get you there? So that’s probably the conversations definitely to have with your accountant. And once you sort of have that worked out what you want to achieve, then the questions come in, how are we going to achieve that? What do we need to do to get us from now down the track? And that can change because lives change. You, you know, get married, have children.

people separate, all sorts of factors affect it. So it needs to be looked at every year. But I think if you’re basing it on that, then everything sort of falls around that. Everyone’s working in a common path to achieve those goals. Cool. What’s your favourite question to ask Jodie? The client sitting in front of you, maybe it’s a new client or you’re just getting to that. What’s your favourite question to ask? Yeah, I think it really comes back to that is where,

where do you wanna be in, by the time, you know, in your life cycle, wherever that is. So in by retirement, what does that look like to you? And then delving into that. Yeah, I love that side of things. Yeah. Nice, cool. All right, so just to wrap up here, tell us a little bit about Moka ‘i Inc. So, you know, what kind of businesses do you help here on the coast? Maybe someone listening or watching needs a new accountant. Yes.

because their accountant’s not asking those questions. So tell us a little bit about what you guys do, how you serve people. Yeah, I guess what we want to do is help our clients achieve their financial goals. And so we take that holistic look with it. So not only do we help our clients with accounting services, but it could be finance, making sure that…

you know, all their ducks are in a row as far as their wills and things like that. We use, you know, people that can help us or our lawyers and finance brokers internally. Yeah, so we’re trying to make sure everything’s under control with them because it’d be surprising how many people haven’t even considered it. So we take that on as we’re here to help you do that to make sure everything’s, yeah, done.

Yeah, because I dare say success in business and life is much more than just the numbers on a spreadsheet. Yeah, definitely. A good accountant should be looking at much more than that. Well, really, your business is enabling you to do what you want to do in life. So it’s a tool. It’s not the be all and end all. It’s helping you achieve your lifestyle goals. So that’s where we come in to help you do that. But yeah, we look after all sorts of industries.

We’ve really many varied, lots of different clients on the coast here that we help from, you know, obviously hospitality and tourism, building industry. We’ve got agricultural department, you know, so yeah, we do all sorts of things. Yeah. And with our financial planning and loan broking, we can sort of encompass it all. Okay. And where’s the best place for people to go and find out more about Mulcahy & Co? Yeah, our website at

www.mulcahy.com.au. It has a wealth of information on it. You can find me as well on there and it’s a great source of information. And Mulcahy & Co have their own podcast as well. Yeah, we do. Do you want to shout that one out? Yeah, so our podcast FS360, which is our tool around how we help our clients. So definitely check that out on any of your streaming services.

Nice, cool. Jodie, thanks for joining me today. This has been a good conversation and hopefully helpful for anyone listening, regardless of the size of business that they’re in. So Jodie Thompson from Mulcahy & Co Accountants and Business Advisors. I’ve probably got that wrong, but there we go. Thanks for joining us on the Coast and Commerce podcast, guys. We’ll be back with another episode here in season two of the Coast and Commerce podcast real soon.