Business founders and owners who experience a “material liquidity event” present a peculiar set of challenges, and – despite being accomplished – entrepreneurs and business people are very often poorly equipped to deal with the issues that arise.
Koda Capital partner Sean Abbott says dealing with individuals selling a business is “an area I particularly enjoy”. And he has produced a white paper, Seizing the opportunity: Wealth management post liquidity events, setting out the key issues that such individuals face in managing the process.
“They are successful people by definition, they can make quick decisions, they acknowledge where their strengths lie and don’t lie, and they’re looking for someone they can trust so they can do something similar, or something left-field.
“But I know when a relationship is going to work because they will tell me in the discovery meeting that ‘I am not interested and even if I was, I want to put my time elsewhere, and my understanding is your firm specialises in this area’.”
Abbott says about 80 per cent of new business comes from referrals by existing clients, “which is healthy, but I remember I was challenged by one consultant one time that it’s a reflection of not a strategic or aggressive enough marketing plan, so who knows?”.
Serves as a business card
Abbott is now more active on social media to position himself as an expert in the needs of his target market. And his new white paper serves as a sort of business card, setting out in detail the issues that individuals need to consider, but are unlikely to think of for themselves, when it comes to selling an enterprise and dealing with both the financial and family consequences.
“The key is presenting to them what they need to think about,” he says.
“It’s laying out [that] these are the areas that need to be thought through, here are the options available and here are the options we recommend, and these are the steps to implement.
“It’s giving them a 30,000-foot view, and then coming down.
“A lot of people will think it just means setting up a self-managed super fund – that’s so often the case, whereas in fact it’s a real education process. Generally they’re terrific at running their operating businesses but don’t have a thorough understanding of [wealth management] because they’ve outsourced those areas to different people to date.”
Abbott says this client segment presents “significant complexity, both initial and ongoing”.
“Because of the size of the investable assets and balance sheet broadly, it does mean there are cash-flow decisions to be made, tax, estate planning, educating the children, just broad governance,” he says.
“They are generally unsophisticated in investment terms. There is that complexity there and they just want it removed.
“These people have new challenges and new opportunities presenting to them all the time that we can get our teeth into – whether it’s starting a new business; wanting to help out in particular areas, be that children or social areas; tax management; changes in budgets; it’s ongoing. There’s a lot of meat on the bones.”
Fits the four pillars
Abbott says his target clients fit the four pillars of Koda’s offering – investment strategy, structuring, philanthropy and intergenerational wealth transfer.
“All of those four areas are typically needed by business owners or founders post a material liquidity event,” he says.
“They need help in all those areas. And one of the things I learned from attending the Stanford Graduate School of Business in 2011 was getting whatever business you’re in to what they call an ‘ideal product market fit’. In other words, have the right fit of services for what you client needs.
“And don’t pivot, or change what you’re offering to sit the client’s needs. Find what your strengths are and go narrow and deep in that area.”
Abbott says clients are as diverse as the businesses they have built up and are looking to sell. But they do share some broad characteristics.
“I would say that they are demanding, but in a respectful way,” he says.
“They expect good service and they expect communication by exception. What I mean there is, [they say] only call me if something has gone wrong, but make sure you call me and let me know.
“But as has been … the philosophy I’ve taken for years: Sean, you’re going to be the one throat to choke. Koda, that’s your role. You co-ordinate with all the specialists and I just want to conduct meetings with you, and with the specialists there as required.
Clear and direct communication
Abbott says there is also an appreciation for clear and direct communication. “I can’t generalise, but there is a consistency around being able to make decisions quickly, once trust has been built,” he says.
In each of the meeting rooms in Koda Capital’s Sydney CBD offices there is a small elephant figurine. For a company whose name is an Australian Aboriginal word meaning “friend” or “ally”, it’s not immediately clear why the firm has such an affinity with an African animal.
Abbott says the nature of his clients means they often research Koda and Abbott as rigorously as the firm itself researches potential investment opportunities for clients.
“I asked a client why he chose us over [competitor firms],” Abbott says. The client replied that he knew the reputation of the firms’ founders Steve Tucker and Paul Heath, and liked the sense of energy and flexibility present in Koda as a start-up business.
But in addition, he also understood there would be no shying away from “the frank and candid discussions that are needed as time goes on” – something that set Koda apart from competitor firms that might be as technically competent.
“Which is why we have these elephants in each of our boardrooms,” Abbott says.
“The symbolism of these is that they will be the only elephants in the rooms in Koda. Candour is something we really value.
“That came out of our culture day as a firm. One of the key values is candour, both between each other as peers, but particularly between the firm and our clients.”
