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The Berman Buzz

EP6 - ESOPs from Down Under (Australia) - International Interview with Succession Advisor - Craig We

[0:11] Welcome everyone this is the ESOP guy we are on this journey to an ESOP. This podcast in the YouTube channel is designed to be resource to help you navigate through the complexities of a nice. So if you have an interest in the podcast or any other topics that we've done please go to our website at journey to an [0:29] So for today if you've ever wondered what other countries do for Aesop's I think you're going to find this episode particularly interesting. Today we have the opportunity to interview and discuss that. A gentleman by the name of Craig West who has over 25 years experience in advising business owners based on his background as a CPA in public practice. During 2015 Craig commence take doctoral study on the topic of using employee share ownership plans esops as a business succession and exit planning tool. [1:01] So in that process of doing that you know Craig has become an expert. At doing that so so is Craig and I talked about doing this podcast one of the things we thought would be really interesting is. Is of course there's some differences between the structure of what we call an employee stock ownership plan in the u.s. versus Australia. You know and then kind of comparing those two but there's a central piece of this in the world of employee ownership that's going to be very similar very much the same, so Craig has a practice called succession plus it is from Down Under it is from Australia right there it is it's morning right there and it's 5:00 here so but it's really cool to be able to do this with Craig, this Craig will be our very first International podcast we've ever done so congratulations on that. And I guess the real thing to kick off with is just tell us a little bit about your background and your ESOP practice that you have in Australia. [1:59] Thanks and I'm very pleased. [2:02] It's fantastic my backgrounds is a CPA is you said and I had an accounting practice advising business owners and saw a lot of those businesses. [2:12] Becoming Baby Boomers heading towards retirement not sure about what to do around. And so developed a process and a system that I then launched as part of succession plus to help business owners work through all of the things that needed to be prepared, before they could exit so the business death personal situation their finances the management team within the business and in some of those cases we led to developing an employee share plan for, mainly to really lock in and retain motivate key staff within the business leading up to some kind of exit in some cases we've used that as a sale so we're selling the business to the ESOP but in a lot of cases where selling 20 percent of the equity to an ESOP and managing the rest of it within the family, so it's retained by the family but managed by people who also have an equity stake that's become more and more popular the government here. Similar ways to in North America have made recent changes to the employee share plan rules to make them more attractive. Which is great so they certainly we're a fair way behind the United States in terms of the take-up of employee Share Plans but hopefully we're catching up and the government's made some some changes to make it more attractive. How many years has has for Australia has this been available to companies how long ago did they start that. [3:33] You could do it in Australia from you know for the last 50 or 60 years that's been around for quite some time okay but it wasn't very popular it's very popular and listed companies as a reward and retention mechanism for senior staff most of our banks here and so on have any stops that's been quite common for, for a very long time in smaller privately owned companies it's not as common okay and that's where where you know I'm doing a lot of work in that space now educating owners, and advises about ESOP and how and why they might use one as part of an exit or succession plan great so in. In Australia we could you call them an employee share scheme. [4:10] Yeah they called a couple of different things actually the government and all the legislation talks about a SS employee share scheme. We talked about an ESOP so I call it employee share ownership. [4:21] Okay and we've also got unfortunately things like Aesop's employee stock options plan there's a number of different names but in principle there about giving employees equity in the company they work for some time is the same as your model. In in in the Australian Market from an entity standpoint are you guys do you guys have like something similar to a C Corp and an S corp structure in the tax side. Not really I mean we most of our most of our business owners here trade through what we call a proprietary limited company so there are the corporate entity separate legal entity that's a company structure I would say 85 90 % of our, is the side as he tried through that structure if they're much smaller they might be a sole Trader, okay literally Craig West trading as Craig plumbing services or whatever it might be okay and then there are some there are some other structures around things like family discretionary trusts and so on and some people use in terms of managing their business okay, so the most the most most businesses are going to be taxed that way the the majority of them are is it is it the entity that pays taxes or is it is a pass-through type of. [5:26] That's the entity in Australia that pays taxes so how do you have a company, succession + is a company and we succession plus pays taxes on its profits got it okay so you guys basically, the equivalent of what we would call as a c-corporation structure for the most part, almost the same year the only good thing about Australia is we don't have any state based business taxes now that's like I roll tax year so your taxation system is actually more complicated than else we just have one Federal taxation model for all companies yeah that's nice so only one return yeah that's great. So when you do that do this does the owner that sells do they normally have some type of capital gains tax in the transaction. Yeah we do have capital gains tax here so if I sold for example if I sold succession plus I would pay capital gains tax on the amount that I have gained by owning that business but there are some pretty generous tax concessions for business owners there's things called small business capital gains tax concessions which reduce the, the business owners pay when they sell their business because long as you make certain conditions is there any mechanism within your ESS structure. Where you can defer those capital gains like our 1042. [6:38] No we don't have the equivalent of 10:42 you can choose a constant barrier for so we often look to the way that your mechanism works over there it's much more attractive we don't have an equivalent model here okay yeah just curious and I think it's interesting for people to kind of think about those things when. When you're you know comparing the two different animals and when your business actually converts let's just say you converted it you said you would do you do a lot of partially stops but when you. Convert it to 100% nice up you're not a tax-exempt entity like an S corporation nice up here. Now we don't have that benefit either yeah so obvious really changes the artist ship from privately owned by two or three people to Iron by all of the employees but the tax treatment doesn't really change. And when the end when the people get the shares of stock, do can you explain a little bit like how do they get their shares like in this in our case what happens is we create this this in side note this internal node between the company and the Esau. That could be 25 30 years and so people get shares of stock over a longer period of time, then what we call the outside note which is the note that we're paying out the owner based on that bank note. [7:50] Yeah we don't have that sort of equivalent structure we can only set up a separate company a separate structure so it's not weird just for the employees share plant okay and that ship land gradually wise equity, so that's quite difficult in a lot of cases to get fund and employee share buyer, just because of the way the tax rules work so what generally happens is the employees start with a small amount of equity and just gradually build up I've got some clients at the moment that are being sold to an ESOP but that process will typically take 10 years oh wow. [8:22] I thought a long slow drip feed process yeah mainly because most it in most cases the employees don't have the financial capacity to just write a check and buy all business and that funding is possible but it's quite complicated so some people just prefer to do a gradual sale over 5 or 10 years so in your case the employees are actually paying their using their own money to buy the shares yeah there are some tax concessions so for example they can salary sacrifice. So instead of earning a hundred thousand dollars a year they can 095 and put the other 5000 into the employees share plan okay the company we the way we do it often is to use the company. The company is allowed to business is allowed to make contributions to the employee share plan for employees okay so what we often do is set a profit Target, inside is the business achieve that profit Target or better than will pay a percentage of that profit into the share plan specifically to allow employees to buy shares that works quite well because it doesn't rely on employee Financial capacity. It's basically using the employees effort and productivity to improve performance and then part of that improved performance funds, the ESOP and allows it to buy shares overtime again it's often five to ten year project you can't do that really quickly yeah which is one of the downsides of employees Share Plans in Australia they're very rarely a quick exercise great for sure. Which you know it is what it is you can only work towards what you guys have you no so you kind of take it so from. [9:51] Obviously it's something you've focused on heavily do you have your PhD in ESOP I'm just curious because you wrote a doctorate. I know it hasn't been confirmed yet it's actually had currently in the bureaucracy of the University system getting a finalized but hopefully in the next few months yes I was going to call you doctor. West yeah you can still call me crying it's okay well I think it's kind of funny too because I think a lot of people in America. With esops they make it really more complicated than it really is a kind of. Jokingly called him doctors of Aesop's because they they make it more confusing by using a lot of the big terminology and all that and I and that goal of this is always do been to make it a much more accessible and make people really understand it, from the person that's listening that has a never even thought about an ESOP to the person that's about maybe halfway through the transaction or deep into it so. So so let's talk about your research for a little bit so what so when you did the research first of all what motivated you to even go into do something like that. [10:55] Look I've always I mean, in hindsight I probably would have thought a lot more heavily about it than what I actually did at the time but look I don't regret doing it I think I was very interested in what drives people to make various exit choices, why did some people decide to sell some people decide to do an ESOP some people decide to pass it on to their children what is the underlying sort of motivators for that. [11:18] Which is a key finding out of the research and links directly to Aesop's when we get to that in a second but also I thought you know. The experience I've had from a very practical non-academic sense is that esops work really well I've got clients that Rave about the employees share plan that they've got the think it's the best thing they ever did so I'm looking at it thinking why don't more people do this what are the barriers why are people not going down the path of doing an employee share plan and that's where the research actually started was to say okay what are the the original title was actually the barriers to implementing an employee share plan it's sort of morphed as a lot of research does through the project but in looking at those barriers you know that was a really interesting angle to sort of see what was it that. [12:01] Why did we not have more people doing employee Share Plans than currently now having started the research in 2015 since then it's certainly accelerated a lot yeah back in 2015 it was not popular at all I was. Beating my drum talking about employee Share Plans all the time and no one was listening now it's quite popular do you have do you have the stats on how many numbers of employees Share Plans you guys had back in 15 and how many do you have now. As far as yeah it's still a very very low percentage and it's in the very low single digits down in terms of percentages of businesses that go down this path but it is growing and certainly the government actually changed the rules in 2015 okay right at the start of my research they changed some of the rules and made them more attractive and they're just doing that again now so there's some more changes, supposed to be coming through the door accelerator. [12:48] Well it was interesting because that led me to understand better what why people make these choices what drives them to decide which way to go and one of the key. [12:58] One of the key findings of the research but also one of the key benefits of an ESOP is actually counterintuitive and that is that it's slow. Huh okay yeah most people think that's a disadvantage and actually what the research found was that's actually an advantage. For business owners so let me explain what I mean by that sure. [13:17] I'm sure similar in the United States but most Baby Boomers in Australia that I've had a business for 20 years are already fairly well. [13:25] So you know if you bought a home in Sydney not one of our Capital Cities 25 years ago like most baby boomers you're already a multimillionaire, and then you've got a business that's my good money you've got some Investments your business is worth the reasonable amount of money so that creates a significant change where 20 years ago when I run an accounting firm clients used to ask me how to maximize the value of the business and sell it, because I need to fund their retirement that's no longer the case most baby boomers have their retirement already funded. And therefore the exit strategy has changed from what I would call Financial Harvest where the main goal is to get the money out as much money as possible, to what I would call a legacy or stewardship type exit strategy. Where clients are saying things to me like I just want to make sure my employees are looked after I want to make sure the business continues after I retire I want to make sure my customers are looked after because they've been with me a long time. What that does is changes the focus it's no longer about financial it's about Legacy, and maintaining the business and looking after employees yeah interestingly an ESOP is a very cool combination of both those things you can actually get both outcomes you can get a good amount of money up and you can make sure the business continues on afterwards yeah now I love that and then you put words to something that I've been I talk to people about everyday honestly it's like I talk to people about Aesop's all the time and and I see that exact same. [14:50] Dynamic in the US where people the Baby Boomers have made a lot of money in their businesses that's not the primary thing on their minds they're not linking oh I don't know how I'm going to actually retire and pay for my you know my groceries, so they have their have the comfort in the position to be able to say you know what there's other options. And absolutely and then when you know in the US of course when we look at the tax side I mean it becomes a very more check-ins yeah makes it even more attractive but that the concept of a legacy and stewardship type of situation is pretty attractive I think in both in both countries so I think that's really kind of interesting that that's what you're saying getting a lot more people talk to me about how to look after their employees when they exit, yeah you know and some of these people you know baby boomers that are in their 60s or 70s have had staff working with them for 20 or 30 years they're really quite loyal to those people and they honestly want to look after them where they can. And this is a great way to do it yeah absolutely let's go back to the barriers for second because I was curious what in your research did you find any specific barriers and why companies weren't. Going Aesop's back in 15 to now. [15:56] Yeah look there's a couple of key barriers that I found the first one is pretty obvious but it's a big one and that's awareness okay yeah both business owners and their advisors we're not familiar with ESOP the way they should be they don't understand them this is 2015 but it's still a case today there's still we're still talk to accountants and so on that don't understand Danny stop or just blatantly tell their client no that's not a good option for you yeah, but unfortunately awareness is a big issue and I think there's also a perception as a subset of awareness that is Aesop's of a large corporate or listed companies it's not for small privately held businesses and of course that's not true but that's the perception a lot of people this awareness is a big issue so possibly I'm doing a little bit of what you're doing and that is educating people about esops and how they work and why they're an option yeah yeah I mean seriously hashtag podcast like everything that we're doing. On this side and is so important I think awareness is a big issue here for the us the markets the markets that you have in the US are very very unique so some markets are ESOP markets that everybody gets esops. [17:00] And like for instance in Wisconsin Chicago Ohio you know they're all really hot beds for esops. And the CPAs know about it they understand it the bank's know about it they understand it but then like I'm in Florida and it's like I'm still we're still educating a ton of people in this market so I don't know how it breaks into Australia because you guys have. You know maybe a different little different geography you're in Sydney and then you got Melbourne and different places by the way I'm in Melbourne right now. [17:33] Melbourne Florida well the Florida yes a little bit further away than a milk it's a little bit further away so anyway I just thought that was interesting. So we're in the US were about I'd say though you would think we have a lot more there's only like 7,500 ESOP companies in the US. [17:50] So it's not a huge number when you think about the amount of number of businesses in the United States I mean it's really it's really it's really small. And I think that that is something I have I have intuitively said oh it's got to be something like people just don't understand them they don't know about them, and of course that that's a big barrier for us as well yeah and unfortunately in Australia they're much more complicated from a legal taxation accounting point of view we still require massive disclosure documents when you get once you get above a certain size and that puts a lot of people off unfortunately and I think you said it before some advisers have got a vested interest in making it more complicated than it needs to be. Yeah and therefore as a business owner you just look at it and think that's too hard I'm not going to go down that road I don't understand it. It's too hard it's going to cost a lot of money therefore I'll do something else unfortunately that's not necessarily true that doesn't mean to be the case but again it's part of that awareness education Focus what is it cost over there to do anything. [18:51] I mean that's generally speaking probably about 25,000 dollars. I limit could be more if you use a law firm it could be more we have some startup Esau plans which are cheaper you can do them for ten thousand dollars for example wow you guys are like it's super cheap in Australia yeah understanding the states it's much more expensive yeah and here's the in the states like what we got we've got a lot of parties got a lot of, you know we've got a lot of players in a in the department of labor for us you know has created this process agreement where you really have to have an arm's length transaction a buyer side and the sale side if the buyer side is the trustee and evaluation firm and attorney, the sell side is the sell-side advisor value, their evaluation people and then you have an attorney and maybe some other CPAs but you know do so you have a lot more people getting paid but the biggest part for us has been in the most of the deals get put together by Investment Banking firms here. Yeah and that creates an incredible amount of costs to it. And it's just something that we've seen I've seen personally like doesn't even make sense because it's not it's not a true ma transaction because you don't have. They're not adding value to it by going to find a buyer that doesn't mean it doesn't exist it'll pay a big premium because the trustees can only pay fair market value. So yeah so when you do the sale you're just kind of creating it and the employees are buying the stock. [20:15] Are they how do you build a valuation around that is it just normal like a normal valuation at they're buying in a door. Yeah we basically do evaluation at the start of the process okay that everyone needs to agree to we haven't had a lot of problems with valuations we don't generally get any competitive tension generally speaking it's a reasonable Fair value for the business the psychology behind it is fairly I seek but you know there's no point trying to sell your business to employees and ripping them off that sort of defeats the whole purpose of the Ping sure that the owner also has to get a realistic price for their business otherwise it's more attractive to go down a different pathway well we generally find a medium sort of fair market value that everybody's comfortable with. And then it runs forward for me. [20:59] So in your in your research kind of looked at the barriers you looked at kind of the reasons why what are some other things that you kind of came up with that were interesting, in terms of you really think one of the key ones is actually I mean I started this research from a legal tax accounting point of view and ended up doing a lot more about the psychology of ownership. And that's a really interesting point so you know this issue of Legacy stewardship exits. Is also accompanied by as I said before the benefit that an ESOP is quite slow, most people think that's not a benefit that's a problem and it can be but when it's set up properly if you think about most baby boomers I read some really interesting research right at the start of my thesis the talked about a thing called role identity Fusion. [21:44] For business owners okay what that means is the owner is very difficult to separate from the business and we all know business owners like that it's their life that's all they do oh yeah they work 24/7, by other business you know they talked about the business as themselves and so separating those two things for some people particularly white Anglo-Saxon baby boomer males who are often control freaks ugly now separating them from their business is quite dramatic oh yeah and so getting them to signed a contract to sell the business tomorrow is actually quite difficult. Getting them to sign on to an agreement to sell the business to their employees over the next 10 years is far less threatening. Mom and so actually the slowness the timing that it takes is actually a benefit to them because they're quite comfortable to gradually reduce their involvement over time. It's not like they're being thrown out, well the business is so we don't need you anymore old man go away right which they hate so really the transition to employee ownership being managed over a gradual period actually works quite well and it's all about psychology is not about the financial attack side of it. I think that's phenomenally important and I'm going to repeat what you said roll identity Fusion I love that you put in words to some things that. [23:03] I think about all the time with people and it's so true like you know yeah it's a big barrier because they don't you know. People don't know what to do with themselves after they sell and one of the people one of the one of the things I tell people you can sell to a private Equity Group or District Egypt buyer. [23:21] But you're going to be out and that door closes and you're out you know so it's. This is an option for you to be a part of the business you know you can sell a hundred percent or a partial or whatever but you can always be a part of it and I think that's a really. An important aspect of how their psychology works because they're afraid of that. [23:43] Absolutely even though nobody's going to tell you I'm afraid of something they are afraid of it when you get down to it they really start sitting there thinking like oh what am I going to do every day or their golfing with her buddy who sold her business in their buddies telling them hey. You know. I'm bored out of my mind you know solutely and so I think that's a really phenomenal like similar similarity between the two you know two types of. You know countries doing the same. [24:08] What about kids in the business how are you seeing that with Aesop's because you mentioned your family business structure yeah, yeah look that's quite popular now as a mechanism to protect the asset, almost it's a little bit controversial but almost protect the asset from your kids yeah no I've been a business owners are quite scared literally of passing the business on to their children a because there's a lot of responsibility and workload and potentially liability that they're handing over to their children and no one really likes doing that but they're also scared that the children might make a mess of it oh yeah maybe maybe a little Johnny's not smart enough or not experienced enough or not old enough, to run the business so what we're seeing is you know businesses that keep the majority of the equity in the family. Maybe 60 70 percent of the equity is still owned by the family but that other twenty or thirty percent goes to key employees which means is not all on Little Johnny anymore Little Johnny's got a CFO at a sales director and a couple of other key roles in the company, that are an equity and are therefore incentivized to help, manage and run that business in the same way that it's been that's becoming quite popular it's a real mechanism that family-owned businesses are using to lock in, okay people you know most families are absolutely terrified of the fact that someone that hasn't got their surname is running their business. [25:28] But you can actually make it an advantage absolutely yeah I mean we've and you've been doing this a long time I have to and we've seen family businesses that fall apart because the next Generation comes in. And the structure of that management team isn't like it was in next thing you know. [25:46] Either they're liquidating or it's worse than that you know there's a lot of solute and there's a lot of fighting chicken, you know one of the things I've noticed in this is just again I'm done any research so it's just me 28 years of being a commercial banker and then doing this for as long as I have is the generations and I'm really careful I don't want likes point my finger at a certain generation say well you're not. You're not capable I think that the younger Generations this is just my own opinion. [26:14] Don't have as much of an interest to be the person that takes over and takes all that responsibility either I don't know if you guys seen that in your research. Yeah actually did come out in the research but it's really interesting that that, younger group of pay enough but two boys that are in their mid-20s right so that's the sort of generation of Materia yeah it's been educated and brought up on entrepreneurial stories, we never had yeah you know I didn't have the a long masks that you know all of the stories around Mark Zuckerberg and all of the entrepreneurs have done spectacularly well yeah out of own a business so most of that generation is very keen on becoming an entrepreneur on owning a business but, I don't want to do it on their own, mmm I don't want to be yeah the guy that runs the business but they're happy to be the guy that runs the business along with 10 other people exactly which this which is the S up thing and it that's in be coming back to the acyl yeah and I've had that where I'm like I've worked so sometimes when I do my modeling I'll say alright well let's figure out if the management can buy it. [27:15] And what their direct ownership looks like cash flow wise and let's look at the ESOP when we compare the two. [27:21] And you know because that's how I basically came into the firm and I bought out owners you know and I felt pretty good like that's a great opportunity. [27:29] But I've had that conversation with those key people like yeah we want to be it we want to be part of this but we do not want to own we don't want to be the direct owners and have all that risk and all of that on our shoulders so I think that's interesting. To see that you know across across the ocean here what about things like so if you go into the structure of what you guys do things. When we put together an ESOP we're really focused to on that management group and so sometimes we'll use a tool like Sr like a stock appreciation rights program, are you guys using things like that in addition to the ESOP for management incentive plans or what do you do to create an we do have things like what we call are equivalent of stars called performance rights plan okay I'm very similar type model, so employees can buy or earn. Stop based on their performance hurdles which might be time-based might be profit based might be sales or return on capital or whatever it is so yes they are fairly common but what we try and do is is Corral everyone into the employees share plan, and use that Equity structure and it's often in our case it's differential Equity so it's not it not everybody has the same amount more cell people okay more shares people that have been in the business longer have more shares and therefore more senior people have a larger Equity stake than more Junior employees. That seems to work fairly well mainly because the again it comes back to psychology not accounting or tax mainly because then everybody is alive. [28:57] Down the benefits of an ESOP at its basis level is you now have employees and owners aligned because we're both looking to achieve the same. Right so you can get as many employees as possible in the same scheme under the same rules with the same. Type of stop than their alignment is much better because they're all aiming at the same thing maximizing the value of those shares improving the performance of the business to increase the valuation on that basis the alignments really. Well it's interesting because your model has people putting skin in the game you know in ours is built around really a retirement account which they they don't pay for. And so we're under we're going to be subject then to the rules of retire of the retirement account the Department of Labor and the Arisa which means we can't discriminate. It is based on your allocated based on your your compensation typically. Yeah but you don't really even think about that touching that until you're going to leave the company you know in your case do they have like we would call them beneficial owners. Those people in your e SS are they able to vote on things are they able to you know basically have a say-so in how the business grows and goes okay they do become beneficial owners so they have all the rights that ordinary shareholders have including access to capital gains dividends and voting rights, what we find though is you're in a lot of cases the employees don't want to get involved at that level. [30:24] They happy to enjoy the ownership benefit and the capital gain in the dividend but they're not necessarily saying I think I. [30:31] And you can okay what we do we've run an education program called ownership mindset which is actually about teaching them to think and act. [30:40] Now I think that's the worst thing you could possibly do it any businesses have 200 people trying to be the CEO that's never going to work. But could I come up with ideas suggestions improvements absolutely all day long so it's a matter of balancing those two facts together to try and get an equilibrium. Where there's that can contribute and they're engaged but they're not trying to take over and run the company yeah yeah and that's something that people are. People in this country when they're thinking about an ESOP they're a little concerned about that issue like now everybody's going to ownership stake they're going to they're going to want to have a say so and everything and you know next thing you know and they're also afraid, of having to share the financials don't know if you guys do that but that's one of the biggest barriers we found there was 21 is the issue of loss of control which is everybody every business owner is concerned no matter how they exit but the other one is around sharing the financials and you know I teach people, the research is quite clear to actually research out of the United States, and it was done several years quite a few years ago now around employees understanding of the profitability of the business they work for. [31:42] So the average and I don't know if you've read or seen the research but it's really interesting the average employee estimates that the company they work for is making somewhere between 60 and 70 percent net profit tongue oh my gosh. It really did that really that's a that's a phenomenal statistic driving idea of the idea of them. Not sharing the financials because they're worried about employees learning how much money they make is completely wrong well there's the employee right now thinks they're making sixty or seventy percent and they're probably making ten or fifteen right of course I do yeah, yeah sharing the financials to me is actually a benefit but most you're quite right most business owners are very scared of that. [32:22] Yeah I mean for a lot of reasons but but I think that's that's interesting research because some of my clients are what we call an open book. They basically share everything with the employees there's a company called great game of business that motivates you make that stuff use that tool and but I'd say 90% of everybody is as pretty close book and they're they're very afraid of that, when you guys put it all together is there from a governance standpoint is there a board of directors or is there any major changes in the way the company is going to be governed as a technical legal requirement to do that but we normally recommend that businesses do do that to start to bring in corporate governance is really about discipline and structure yeah and that's good for any business with he's got nice off or anything else so we normally encourage clients when they get to that. To bring that in what we also do even though again there's no technical legal requirement when employee shareholding gets to sort of twenty percent or greater we normally suggest that the employees put one person onto the board, so they didn't have a formal role in a contribution at that level that's more about education and success in than anything else is not legal requirements do it but it does make sense and companies that have done at generally perform well because it's all about understanding the structure and discipline required to manage the biscuits. [33:42] For surely board meeting the reporting all that stuff quite important yeah I know everybody has a has a an interest in making the business be successful and do the things that need to happen so so with with kind of the span of research you had is there anything else that you wanted to mention when it came to what you've what you've found what you think is similar in terms of psychology and that kind of thing. No I think the big ones with a difference between that Legacy stewardship and financial harvest the lack of awareness both both business owners and advisors is an issue the other accountants lawyers and so on we found a natural bias for advisors to recommend, exits that they're familiar with, so for example example most business brokers recommend that you sell the business using a broker why I recommended exactly they should work for exactly groundbreaking research this we work for congress right yeah I mean likely course they're going to recommend that. [34:35] Yeah and the other part of it was one of the the additional findings was just around the lack of use by business owners of financial advisors. [34:45] That's a financial advisors as the appropriate person to go to for exit strategies now that's that's a little bit different I think in the United States because there's certainly a more financial advisors doing exits and eating else but here that's certainly the case mmm, alright very skeptical about financial advisors and almost a little bit of that. You know business owners and particularly here in Australia we've got a very Cavalier attitude you know I'll be right she'll be right mate you know we know what we're doing, leave it to me do it yourself I don't need to pay someone to tell me how to manage my money on the business person I'm successful press it that's it relevant therefore. I don't intend to take that advice which then contributes to a whole stack of other, yeah yeah well I'm in planning and funding and so on so yeah interesting model it is so you what do you what do you see the trends going to be in Australia going forward you feel like it's just going to be a larger and larger, percentage of companies go in this direction. Yeah I think it's already starting to increase quite substantially our employees share plan business which is about basically a third of my business has grown by about four hundred percent the last three years has really taken off yeah it's congratulations yeah. Yeah it's going really well but I think that's partly because of the education and partly because the government's made some changes to the rules to make it simpler they're talking about doing that again, so that's sort of contributes to it I think also we're very lucky here in Australia we bought in way back in the 1990s a very comprehensive retirement superannuation. [36:12] So every employee in Australia no matter who you work for, about 10% and it's increasing each year of their salary goes into a retirement funding account like a 401k okay Seymour yeah and that's happened since the 1990s so if you're now you know 50 years old for your entire working life 10% or more of your salary has gone into an investment account you can't touch it you can't use it one of the things governments are talking about is allowing people to use that money to buy into Base Ops for example now if that happened that's quite that's quite a dramatic change because most 50 year olds in Australia now it's sitting on fairly substantial superannuation retirement accounts now you know hundreds of thousands of dollars which would mean not that they don't necessarily should put it all into a privately owned business because there's risks with that sure but they've got the financial capacity to do it whereas previously they probably didn't yeah and you could probably see larger transactions as opposed to the slower erect 10-year types of deals but. But Greg because it would be quite easy to get 10 people together and have two or three million dollars in retirement funding available. [37:15] Yeah straight away okay that's that's pretty dramatic changes that was to occur. Kind of interesting well I'll be curious to see if the if your government does change the tax structure to open the door because I think that, when that happened in the United States that just opened up Pandora's Box and that's why our car transactions are more complicated because the tax benefits are so strong. And I you know you have to make sure you don't trip a wire with IRS and, and there has been abuse people have abused it of course that's happens and so that's why there's so many different regulations now that you got to yeah get your so but I think it's been a really interesting discussion like over, just seeing what you guys do differently but also just just the same thing like what we're really centers people on this is just the idea that that, it just makes sense for them to take care of their employees and they have the ability to do that and there's no better no better structure than to share the share the stock with them and let them enjoy the fruits of the value of the business. Yeah absolutely so so with that thank you so much for joining me today Craig and I'm sure people will get a lot out of this as they watch it. Just to keep you kind of like Get Around what it's what's different and I appreciate all the time that you spent with me. [38:29] Pleasure thanks for having me it's been great all right thank you so with that I just want to say thank you guys for joining today to listen to the ESOP guy journey to an ESOP. We will see you on our next step on this journey to Nisa.

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