Business Expansion Strategies(without taking on debt)

Full Transcript

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

How do you go to that next stage? Do you have the cash inside the business? Just because you don’t have it there inside the business doesn’t mean it’s not the right time to be expanding your business.

G’day and welcome back to the Coast and Commerce podcast. This is a show where I bring inspiring business leaders from across the Sunshine Coast and beyond to share their stories, insights and knowledge for you guys who are watching and listening to this show. So if you’re watching on YouTube, make sure to hit subscribe. And if you’re listening on your podcast player, then follow this podcast so you don’t miss another episode. We’re here in season two of the podcast and I’m excited to bring one of our long -term clients actually, John Gallagher from Argon Law. So welcome to the show, John.

Thanks Ben, I’ve been looking forward to joining on this. Absolutely, yeah. So as I said, long -term client, you know, we’ve done business with you for many, many years, I think from almost the foundation of Argon Law. But for those that haven’t come across Argon Law on the Sunshine Coast, can you tell us a little bit about you and how you started Argon Law and what you guys do? Yeah, sure, sure. So we’re a law firm based in Maroochydore.

I started the business 11 years ago now. So, and I’ve been on the Sunshine Coast for over 20 years. So I had a career in law, not always in law firms. So I spent a lot of time working in companies, including in some of Australia’s biggest banks for quite a number of years. But well, and truly call the Sunshine Coast home now. So Argon Law is a…

a mid -sized firm, I suppose, there’s myself and three other lawyers. And then we have a number of other staff up to about 13 people. And we really enjoy what we’re doing and servicing our clients on the coast and beyond. And looking forward to the coming period, which is going to be exciting, always exciting. Nice, yeah. You were saying you’re moving into a period of growth, hopefully, for the firm, which is awesome. But can I take you back to when you started? What?

prompted you to kind of go out on your own and start a law firm back 11 years ago? Yeah, I guess I just had that desire to control my own destiny. There are opportunities to join other firms and do other things, but I really just wanted to control my own destiny and just create something that I could.

really be proud of right from the start and be in control of. So certainly worked out that way, although things are never as easy as they sound until you really get into business for yourself. So I’ve learned a lot of lessons and been at it for a good period now. So I feel as if we’ve kind of got control of our direction and our strategy and really excited about going forward.

Excellent. So you were from the Sunshine Coast and you decided to start a law firm on the Sunshine Coast. So, you know, for you, what does it mean to start and run and build a business on the Sunshine Coast and not, you know, typically you think law firms in capital cities and that sort of thing. Why the Sunshine Coast for you? Yeah, look, it’s first and foremost, it was a family based, you know, I guess lifestyle slash lifestyle decision.

to be up here. It’s a wonderful place to be but still close to a big city and the benefits that a big city brings. Obviously there’s some drawbacks or different impacts of being near a big city and professional services. You’ve got competition of bigger players so getting scale and economies of scale that allow you to kind of

provide a really complete range of services is more difficult, but you can be good at what you do and that’s what we focus on. So we focus on being a boutique type offering and we tailor our services to what we can see in the market and have been successful for a number of years. Yeah, awesome, cool. So before we get into some of the things I really want to unpack with you, John.

specifically to help our listeners in their business as well. Can you just give us a sense of what are the areas of law that you specialize in or practice in Argonne Law? Because it’s fairly wide. Yeah, that’s right. So I mean, we just kind of think of it under four pillars of commercial law, commercial and business law, property law, real estate. That means existing assets or development. And then…

succession law or wills and estates as people often call it and then commercial litigation. So they’re our kind of four main pillars. There’s obviously a lot of crossover between all of those things and clients that need one of those pillars often need more or all of them. And well, hopefully not litigation, but no, sometimes it’s unavoidable. So we can provide that.

sort of full range of options. Yeah, so really able to help anyone at any stage in business from early on in establishing a business right to growing and expanding and becoming bigger and better as well. Absolutely. It’s a good point, your mate, that our clients first come to us at all different stages of their evolution. And so we can get them right from the start and help them with establishing and setting up their base.

That’s great, but we can pick them up and help them all the way along. And sometimes, we might start, when they’re involved in a dispute, and help them resolve that and then kind of work backwards down the chain of all the things that we do. But where our services are targeted at both business owners, but also individuals. So in terms of particularly on the wills and estates side.

It’s not generally part of your business, although often it bleeds across into business and you need an understanding of your business to do a full succession plan. But they’re definitely sort of personal and business related products there. Yeah, awesome, cool. So there’s many ways we could take this conversation today, you know, to unpack some value from you in your experience with law and business law in particular.

But you did say that you’re moving into a stage of growth in your business. And I think that for many businesses across the coast, we’ve gone through some periods of a bit of uncertainty and for many businesses as well. Now it’s time to start thinking about growth and expansion. But we also talked before you record here that Sunshine Coast is a lot of small businesses, a lot of medium sized businesses. You don’t get a lot of the large businesses here, right? But.

There’s certainly opportunity on the Sunshine Coast to become larger as a business. Yeah, absolutely. Absolutely. It’s a great place right at this time. I mean, there’s statistics that just came out last week from the Commerce Bank about internal migration to the Sunshine Coast. We’re just, blew me away really. That, you know, of all the people migrating within Australia, moving down a moving state, 16 and I think 17 and a half percent of them,

are coming to the Sunshine Coast. That’s a crazy statistic. Twice as much as the next biggest place, which is the Sunshine Coast, which is the Gold Coast. Yeah, you’re right. So it just shows you just how attractive this place is at this point in time. So the opportunity, and I think the pressure now for growth is going to come on. But growth has its own issues in terms of how do you fund it? You’ve got…

You’ve got your spaces, I’ll be talking about your space here. You’ve got your, you’ve got, you know, you’ve got labour in terms of finding the right staff. And then you’ve got, of course, you’ve got capital, which is where you get the funding from, where, how do you, how do you sort of, how do you go to that next stage? And do you have the cash inside the business? Just because you don’t have it there inside the business doesn’t mean it’s not the right time to be.

expanding your business and so you need to bring in capital from from somewhere else. So that’s one of the one of the challenges and one of the things that you know, I’m really kind of focused on at the moment and what I’m doing because I’m seeing a lot of it. So yeah, it’s it’s just an interesting stage in the cycle. Right. So for those businesses that are thinking about expansion in their business, and you know, they’re thinking they’re held back by capital, you know, they’re thinking there’s an opportunity here to grow.

And you know the business my business can look very different in a few years time if I make this move now You know, what are the things that you typically see holding businesses back from taking that step, you know Obviously you talked about space and staff and capital But is there something in in your experience in business owners heads that’s holding them back as well? Yeah, I guess they they just see it as

They see only a limited range of options for expansion in terms of getting their capital in. I think if they can’t, if money’s not available from the bank, then it’s not their time yet. But there’s a range of options in terms of getting capital into your business.

And I guess we can talk about that. So I guess there’s, I’m no finance expert here, but it’s pretty simple stuff. You have your debt, which can come from banks, but there’s a range of other options in terms of debt. But then you also have equity, which means sharing the ownership of your business. So, and those two quite…

distinct areas, but it’s a continuum and I think it’s important that people, when they feel they’ve got that potential in their business, then they explore that full range and look at what the options are out there for them to get capital in. So when you talk about equity, there are a few ways that that can be structured or set up, right?

We had a really interesting conversation on the coast and commerce podcast with Jody Thompson from Mulcahy and co accountants, you know, from an accountant’s perspective of the idea of, um, you know, becoming in a partnership in business or bringing on a partner in business, but that there are other ways that equity can come into a business or you can, you can share equity. Absolutely. Absolutely. Can you talk through some of those that maybe aren’t related to.

you know, bringing in a partner to work beside you in the business. Yeah, that’s right. So it’s I guess it’s external investors. So people coming in who take a position in terms of, you know, in terms of ownership of the business, but aren’t necessarily working in there from day to day. Doesn’t mean they don’t bring a lot with them beyond just the money. But yeah, they’re not they’re not there running the business with you doing you know, actually,

working in the operations, but they can definitely be providing a lot in terms of connections, in terms of strategic direction and sitting on boards and really helping with mentorship, I suppose. So, I guess on the equity side, you’ve got the partner situation, but then you have different forms of those external investors that aren’t working in the business.

A couple of those areas would be, you’d see venture capital, where these are businesses that are set up to take positions, equity positions in a range of different businesses. They’re looking for a high return, they’re investing strategically, they might see that they can add some value, but they’re there for, generally for a reasonably limited time.

So they’re looking to get in and out. You’ve got angel investors that are theoretically similar, a lot of similar situations, but they tend to be more patient. They’re looking for that big growth story, big potential. You’ll see some of it on TV with Shark Tank type.

concept but that concept exists well beyond the television screen and so there’s those types of options as well with equity. And there’s a range of other private situations that aren’t quite as organised and standardised but there are private investors out there that if a good opportunity comes across their desk they’ll often look at it and…

and look to participate. So for many people’s understanding of private investors or equity or seed fundraising and things, you’re thinking about like startup type companies with like a unique product that’s going to go to the moon, you know, that’s going to explode and become a household name. That’s kind of the shark tank kind of story. Yeah, that’s right. What sort of businesses do you see that?

a right to consider that sort of capital raising that aren’t fitting that typical mold of that kind of high growth startup kind of thing? Yeah, good question. Look, I guess it’s probably, I probably wouldn’t sort of put it down to industry, but it’s really more businesses where there’s…

where there’s scalability, where there’s systems in place and there’s that potential for the business to be upscaled and rolled out and reproduced in other places. It has a kind of a unique way of doing things that’s perhaps different to their competitors. So that’s one example of something that I’ve seen.

So in your experience, and I assume you would as a lawyer and counsel for businesses like this, you would advise them whether it’s the right option to go or not potentially. What are you looking for? What are you thinking if your business is kind of in this position, it might be a good avenue to explore? Yeah, look, I guess I’m only a lawyer. So I need to be careful about the advice that I can give people.

My expertise is advising people on the law and the terms upon which they’re doing deals. But yeah, look, certainly I can help people with, give them the benefit of my commercial experience and what I’m seeing and certainly put them in touch with others who are perhaps better qualified to guide them on financial type decisions. But yeah, it’s, yeah.

Sorry, I lost track of the question now. Yeah, where I was trying to, because I’m really interested in the answer myself, is like, you know, what sort of, I guess, business position do you want people to be in when to consider this sort of external capital raise sort of approach, you know, taking on an equity silent partner or something? Just, I mean, I guess to have that story, you know, to have that pitch about

where their business can go, given the demand for what it is that they do, and just the ingredients that are missing to get them to the point where they can service that demand in a profitable way. So I think it can be really in a whole range of different ways. So it’s more just.

knowing that pitch, knowing what that sales pitch is and being able to sell that story. Yeah, be in the shark tank and get the lines down and know where it is that you want to go. Excellent. And where… I guess it’s a vision thing. Right, yeah. And where in your experience can people potentially find these…

these opportunities, right? So you talked about angel investors and you know, there, I know there are some angel investor type groups and so on. You know, are there any specifics that, you know, places that you suggest people try and seek these sorts of opportunities or is it a bit more open than that? Yeah, I think there’s, I guess there’s, it tends to be more industry specific in terms of, you know, where you would go. So, but certainly there are,

plenty of advisors out there that will help with, I guess, the strategic coaching and having access to the capital, which tends to come from out of town, obviously. So it can often be the bigger city -based places. But yeah, I can’t send you to one place.

for the advice, but certainly there are plenty of advisors, finance brokerages, who certainly have a range of products that they can offer, particularly on the debt side, but can also have connections that go beyond that and can put you in touch with people at the next stage. Yeah, awesome, cool.

So as a legal counsel, you know, at the role that say Argonne Law or yourself as a lawyer would play, John, when a business is expanding, whether it be through, you know, bringing on equity partners or capital raising, what are some of the things that you, you know, you need people to look out for? What are some of the kind of legal structures that you need to make sure are right that people maybe aren’t thinking about?

Yeah, well it’s the same thing, same issues when we get involved with succession planning around a business and just looking at how the business is set up, what the legal structure is and is that conducive to passing control, to sharing control I guess in the case of an equity sale. So often that side of things does need to be looked at and adjusted before you can…

can go to the next level. So yeah, we certainly have all the expertise we need to look at that. But often it’s in conjunction with accountants and financial advisors as well as to what the optimum setup will be. So yeah. Excellent. So, you know, are there any kind of complexities around these sorts of arrangements that people might need to be aware of? Yeah, there are. I mean, I can go into details of, you know, company structures and

and trusts and partnerships and all kinds of joint venture arrangements. But it’s probably, yeah, look, there’s certainly complexities that are easier to kind of discuss when you’ve sort of got the facts in front of you. Yeah, so it definitely highlights the importance of getting the right legal counsel when going down this path. Absolutely, absolutely. It’s a key part of it is to make sure that’s set up.

probably ideally right from the start but as soon as you start thinking about it come have a chat to someone like me and we can have a look at your structure and see where you’re going. And of course often it will also depend on what the offer is in terms of the parties coming in as well. They’ll sometimes do business in their particular way and they’ll have their own structures and they might even want to just transfer the whole business into a new entity and it becomes a full…

acquisition where the new investor acquires the whole property and then you end up taking a share in the new ownership structure. So they’ll acquire the whole business, sorry, and you end up then taking a share in that. Yeah, so it can look in a lot of different ways. Yeah, so many different ways it can happen. And so it really depends on what the options are.

But yeah, certainly that full acquisition scenario has been common in recent times and we’ve done a lot of that where we’re acting for local business owners where a larger organisation of the corporate will come in and take them over. But the original business owner will then end up with a minority position in a subsidiary of the bigger business and that will create the…

Now the investor wants to still maintain that motivation for the original owner to keep growing the business. So you still participate in the upside and it’s really just a case of, okay, how much am I going to give away? Because that’s in any situation where equity comes in, by definition, you’re diluting your participation as the original owner in the profits of the business. So what you’re getting in exchange is, you know, scale. You know, you’re getting…

often a whole network of connections and a feeder of business and even a brand, a new brand that can just supercharge your business. So I guess it also needs to be considered as the business owner what you actually want from the expansion as well because if you do dilute your ownership position in the business then potentially it becomes the

potentially the business that you don’t really want. That’s right. Yeah, you’ve had to give away ultimate control of your business for the opportunity to kind of achieve your vision. So sometimes it does come down to that. And we talked about when I started out and I wanted to have I wanted to have that level of control. Yeah. You know, I guess now, you know, I guess I would I would see things differently and I would I could just do the calculations in terms of well,

Do I need control to achieve my vision and to achieve a better return for me and my family? And it doesn’t necessarily mean that I have to keep absolute control. There are ways you can maintain a level of control through negotiating and setting up your shareholder agreement in a way that allows you to still be well and truly a seat at the table and have some, at a minimum, some veto rights to sort of mean that the business can’t go down.

certain tracks without your okay. Even though you only might own a minority of the shares. Well, we all go through different stages of business, don’t we? Where you want different things out of your business. So yeah, that’s really cool. So we talked about kind of equity as a way of business expansion and bringing capital into the business. Obviously there are bank opportunities as well, but are there other places, lesser known ways to kind of expand and

get the required capital in your opinion apart from those that we’ve spoken about? Well, I mean, debt and equity is really the range of it. But within the debt side of things, there’s a big range of alternatives. And so again, there are people who are better qualified to talk about those alternatives than I am. But basically, you’ve got the big four banks that dominate in terms of

lending but they’re also very, they’re the least flexible I suppose in terms of the terms and the types of customers they’ll take on. So there’s always a percentage of the market that the banks just won’t touch for various reasons due to their history and their background or the way they’re set up. But then there’s a range of debt providers beyond that. They talk about second tier.

third tier and then different forms of finance around asset finance where the lending is against the assets in particular or there’s cash flow type finance where you borrow money against the income that you’re expecting in the short term so that you can borrow against your, it’s like I guess an overdraft against your expected income in the short term. So there’s such a range of…

of different alternatives there that might suit your circumstances. And so speaking to, this is where the finance brokers can really come into the room, because they’ll have a range of those products and a range of different types of lenders that they have on their panel that they can put you in touch with. So that’s an easy one on the debt side. And the great thing about debt is that you retain 100 % control. So all the equity is yours, all the profits are yours. But

But I guess that’s sort of classic difference between debt and equity, where equity is by definition more patient. It only gets paid when there’s profits to share, whereas debt, you have to pay your interest, you have to make your repayments on time and stay within the parameters of your terms of your lending. So yeah, I guess it’s predictable.

But it’s relentless in the sense that it’s always, you always need to pay up. Yeah, pros and cons of both. Yeah, absolutely. You just got to consider your options. But obviously you’d recommend seeking that advice from your accountant, from your financial advisor, finance brokers, and also your lawyer, right? So, and you know, Argon Law and your background in banking, John, you know, I think you’re somewhat well positioned to guide businesses in this way. In your experience,

you know, if you go to any commercial law firm, they might not have that experience though, would that be right? Yeah, absolutely. Yeah. I mean, it’s banking and finance is a particular specialty within, within the legal industry. And yeah, it’s not, it’s not, I guess there’s not a lot of lawyers on the coast that have worked in that banking finance area as particularly as intensely as I have for a big part of my career. Yeah. So you really do want to be seeking.

a law firm that does have that experience really to get the best guidance. Yeah, I think so. Yeah. That’s your opportunity to blow your own trumpet. Yeah, of course. Yeah, that’s right. Yeah. No, well, it’s certainly an area where it’s not just me within my firm. I mean, because I’ve kind of attracted that kind of work over the years, my, you know, there’s other people on my team that can help in that area as well. So we certainly get involved in it a fair bit. And…

Looking forward to yeah, period where there’s more of that happening. The coast is gonna have a period of change and expansion and that’s exciting. Yeah. Yeah, we all want to see that. So, before we kind of wrap up here, John, we’ve shared for our listeners and viewers, you know, quite a bit about the opportunity to grow and expand in different ways. But what words of caution would you have for someone who’s thinking,

Okay, there’s an opportunity here. I just got to do everything I can to jump and take it in my business. Are there words of caution that you would suggest? Well, yeah, I mean, look at your options because the first thing you see isn’t necessarily going to be the one that’s best for you. So given there’s that range of, we talked about debt and equity, consider the equity side, consider the…

I guess, taking on investors and the more patient nature of that type of money and what it allows you to do within the business in the short to medium term in terms of being able to reinvest your profits all back into the business to keep it growing. But also just that range of debt products, some of them might…

suit you so much better and particularly if you’re falling into that sort of category where you don’t fit the mold of what the big banks are looking for, then speak to your finance broker and look at all the alternatives. And come to us to talk about any aspect of it because we’re not motivated by any particular outcome. We just want you to have the best setup that you can and one that you can…

can live with short term and long term. Yeah, cool. So, you know, if you are thinking about expanding your business, look at all the options. I think for many people, myself included, I wouldn’t in certain types of businesses, you wouldn’t necessarily think about the equity. You would only be really thinking about debt. And again, as we talked about, you know, at certain stages of your business, that idea of equity actually might be quite appealing. Yeah.

you know, if you can find that right opportunity and you can set it all up properly. That’s right. And we can certainly on those equity type deals, we can really add some value in helping you to structure something that gives you what as a business owner, what you want and the control that you want going forward. Yeah. It’s amazing what synergies you can find if you look and it might be someone very nearby or it might be

it might be people you see as competitors who have those sort of similar needs and might want to combine. Yeah, cool. Very good. So if anyone watching or listening wants an equity in Innovate Media, just reach out and let me know. I’m not sure about that. Anyway, John, this has been really fascinating. I think it’ll be a great investment. I think your business is very…

very mature now and it’s really, you know, you really know what you’re doing. This kind of session really sort of shows that you’re a kind of a real leader in what it is that you’re doing in your industry. And so I think you’d be a great candidate for attracting capital if you’ve got your pitch for vision and growth. Awesome. Well, thank you for saying that, John.

And I really appreciate you coming in as well. So again, another leader of the Sunshine Coast, you know, been doing great stuff around the Sunshine Coast. And, you know, we haven’t been able to in this conversation get into some of the great charity stuff that you’ve done as well over the years. So I do encourage anyone watching, if you haven’t followed Argon Law and seen what you guys have been doing on the coast here for 11 years, then connect with them, you know, follow their social media.

jump on your website, lots of information there, lots of great videos with information about certain legal topics. That’s right, our website is rich with videos that Innovate Media have been expertly producing for us for a long time now. So it really sets us apart I think. Yeah, thank you John. So if you are looking for any legal counsel at all, Argo Law is the place to go. John,

Where is the best place for people to reach out to you if they want to connect with you? Is it through your website? Yeah, I think the website, there’s an inquiry channel right through it, but just give us a call. We’re very happy to speak to you at any time. So enjoy just giving people some advice in terms of how they might approach things to start with. Excellent. argonlaw.com.au is the place to go.

John, thanks for joining me on the Coast and Commerce podcast. And for you guys watching, make sure you hit subscribe and share this episode with someone that you know who might be thinking about business expansion in the coming months or years in their business as well. So we’d love you to share the love and share the information. John, again, thanks for joining me on the show. Thanks, Ben.