Episode 13 | How to Build, Grow & Exit Your Business Successfully with Chris Harrington
In this episode of the Enriched Wealth Podcast, Kris Tatt sits down with Chris Harrington, Managing Partner at Strategem, to explore what it really takes to run, grow, and ultimately exit a business.
Chris shares his journey from working in small local firms to leading one of regional Victoria’s most respected accounting practices, offering a candid perspective on leadership, business strategy, and the importance of relationships.
They unpack:
Why your business structure matters from day one (and how it shapes your exit options)
What succession planning actually involves — and why it’s never too early to start
How to prepare your business to be less dependent on you as the owner
The value of understanding goodwill and realistic valuations before it’s time to sell
Lessons learned from decades advising family businesses, farms, and professional firms
Whether you’re just getting started or you’ve been running your business for decades, this conversation is packed with practical insights to help you protect what you’ve built — and plan for what comes next.
Transcript
Kris Tatt
Welcome to the Rich Wealth podcast.
This week we're going to be talking to Chris Harrington, managing partner of Stratagem.
Chris, welcome to the podcast.
Chris Harrington
No worries.
Thanks, Chris.
Kris Tatt
Great to have you on.
And two, Chris's don't make a right, but hopefully today we can, we can find some good things to talk about.
Would love Chris to start talking about your journey at Stratagem, how you sort of started, how long you've been there for what, what drew you to become an accountant and sort of that that journey now into sort of leading the organisation as as managing partner.
Chris Harrington
No worries.
Thanks, Chris.
Kris with AK, Kris with the C just in case you get mixed up.
So it's, it's interesting when you, you look back on your life and you say, what, why did I become an accountant?
It was one of those things where as a young kid I could add up numbers in the head, which everyone said you'll be an accountant, which there you go.
When I look now, 30 years later, I say adding up numbers in, it's still a worthwhile practise.
But what we actually do in public accounting isn't just numbers.
And, and that's actually the thing that I'm so glad happened because you build that understanding of relationships and what you're really there to do is absolutely get the numbers right.
But Bill, that trust with the client and have them come in because we're dealing with their finances a lot of times and also with some complex rules.
And that there's actually that trust in you being able to deliver what you need to do for them so that they can walk away knowing that they're in the best position they can be financially.
And that's, I suppose that doesn't come when you first start accounting and when I was a 12 year old kid.
But Yep, that's sort of what started the process.
You get to year 12.
Yep, you know, I did have a bent towards law and accounting at the time and thought I'll go to the accounting line and certainly enjoyed it.
And and you know, there is something inside every accountant that actually just likes getting the answer right.
And I do have that, even though that's not what drives me and gets me up in the morning.
But there is, you know, it's nice to go that works out and and that's just part of part of the personality I think in the in the background that that sort of leads you down that track at the start and and actually studied locally sort of enjoyed.
Kris Tatt
At La tribe.
Chris Harrington
La tribe uni Yeah, yeah.
And certainly enjoyed that Bendigo aspect of my life.
Never really went anywhere else.
Had very strong family connections to business of all kinds.
That's so.
Kris Tatt
You sort of grew up with exposure to business even before you went down the accounting line.
Absolutely.
It was something that was within the family.
This is part of what we do.
Chris Harrington
Dad had a business, mum's family had businesses as well in, in Bulgura.
My uncles all had their own businesses.
It was, it was just the way we think.
And if I look at my client post now, there's quite a few HA double Rs, which is sort of the Harrington, the start of that just with virtually, you know, all my family have had virtually had a business interest in some way, shape or form.
And, and it is understanding that, you know, you see how your family operates and, and what it takes to to run a business and it sort of just gets built in.
So without really meaning to head that way, you just found your way there.
And I remember my uncle once saying to me, we need a good beer encounter in the family.
So hopefully, hopefully I've lived up to the expectation.
Kris Tatt
No pressure or anything.
No, not really.
But I think that's, that's, that's a great sort of formative thing for you to just, it's just part of what you do.
And I think for any parents out there wondering what to expose your kids to, Yep, sports great.
But if you can expose them to business or get them to do some work experience and all those things, I think that helps people get a bit of a rounded view on how the world works and, and how how business works, because business is what makes the world go around.
And we're all going to need a job one day.
And I think it just having that that exposure, I think would would have been great in terms of just your understanding of the mechanics of this is how it works and also what it actually, as you said takes to make something successful.
It's not it just doesn't happen by chance.
No, most of the.
Chris Harrington
Time certainly agree I, I, I look at even just the, the holidays during uni time when I'd head up north and pick grapes or oranges or, and, but getting get involved with, you know, the, the other people doing that on, on what was a family farm and actually understanding work ethic and looking at sort of my grandma at the time who would pick two buckets to my one, but but just understanding what, what it was.
And then I'd watch her go and, you know, cook lunch for everyone and then at the end of the day put together the pays on the Thursday for everyone as well.
So that whole aspect of what it takes to operate a business was, was, you know, it just our way of life to a lot of and dad being involved at an ownership level and with the different businesses he did and the same thing.
You've got a good look at what labouring was and what trades were and would that have suited me.
The hands are a bit soft I think for that and.
Kris Tatt
Try remember telling me a story about trying some concreting at.
Chris Harrington
Once, yeah, they might have been.
I might have turned up my first job interview with black hands.
The main reason was that no one told me.
Put gloves on when I had to make the concrete black.
And so black hands for like a week and a half and the other guys I was working with loved it that the the stupid student had no idea what he was actually doing.
At the same time, really good, really good grounding, yes, to say that when you do look at businesses now, you do know what it is when they get up in the morning, what they're doing.
Kris Tatt
And then the and what it takes.
Chris Harrington
Correct.
And and the fact that when we do that paperwork aspect of it, I can understand those guys are tired and or families, I'll say are pretty tired and rundown and then you've got to do the books.
So as much as we can do to make that job easier for them, I think is yeah, works out well for.
Kris Tatt
Them and I think that's one of the things we can forget sometimes as well as we do all the paperwork, the numbers side but that's only small elements sometimes of these businesses for these people if they're running around looking after customers, you know if they're on the tools and different things like that the paperwork's almost an afterthought sometimes where it's kind of our world and we're trying to help them make it work but for a lot of people it's just it's it isn't always front and centre in their mind as well too so absolutely being able to be that support is I think really crucial for them so and.
Chris Harrington
And yeah, knowing that there's a whole lot of ingredients that goes to actually operate creating a successful business and being exposed to from the ground level, you know, right up to, you know, the, the high level of making strategic decisions, all that kind of stuff.
You know there's an element you get by being exposed to watching people act within a small business.
Kris Tatt
Yep.
So we'll talk a bit more about your tuning at Stratagem once you become partner.
Chris Harrington
So I originally went to the to to the celebration drinks of Trevor Elliott leaving stratagem.
Kris Tatt
Right, which just just as a reference he has he's he left and came back, he's still here.
Chris Harrington
Trevor saw the Trevor saw the bright lights of Melbourne and he decided he wanted to head to, to work in Melbourne.
And I just went along as an acquaintance of his.
I won't say he, I didn't grow up with him.
He wasn't the best friend or anything, but I knew him pretty well and I knew he worked just down the road.
So went up and sent out the Rolfer Gaddy said you should apply for my job and I said I'm quite happy where I am anyway.
Well Johnny Lewich gives me a call and I think John's a family friend.
So said come down and just me, just just me, just just me, just come on, come on.
If anyone knows John Lewich, I'm sure you'll understand that you can't say no to him.
So Dan, I went had an interview and thought I reckon this might be a good thing.
So tossed and turned for a a couple of weeks and then made the move and joined Ashman, Ralph and associates back in the late 90s.
And and it was fortuitous.
It's just the way the world runs sometimes.
And I always think, yeah, your decisions are half luck as half as much as half good management.
And that was a great decision that I made at the time.
And then.
Kris Tatt
But I think too half luck, but you explore the opportunity and I think that's that's part of it sometimes is when opportunities present themselves, maybe walk down the road a little bit, don't always have to go.
But if you had of just knocked on the head at the start, so who knows where it would have gone.
So sometimes it is just knocking on the door and seeing what's on the other side, so.
Chris Harrington
Very true.
And so then I went sort of change jobs which I found very difficult to do.
I will say there's an element of the people that give you your first chance in employment in your chosen profession.
It's difficult to make that call to move on.
Yes, and.
Kris Tatt
How long have you been at the other?
Chris Harrington
Family five and a half, six years so.
Kris Tatt
Good amount of time, like it wasn't just a you got out of uni, moved around a couple of jobs and here you are, you'd sort of cemented some relationships, correct?
Spent a bit of time with clients and yeah, yeah, there.
Chris Harrington
Was that yeah, there's there's a difference in the way I thought about my career at that time of my life when I moved to Ashland realm from associates as it was compared to probably earlier, right.
You know, there's a bit more a bit more older and wiser and and could see opportunity I suppose, which you're never quite sure.
And then sort of five or six years later starting in some reasonable discussions and yeah, 1st of July 2004 was offered partnership and and took it.
Kris Tatt
Awesome, very good.
And so then obviously from there, seeing clients, building a client base, working with a whole range of businesses over those last 20 years through your journey there and you've probably seen the firm grow and change over that time as well too.
And then what would have been, what, 21, I think it was managing partner, you stepped into that role.
Chris Harrington
Yeah, yeah.
Into 2122, which it wasn't a desire of mine, of your managing partner, I think.
Kris Tatt
The Reluctant.
Chris Harrington
Oh yeah.
Well, well, it's it, it was, it was time in some respects.
I, I spent most of my time very client focused, certainly in the early parts of my partnership and, and getting involved when I needed to at a management level, but never really having that much formal roles apart from the hallway conversations and obviously a partner meetings when there's decisions to be made.
But actually taking that step into the managing partner role was, it was challenging to me, but it was also rewarding.
It's been rewarding and, and there's an element of ensuring that at the end of the day, you know, our, our clients are paramount to what we do, but at the same time, so is our staff and so is my fellow partners.
So actually having that little bit more influence in those areas has been, yeah, refreshing and and very enjoyable as well, as much as it's takes a bit of time anyway.
Kris Tatt
And you've, you've taken on a few projects I've had, we've had a renovation in that time.
There's been IT stuff that we've been changing over in that as well too.
So you've been part of quite a bit of a change in that.
As well too, not just keeping the ship afloat so.
Chris Harrington
Correct.
Been been interesting.
We've had, look, I think we're in a good space at the moment.
We've we've sort of developed our physical building for the long term and thanks very much to our landlords.
They certainly helped out in that area as well.
I think it's, it's given us a bit bit more focus too on it, on our internal people.
And I think they've certainly enjoyed the fact that, yeah, we have a certainly terrific place to work.
And then the IT part of things, I just, I can't say that I'm an expert in that area at all, but we have to use it every single day.
And I've, I've learned a lot of things.
And I, I keep saying to the IT guys, one O 1, you're starting at one O 2 and you're starting at the wrong place.
So keep pulling it back to one O 1 and explain to me why we need to do that and how we do that.
And, and even now with, with our change in, in, you know, client, yeah, client data management, that that'll be a big change.
That's sort of right afoot right now.
And it'll, it'll be a terrific thing.
And I know the younger people grab hold of this stuff a lot easier than us slightly older people.
And I think I'm pretty young still.
But anyway.
Kris Tatt
I think you do all right taking on change so.
Chris Harrington
Yeah.
But yeah, it's a, it's challenging, but it's also rewarding.
And we know, hey, think of it as how this is going to be better for you.
And yeah.
And it's it's coming and it's working.
So far so good.
Kris Tatt
So what, what would be if you reflect over and it probably feels like 10 seconds the last four years, I know for me it's felt, you know, the last few years have just flown by.
But if you reflect over those couple of years, what what's 1 of the takeaways that you've sort of learnt from your leadership in that period of time?
Chris Harrington
I think everyone you need to work with your people.
You need to have them understand what you're trying to do, but also they've got jewels in their minds that you need to try and find and get out.
Yes, yeah, Ask the questions and and then you have to decipher some of that sometimes.
But I really think that, you know the people part of it.
There's no business in any business anywhere without the people.
Yes.
And as we move into a different world, in some respects, I still think there's a people element to everything we do.
Yes.
And, and you never want to lose that.
No, and and that's that's the thing we really try and focus on.
And, and I keep pulling it back that yes, this is physical and that's a nice looking building.
But I want people to walk into the office saying, I'm looking forward to today getting out of bed thinking, oh, today's a work day.
That's good.
And I think with that aspect in mind, I think everyone performs their best.
Kris Tatt
Yep.
And I think looking at, I mean, we're a service based business, but if you've got staff who are happy to come to work and you've got clients who want to come and see you, I think you're doing the right things.
Yeah.
And you're ticking the right boxes.
Great.
Yeah.
And.
Chris Harrington
And we never want to lose sight of that, the fact that yeah, we, we are not much without our people from all different areas.
Kris Tatt
Yes, Yep.
No, that's, that's excellent.
And you've, you've had a bit to do with the Community Foundation as well over the last little while.
There's been a, it's probably been a bit quieter since COVID.
It's probably been a bit hard to do some things, but there's been been a bit over the last few years in terms of support to businesses and things like that as well too that that we've done over that period of time.
Chris Harrington
Yeah, the Community Foundation's a, a thing that I'm personally proud of, but also as, as a business we're proud of.
It was a, I'm going to say it's will be a bit over 10 or 12 years old now.
And the main aim of it is that, you know, I think we live in a, in a privilege, maybe not the word, but we're in a position where we can help others.
So we want to make sure that we do actually, yeah, spend the love the way we can.
And as you say, COVID certainly put some of that to the back of the, of the queue, which is a bit unfortunate.
But we're certainly in the next year or two with some of the other partners being more involved, looking to push that Community Foundation to the forefront again and also really create something that will be, yeah, hopefully very much changing to our immediate community, but also the wider community that strategy I'm operating.
Kris Tatt
Yeah.
And I think that's that's excellent.
That's really good.
And thank you for for some of those reflections because I know it can be very easy to get lost in the business sometimes on different areas.
And so to be able to be able to have that opportunity to the helicopter up and see you know our size business at the level you have, obviously it helps create perspective and experience that yeah, you can help with clients as well wanna.
Chris Harrington
I don't wanna I reckon when on if, if I ever retire.
No, I'm sure I'm going my darling, my darling wife.
But the you could write a book.
It is so interesting with having people being in your life of all different, yeah, employees, you know, community people you deal with and and clients there.
There is just so many unusual and fascinating.
I'll call it things that happen during your time.
Kris Tatt
Yep, that things that you just you couldn't predict if you had all of the options there and thought, well, that's the outcome, correct.
Chris Harrington
And if you could, if you could blow the gaff on, you know, confidentiality, it'd be it is.
Yeah, what goes through and comes out and the things we deal with, it is fascinating.
I just look back and I think really lucky actually to be in that position sometimes when people do share things with you that are quite privileged.
And, and if you think accounting in the public space is boring, I'd tell you what if, if I could, I could tell you so many stories that no, it is not boring.
Kris Tatt
I think, I think for me that I look forward to some days just doing the numbers because I'm like, you know what, that today I just need a bit of a quieter day because the numbers are the probably the the least dramatic part of it.
I think everything, everything else is anyway, it's good fun.
But yeah, there's always, there's always something to solve.
So on that, we'll talk beforehand just on, on what we're going to talk about today, because there's so many aspects that we could talk about with business and accounting.
And one of the areas and spaces you've been involved in is, is succession planning.
And I think it's something that all businesses should be thinking about.
And you might be thinking it's 20 years off or it's five years off, but succession planning for the end is, is so crucial in terms of what you do.
And, and I'd love to talk a bit about when, when we set up new businesses, we, we're actually thinking about structures and, and how to get out of them at some stage as well too.
Not from a, this is a poor choice, but from a we want to, if, if we exit this at some point, we want to be able to do that well and, and in a tax effective manner.
So we'd love to start talking a little bit about what we do from the start with clients and then sort of talk about what we go through when we're looking at succession with clients and get on to a few other topics.
So but love to start at the start.
Chris Harrington
Absolutely.
I think a wise man early in my career once said, have this focus when you're speaking with your clients, when they first come to you, they've got to have a plan about what the end looks like.
So don't get into anything without understanding or having a bit of a plan on how you're going to get out of it, because at some point in time there's going to be a need to sell.
Move on.
Kris Tatt
Head of the range.
Chris Harrington
Correct.
All those things are so important, which leads to the very foundation is that structuring part of things to say.
Well, even though right now you may not be in a relationship and you may not be in a position to take advantage of flexibility within say a trust environment, depending on what you're doing and how you're doing it, being a trust right now might still be the best thing, particularly if some things change moving forward and crystal balls would all have one of those.
But but yeah, you do need to have that flexibility.
You do have the mind and and explain it to your clients hopefully in a nice clear, concise manner to say hey, this is the reason why we would suggest you probably head down this track with with the establishment of the business and then with the eye to the future to say this is how you can manage it best on the way out.
Kris Tatt
Yes, and I think too, sometimes people come with a great idea of what they're going to do for a business and they don't realise how big it could get.
Or if things go South, what do we do to protect ourselves or make sure things are done?
And so that structuring and getting that right at the start, I think is really important from a how does the end look and and is this gonna blow?
Is this gonna blow up and and impact more than we thought?
Or is it something that we can get out of with a bit more ease?
Chris Harrington
I think a classic there is that people say, yeah, but if if I've run a business and I've made debts, I don't want to leave those debts behind.
Yep.
But I have seen on a number of occasions where it is purely not your fault that you've got to this position.
Yep.
And it's not necessarily a decision you've made, but if a decision is made down the track that then from someone else that flows to you and you're left, I'll call it holding the baby.
Yes, it is actually, yeah.
That's when you know, the appropriate structure is that is allows you to make a decision on on being able to live and breathe tomorrow essentially in a financial sense.
Yep.
And that's, that's pretty important that people do understand that because sometimes it's not their immediate or their decision or their choice at some point that actually does impact their position.
And that's where you just want to have that scenario, which we hope no one gets to.
But I do know it does happen that you're in a position to actually, yeah, lift the fight another day.
And again, in a financial sense, based on the fact that you are structured correctly.
Kris Tatt
Yeah.
And I think that's, that's, that's such a big thing about people don't always think about the personal impact of the business or what it does down the line if there's issues and things like that as well too.
If you think about succession planning, so someone's set up a business that's running well and they're thinking about, well, I've got five years left or something like that.
What are some of the things they should be thinking about in terms of succession planning?
And it obviously planning is not the same as doing so you can set up a plan and that can change.
So it's not about saying I've, I've written this in concrete now and I can't change what I've done, but it's about making sure that we've got hopefully thinking through some of the issues that might be there.
So what are some of those issues that you see clients need to be thinking about as they're thinking about the end?
Chris Harrington
I think a big part is that, you know, a lot of people say my business is my superannuation, for example.
Depending on where the world is moving in your particular business industry or aspect, can you sell it?
There is a question, is it actually you you're selling or you can't actually sell yourself in business?
It is, but so you have to really think your way through, yeah, what am I doing now that's gonna allow someone else to come in and actually take my place and operate the business and it be worth something for them to do that versus I do everything.
This business runs purely on the back, on my back.
Therefore, when I'm not there, is there actually a business there and just understanding what are the processes and procedures I've got?
Can I go away on holidays and not have to answer the phone 16 * a a day?
Kris Tatt
And, and I think we talked about that as a bit of a litmus test.
If you can go away for a month and everything's still running when you get back, correct.
It's a business.
If it's all falling apart, then there's probably a few dependencies that you need to look at and go, well, can we can we shift some of these to either other people or get personnel involved that can help take some of that load?
And yeah.
Chris Harrington
I agree.
It it, it really is making yourself as least dependent as you can moving forward.
There's always an element of it is your business.
And unless a person is, you know, has written a cheque and is involved financially or emotionally in the business, they probably don't have the same aspect.
But, but can you actually, yeah, can someone just walk in and take over the business the way you are and, and operate it and operate it and make the money and that you're making with your business at that time, which then gives something to sell.
And there's also physical assets to it.
So you could possibly sell the business and just sell the physical assets, but you're probably not getting the greatest value if that's all you're going to do.
Kris Tatt
And so the difference between those two values is goodwill.
Is that what it is?
And so goodwill is basically the ability for the business to function without the key person.
Yeah, isn't it?
It's.
Chris Harrington
The fact that that people will walk in the door tomorrow if you're not there, yes.
And they'll, they'll still say I know stratagem and I will still go to stratagem because I know what they do.
And it doesn't really matter who the person is on the other side of the desk.
And actually, I know what they can do for me.
Kris Tatt
Yep.
And so that is goodwill probably comes in a few different forms, but it's really, if you think about it, McDonald's, we, we don't know who, who runs, operates, any of those kind of things.
You don't even know who the franchise owner is.
It's just McDonald's.
You drive through the drive through, we'll walk in and, and you get served and you walk away and you know what to expect.
And it's the same for any other business.
If if they don't have those elements to them and it's I only come because I see Chris Harrington, then there's a lot of dependence on the person not on the business as a brand and, and and more than just just what it is there.
Chris Harrington
Totally agree and with that the succession aspect as well.
You need to as you're going along.
If the right person is new and key employees, do what you need to do to keep them satisfied and keep them really enjoying their work because they are part of your goodwill as well.
So they're the ones that can certainly help with either it's manufacture or service, whatever it might be.
But they are the people that allow the business to operate the way it should.
So have that in the back of your mind that they're key to the success of the business moving forward.
And, and it is, as we said before, the plan of how you think you're going to either exit your business, sell your business, hand your business on it changes so much.
So you never want to be totally setting stone on it.
You always want to think it through, understand what is the best option now.
Yep.
And it was very interesting.
I was just in an office one hour ago sitting in a arguably what was succession planning meeting, which is very different.
This is a second generation person, very different to how he took over his father's business 20 years ago.
And it is a it's a different world and, and in these different scenarios for them to think through and it's understanding and it's a bit of a pivot.
You know, I think there was an element of saying, oh, this will be in the family forever.
It still might be to a degree, but it's probably not going to be day to day operated by the family moving forward, which has certainly been a good process to go through.
It's still a long way to go, but just the mindset of the shareholder driving the scenario, the business owner driving the scenario and how they've been able to pivot and pivot intelligently, really to think, well, I always thought it might be like that, but it's not going to be that now.
It's going to be this, and this is the best way for us to let this business succeed moving forward.
Kris Tatt
Yep, and I, I think that's, that's one of the things is having an open mind because you might miss out on opportunities if you go, well, run the going that way because you will close all the other doors along the way rather than actually saying, oh, actually it could be this staff member, It might, might not be that son who's never been interested in the business, but I'm just going to hand the keys to him anyway.
There might be other opportunities and, and if we talk about the ways we can, if, if I can say it nicely, get out of a business or or pass a business along, there's, there's a few different ways we can do that, isn't there?
It's not just family member or cell.
There's a whole range of different ways that we can exit a business, isn't there?
Absolutely.
Chris Harrington
There's, you know, there's a number of different ways and I and it does sometimes depend exactly on what type of business it is, yes.
And as as you sort of said at the start, sometimes the business isn't saleable, but you still want it to continue.
The word succession.
I mean the key to it is the word succeed, right?
Yes.
So you want the business to succeed.
So you want someone else to come in and continue for it to go well.
And that may mean that you don't get any money for it, but you still see the business move on with someone else with the reins.
So you, you, you, like I say, you've got to be think that through and work out well whilst I'm going along.
Then I need to make sure that at the end game, the end game may be that there's not a big payday, but I need to make sure that I've set myself up so I've got the assets to the side that will allow me to live the way I want to live once I've left the business.
And and sometimes it is just closing the business.
It might very well be that that's the best succession plan moving forward.
Kris Tatt
Which if we look at retirement for someone, that could be an impact on retirement because what they thought was their super may not actually be their super if they've got to close the doors and they've got no one to pass it on to.
So.
Chris Harrington
And that's the that's the 510 year plan scenario to yes, sit down and say, well, can the business be sold or on let's not rely on X amount of dollars at the end of this, yes, let's start to build that those dollars now.
Kris Tatt
And I think one of the things, and I'm probably jumping forward a little bit here around all of that too, is as part of that planning is and you've done a favour to work in this space.
So I want to pick your brain on it.
But doing a business valuation as well and actually understanding where you sit right now, because I've, I've heard different, different people over the years, they believe their business is worth X or they'll be able to get Y for their business.
But when we do the valuation, for whatever reason, the goodwill might not be there as much as we thought or the assets aren't actually as, as worth as much.
Just because we paid X for this doesn't mean it's worth that now.
So valuations is key and and you've actually gone through that process quite a few times, haven't you?
Chris Harrington
That's right, yeah.
And very, it is key and there's always an element of opinion in valuation.
There's no doubt about it.
And it really just gets to the opinion of a person that's going to buy this business.
What can they see as the return on their investment?
So you need to have an eye for what do I see as my return on investment in what I'm actually doing and and how am I doing it every single day.
So how do I I?
Kris Tatt
Think how much am I actually getting paid for the effort correct I'm putting in correct that's.
Chris Harrington
Correct.
You see some people buy a business which essentially they buy a job.
In other words, they buy their own hours, if you want to call it that.
Kris Tatt
Which is fine.
Chris Harrington
But.
Kris Tatt
Absolutely.
It's understanding what you're getting into, isn't it?
Chris Harrington
Correct.
And and it's the end game what that means that the next person come on is just buying a job.
So it's not like we're giving them a, yeah, I don't have a great big pot of gold here at the end of this.
Yes.
At the same time though, by stopping and looking at the processes and procedures and the operations of the business, you can start to transition some of that to other people so that it doesn't really matter who sits in those seats.
They can actually.
All they gotta do is follow the formula and then you've got something worth selling.
And often that's where you need to, yeah, peel it back and plan out for that longer term strategy of me not being or the business not being so dependent on me.
Kris Tatt
Yeah.
And I think, I think when we talk about the business not being as dependent, it's not removing the value of that person from the business, but saying what we want is for you to be able to dictate more of the success of the business moving forward.
So if you're able to pull yourself out of some of the day today, you have the ability to and the time to be able to grow and take it to the next level as well too.
So it might actually be the best thing for the business to actually plan around some of this stuff and say if I can take myself out of this and that, imagine what else I can do.
Absolutely.
Chris Harrington
And you know, and evaluation of businesses, you obviously look historically at the figures to work at.
Can that be replicated?
Kris Tatt
So how far do you go back when you're looking at figures?
Chris Harrington
I mean, I think sometimes you can go back a long way.
If you've got a historically very strong business and you can show figures that over or say a 20 year have grown with, you know, there's a profit level and it is grown steadily over a / a long period of time.
You can say well, this business is well put together, this business continues to grow.
This business charges correctly.
This business has the right resourcing as well, so.
Kris Tatt
So that, that time factor is also a bit of a litmus test, isn't it?
Because it's really sort of saying over a long period we've continued to deliver and be successful and we've got people coming through the door that are happy with what we do.
Chris Harrington
Absolutely.
And when in in saying that, that's a, it's a really good history lesson, but you normally just look at the last three to five years on what you're going to buy.
Yes, here and now I suppose.
So even though those other that that history certainly helps in just proving to say, hey, we haven't just, you know, our business.
Kris Tatt
Just hasn't.
We haven't.
Just popped up yesterday.
Gone.
Gone, man, Gone.
Chris Harrington
Yeah, really, really good economic conditions over the last two or three years.
And look at our look at where we're at.
We're actually look at us over a long period of time, you know, there was differences in the in the way the economy was running, but our business still held its held its own and did very well.
So you know that they're the kind of things you need to look at.
The other thing is what is the market value of of your assets within that business?
What?
Kris Tatt
How much is that truck actually worth?
Chris Harrington
Correct.
Yep.
And, and how many of those trucks do we need and can you, can you just go and buy one of those trucks and get the finance to do it?
Kris Tatt
And, and I think too, what's the life cycle of some of those assets as well?
Because if if it's been in the business for 15 years and it needs to be replaced, while it's probably worth nothing and it could almost be a liability because it's actually a cost that's going to come up to the business that hasn't been there for the last 15 years.
Chris Harrington
Exactly right.
So it's, it's, it's looking in and saying what assets you actually need within your business to operate it.
And then what resource is our human resource?
Do we need to operate the business as well?
And how dependent is that on the owner?
And honestly, you need to look and say, well, whatever our profit is, we need to take the owner should get a correct commensurate salary for that that comes off the profit because that's the owner turning up every day to do the work.
Yes, so.
Kris Tatt
Really what you're saying is how much is this worth if the owner wasn't working the business, correct.
If you could, if you could fully staff and manage it and you would never there and just a silent shareholder, that's when you can sort of get a better idea of what, what profit would be coming out of the business and and essentially what value isn't attributable to that and.
Chris Harrington
Look also it does depend sometimes on who the the purchaser is because if the purchaser is a bigger entity coming into grow its market share, it might operate on a different mindset on what return on equity it wants compared to this is mum dad business.
Mum and dad are coming to buy the new buy it off them.
They would think differently than some of them might come in from a corporate point of view, yes, possibly a listed company coming into when they come to buy it, they come to buy it with a different mindset.
Kris Tatt
And that might, it might just be a geographical location for them and it might be we don't need XY and Z, we just need this.
So we're buying the ability to put our brand on the front door and do what we do in another space.
Chris Harrington
That's right.
Yep.
And so it does depend on who is coming to the to the table to to buy the business.
Kris Tatt
Which can also then impact obviously current employees that might be sitting in the business as well too, might not depending on on what the exit looks like as well.
So absolutely yeah.
And thinking through all of those impacts as well.
I.
Chris Harrington
Mean and again, if it was a bigger business coming in just been through due diligence processes before where a bigger business has acquired a a I'll call the micro slash mum and dad business.
Yep, it's the way they think compared to the way mum and dad think.
Like our employment contracts are one page.
Our policies and procedures are mostly in people's heads, but there's a little bit written down our oh and S requirements.
We meet them, but you know, there's a little bit, a little bit of work to be done in those spaces.
They're the kind of things that a bigger business would come in and say we need to know about this, this, this and this and to, you know, take the business on and move it forward.
And that's where it might cost a bit extra during that process to actually get the best, the best value for money at the end, at the end of the transaction.
Kris Tatt
So I would say it's, it's actually a really good process to go through that valuation and and that thinking, even if it's a day, a year or something like that, what, what will we actually, what's the business worth?
What will we need to what, what would we actually get for it if we sold it today?
What are the changes that we want to makeover the next couple of years to obviously really impact what that valuation could look like and potentially what we could sell it for at the end of the day or if it's not saleable.
I think the other other side of that is, OK, well, what are we doing to make sure that when we've we can't work or we don't want to work anymore, we've got other assets that we can live off.
And I think not all of that's always thought about sometimes and usually correct me if I'm wrong, people will just get to a point they say I just need to get out of the business, which is not really not really the most opportune time if they hit that that point.
Chris Harrington
Correct, That's where you know, succession in theory is as worst for the fact that you haven't planned enough to actually get it out there ready whilst it's the business is in its prime, yes, to actually get the the best, you know, vote for money.
And look, there's some people that and I've seen instances where they've said well, that business is my baby and I I've really like the way it's operated over the years.
I'm not that fussed about getting best value for money but I would just like someone that comes in that has the same care factor I've got.
Yes.
Kris Tatt
And it influence, that's a real legacy aspect, isn't it?
Because it's, it's saying I want, I want to know that that that continues on with what I've built, not not I'm going to get top dollar for this.
And what happens after I'm gone, I don't care about, you know, but that that's a real legacy of, of I want, I want this to, to basically outlive me in a lot of ways.
It's.
Chris Harrington
Yeah, it's it's understand the mindset of the person running the business and what they do expect from that succession.
And what they do see is the as the aspects of the succession that they really want to achieve.
And like I say, some people just say I just want, I've built that.
I want that to keep going and I'm happy.
Kris Tatt
And I'm sure there's.
Chris Harrington
Support and help and move it.
And if that means that I don't get maximum dollar value on not that fast, I'd rather it.
Kris Tatt
Because there's more.
There's more for me than just the money.
It's the.
It's the worth of.
Chris Harrington
And that's that's a big part, I think even in the game we're in, even though, yes, we're here to help people with financial decision making, there's always an element of emotion.
There's always an element of the person.
There's always an element of what really drives that person.
And the almighty dollar doesn't control everybody.
So there is a need to make sure that it's.
Kris Tatt
Relationship, isn't it correct?
Go back to it, understand.
Yep.
Chris Harrington
Yeah.
And and it is getting the people part of it right.
Yes.
And we're public accountants.
So that means we're over to the public and that means there's people are going to deal with this.
So that's where, yeah, we need to have that.
I'll call the word sympathy, whether that's the right word or not, but there's sympathy for what that person actually really wants to get out of this.
And sometimes it's a legacy.
Kris Tatt
And I think that's one of the things that I think is important is making sure both parties, the one who's leaving the business and the one taking out of the business, both have a really good understanding of what that handover looks like.
Because there can be a lot, there can be a bit of miscommunication sometimes in that handover piece, can't there?
Where I only thought you were going to show me these, I didn't realise you wanted to be here for another two years showing up each day or, or I, I thought I was going to get more support where you just happy to just disappear.
And, and so getting everyone on the same page I think is a big part of it.
And, and I think that's where, that's not just an accountant's role, is it?
That's where we've got to get solicitors or people involved as well, just so everyone's on the same page, even finance, everyone's on that same page around how is all of the mechanics around this kind of work, not just who unlocks the door tomorrow and deals with whatever comes through.
Chris Harrington
Yeah, I agree.
You need to.
There's a financial aspect of it, There's a sale agreement, but then there's just the underlying thoughts of what what happens next and and that we both agree on that.
It might for real be that.
Thanks, Chris.
I've loved every word.
You can just leave the room now that's fine.
It's it's my baby.
I'll move from there that and that's how most of them happen.
But you need to make sure that we we're all fully aware of that and.
Kris Tatt
And it's probably nearly easier, correct me if I'm wrong, when it's for those scenarios when it's not family members.
It's a lot harder when just as an example, dad hands over to son or dad hands over to daughter and dad continues to from out of his love and affection, continues to come back and wanting to help out.
And that at some point that help becomes a little bit of a hindrance and, and, and things like that.
And it's, you know, like I think of the family farm as well too.
I know my my grandfather when he was still around, he was still in his in his 80s out doing bits and pieces and helping out because he just felt that that was part of his role and his duty.
He never, he never stopped being a farmer.
And it's a bit the same for other business owners as well too, I think sometimes.
Chris Harrington
Yeah, farm succession is a is a huge issue.
Yep, and and it often there's differences in siblings positions in in the world and some of farmers and some aren't farmers and trying to juggle balls to get that right can be very.
Kris Tatt
Difficult same for family businesses though too.
Not everyone's in the family business, not everyone wants to cares about plumbing or whatever the family business might be.
But they all feel like well this is inheritance getting passed along.
Am I missing out because I?
Chris Harrington
I think a classic is with, with business farms, etcetera.
They don't operate without somebody, they don't make money without somebody operating them.
And and there's got to be the appropriate reward for those people that are actually getting up every day to make sure the doors are open and that the customers are still coming in or the, you know, the crop is still growing and the sheep are still getting tended to.
They're very important aspects to what should happen with succession and family succession is a very different beasts than just the normal succession.
But again, I think if everyone has to, yeah, take the emotional cap off when they're doing that and and think it through for the people that are continuing with the business and the ones that that may have no interest in the business at all.
Kris Tatt
But I think too.
Chris Harrington
The biggest part of it is discussion and talk, understanding what our intentions, whatever the the older generation's intentions are.
And that gets passed down and remembering that sometimes this is horrible, but people don't die in turn.
In other words, sometimes it's the succession that's planned actually happens in a total different way because of unfortunate accident or or illness That, yeah, changes that expectation of, you know, how things are going to move on depending on the younger people.
Yeah, passing away sooner than the older people.
Kris Tatt
And I think that that was what I was going to say.
One of the crucial things is start having those discussions earlier than you think.
Don't wait And and also to don't assume because not everyone wants to do what you think they're going to do.
Like I, I, you know, I've got young kids and I have ideas on what they could do, but I certainly wouldn't want to put in stone that that's what they do do.
And so you sort of go, I've got to be open to the idea that no one might want this business.
None of, none of my kids might want to be involved in running, running this day to day or coming in and doing that day to day.
They, they all might want to go, you know what, I'm moving to another country or I'm moving to the city or whatever.
And so I think it's being open to the fact that that everyone's going to have different ways, but you got to start those discussions and and get everyone involved that that's impacted by it, I think.
Chris Harrington
It is the biggest thing.
It is having the discussions and keeping them open and and putting numbers in front of people as well to understand.
And so everyone might get a bit shocked sometimes by what the numbers actually are, so that they do get an understanding of how it should look and and discussion is key.
And it should.
A well found a discussion may need a mediator in a nice way, not someone to sort everything out.
Kris Tatt
Facilitator.
Chris Harrington
Certainly facilitator is a better word.
Yep.
Yeah.
The facilitator that's actually in there just says, well, this is what it looks like and this is how this is the intentions.
Yep.
Let's have a chat about it.
Kris Tatt
Yep.
And and I know we've, we've helped with some of those discussions before, haven't we sort of helped explain things as well too, because structures aren't always simple.
And so if someone hasn't dealt with structures much before and they can come on warts all of this and oh, a company just means that that, that, that if it, if there's a company involved or there's a trust, well, that's a lot of money.
Well, there's plenty of trusts out there that don't necessarily have a lot of money in them.
So it's being able to understand all of those elements and aspects of it, not just what am I doing and how do I do it.
Chris Harrington
Just sneaking out of the numbers for a minute.
Also, the thing called contingent tax liabilities need to be understood.
Kris Tatt
As well.
Chris Harrington
Yes, that there is some liabilities that might sit there sleeping that somebody's going to have to take care of at some point in time.
Kris Tatt
Yep.
Chris Harrington
Yeah, needs to be thought about because someone's like, oh, that's worth $1,000,000.
I know, but there's 300,000 of that's going to go to tax building, no building roads.
Kris Tatt
Sorry.
Yep, Yep, Yep, Yep.
Chris Harrington
At some point in time.
So it's not really amine dollars and that's why that's how, yeah, you need to think you want.
Kris Tatt
Those kind of things and, and just being able to understand all of those bits and pieces, I think is, is crucial because it gives everyone then a more realistic view of what this actually looks like.
And, and it's not, I'm not inheriting this, I'm actually just inheriting this plus a lot of hard work and debt and other things as well that might be involved in that.
So.
Chris Harrington
That's right.
Yeah.
I mean, that brings up a good point.
The the fact that you might have to put your house up against that overdraft that sits in the business, that's the family business versus someone else who doesn't have to do that.
Kris Tatt
And just gets to take some money and.
Chris Harrington
Correct.
Or, or, or think, Oh no, they're just, they're just in there running the business and they get all the profits and all that kind of stuff.
But there's actually no risk, quite inherent risk in that by turning up to a job every day you don't have.
So you need to think those things through as well as yeah, insurance, in other words, personal insurance just to make sure that if the worst happens along the track, which we sort of spoke about earlier, that the the business slash family as well are all covered appropriately just in case for some reason we actually can't open the doors tomorrow.
Yep.
Kris Tatt
And I think insurance is sometimes overlooked or sometimes thought we'll deal with that later or that's an expense we don't need right now.
But it's usually also the most valuable thing to come along when you need it.
And if it's not there when you, if you don't have it set up prior, you can't go and get insurance after the fact.
And so thinking through some of those things, especially if a younger person's coming in to take over a business, mum and dad might actually be set up in a position where they don't need insurance, but the younger person who comes along goes, well, Jeff, all this goes S I'm, I'm left withholding the bag and I've got this to worry about and I'm still got a mortgage on the House or I've got something else.
That's right.
Those are the things that if you're not planning for those contingencies or those issues, I see that you're sort of you're setting yourself up for failure from the word go.
Chris Harrington
It seems, I mean, sitting down with a couple of young guys and they're sort of got a business and it's sort of going ahead and leaps and bounds quicker than they thought and it's now got a bit of value about it.
And the initial thing you need some insurance, the gun, I believe we're young and fit and whatever, but yeah, you still need that insurance and.
Kris Tatt
The bus doesn't care if you correct.
Chris Harrington
And and you do want other people to join you on the on the crusade.
So everyone needs to protect each other here, yes.
And that's what it's, you know, that's what it's.
Kris Tatt
And I think too, that's one of the things to think about with a multiple partner business.
Like if it's just you on your own, yes, you've got to cover yourself.
But if you're got your hand to the player with someone else and they pass away for whatever reason, have you got coverage in place for them?
Because there might be a period of time where you take a huge hit or there might be an element of the business that you either need to pick up and start running that you don't know about or bring someone in.
And, and so being able to make sure you plan around those contingencies.
And it's never fun talking about these things.
That's a hard bit.
But I mean, as our brain doesn't want to think about death or that.
But I think if we're not thinking about and it's not talking about all the time, but at least just knowing if that happens, I've got it covered.
Chris Harrington
That's right.
And and that's element of succession, isn't it, Understanding the risk and mitigating the risk wherever you can.
You can't mitigate all risks speaking, certainly.
Kris Tatt
There's probably a few big ones that you can cover all, some of them pretty easy.
Yep, No, that's excellent, Chris.
Great discussion today.
I love talking about succession business, where we're going and those kind of things.
If there was one take home message for any businesses out there at the moment thinking about maybe I just maybe I hadn't thought about this, maybe I need to start thinking about succession.
What's one thing that that they should do as a starting point?
Chris Harrington
Yeah.
I think that actually taking a step back and saying what, what is my business worth?
And, and, and, and the second part of that is to say, well, how would I like it to, yes, move to the next generation?
I'm not saying necessarily family, but the next person that's going to operate the business.
Just so that there is that thought around as, as I said, sort of at the start, how do I plan to exit?
And what's the smoothest, best way for me to do that?
And, and, and also reward the effort that I'll put in over fair periods.
And the sooner you sort of have that in mind, the sooner you can start to ensure your business is operating to that mantra.
Kris Tatt
Yes, yeah.
And I think that's perfect.
And I think so often business owners are the busiest and they don't actually ever take that time to sit down and say, well, what do I want out of this?
Or am I getting what I want out of this?
And and I heard a great line the other day which a lady said she she was talking about how she had a friend say, why do you work so hard?
And she goes, I work so hard, so at some point in the future, I don't have to work as hard.
And she said I stopped because I'd made the same comment 20 years earlier and I'm still working hard.
And so it made her go back and really look at what everything she was doing.
But I think that's that's one of the things he's taking that step back and saying what do I actually have here and and what do I want here?
Chris Harrington
Look, I, I have a lot of respect for anyone that runs their business because there is so many aspects to it that you don't understand until you're in that seat.
And there's aspects to it, even though you think you run your business and you listen to what they've got to say.
And it's like, that's a little different.
I didn't understand.
I didn't think that might be an issue, but it does come up that way.
It's like a baby that never grows up and, and what you want to do is you've got your baby and you know that, you know, it's your lifestyle and you want to keep the baby happy and healthy and then hand that baby to someone else at some time.
So how do I make sure that that baby's as healthy and you know, in in the best condition it can be?
Kris Tatt
Yep, perfect love that that's great analogy and I think we'll we'll finish there.
Chris, thank you so much for today.
Thank you for time.
We'll include your details in the show notes.
There's probably a lot of people that already know Chris who's who's listening anyway, but for anyone who might be interested in talking about business valuations or actually what they've got and what what their business is actually worth, reach out to Chris.
He's got a lot of experience in it and I think it's a valuable discussion and a valuable thing to start doing in your business earlier than you think.
Don't leave it until a year out.
Always, always be planning ahead and always be thinking, where do I, where do I want to be?
Because five years can go past very quickly and you can actually change a whole lot in five years I think as well too.
Chris Harrington
So I think I'd go back to go and have some drinks with Trevor.
You just got to be ready for the opportunity, yes.
So if the opportunity presents itself, you're never quite sure when it's going to come up.
Best things don't always work.
So if you're ready for it, yeah, you'll get the best from it.
Kris Tatt
Excellent.
Thank you, Chris.
Thank you everyone and and we'll leave it there.
Thank you.
