Founder Interview: The founder who beat the banks at their own game (Part 2)

First published on Firstlinks, 15 June 2022


In Part 2 of my interview, Barry shares his approach to scaling, how he differentiated Count Financial from the plethora of financial services companies, and what he defines as good management.

For readers interested in finding the next Barry Lambert, you must first understand how long-term founders think, as their philosophies are reflected in business strategy, and ultimately flows through to financial performance. In other words, financial performance is only the outcome. To catch founders early, readers need to recognise the hidden engine of the philosophy, strategy and thinking that fuels it all.

Let’s take Count Financial as an example. If my readers were presented with the opportunity to invest in a boutique accounting firm that specialised in tax returns, many would baulk. On the surface, there’s nothing sexy about tax return service providers. But that’s the superficial view. Those readers may not have considered the philosophy and strategy underpinning the business, they may not have looked under the hood to uncover the real source of growth – the engine that allowed Count Financial to morph and evolve their business over a very long period of time. If readers want to find great founder-led investment opportunities, they must first understand how a founder builds a business from the ground up. Results are only the output. The entire picture consists of philosophy, strategy, execution, which leads to results.

Barry Lambert saw it differently than most. Through his business strategies, the initial $90k of capital he invested in the beginning eventually became $373m decades later (a 4000x return). Investors who recognised the nuances of how he ran the business were able to ride his coat tails and participate in the rewards.

The theory of multipliers

In Part 1 we saw how Barry transformed Count from an accounting network into a financial advisory network. Accountants had long-term relationships with their clients, understood their financial goals and had the technical background to provide advice. But back then most accountants weren’t interested in offering investment advice; opening a new business line brought more licencing and compliance obligations – something they didn’t have appetite for as owners of single accounting firms. But therein lay the opportunity for someone like Count Financial. They had a network business that had scale.

As Barry recalls, he saw the opportunity to transition into an investments business and could execute the strategy ahead of others because he was the founder and didn’t have the multiple layers of bureaucracy that prevented many others from pursuing bold untested business models (I’ve written previously about the merits of less bureaucratic companies).

The idea was to obtain investment licencing and offer training to his accounting network, provide all the know-how and investment knowledge to help facilitate them providing investment advice to their clients. In return, Count would take a percentage of all the investment revenues generated by his network. As Barry highlights to me during our interview, he had no interest in servicing individual clients but saw a greater opportunity to instead target accountants and to ‘leverage their client base’, as he says. Count generated revenues as a percentage of total Funds Under Advice across the network, so its growth was scaled across multiple dimensions. First by the number of accounting firms in the network, then by the number of clients within each accounting firm, and each client would have a growing investment portfolio which would also contribute to Count’s bottom line. The model was exponential, not linear.

When I quiz Barry now about how this model was so successful, he attributes it to the ‘multiplier effect’ – the ability for the business to scale revenues by more than one factor, and being the first mover with the truly differentiated service.

Elevation through differentiation

One advantage companies that are still run by their founders have over other companies is that founders have the confidence to be unconventional. Employees worry they’ll get in trouble if they do things differently. Founders don’t. – Paul Graham (Founder of Y Combinator)

As I chat to Barry, he describes a made-up word to me: ‘Surpetition’ he says, in a tone that implies it’s a word I should know. He tells me it’s the name of a book written by Edward De Bono and its concepts stuck with him for decades, and a key ingredient of how he differentiated Count from its competitors.

For Barry to compete with the incumbents on their arena would be like driving into a traffic jam. As he says to me during the interview, ‘the concept of surpetition is you have to elevate yourself to another level so your competitors don’t come looking for you – you’re operating on a different plane altogether’. 

Barry aimed to add a new service each year. Starting with his network of accountants, he soon offered investment licensing and training, then progressively expanding into superannuation, savings, leasing and asset finance. He launched software to aid in the efficiency of his network of accountants. At one point Count had the goal of moving into mortgage broking.

The pace at which new services were being launched was fast. The quicker Count could help its network of accountants entangle their customers, the more entrenched they could become in their financial lives. That was how Count differentiated itself from the competition. 

A recipe for longevity

The pursuit of growth for any business requires capital expenditure, funded either with internal cashflows or externally through the use of debt or additional equity. Under Barry’s leadership, Count always chose internal cashflows, never debt. Barry recalls in the late 1980’s when he took out a $200,000 working capital facility and discovered the interest rate was 20.5% (in those days interest rates weren’t shown on statements so he had to call up to discover that surprise). Barry paid off the loan and decided from then on he would never take out another loan for the business ever again. 

And Count never had to. It was profitable and able to use internal cashflows to fund its growth strategies (I’ve discussed this compounding mindset previously). Unlike his competitors, Barry had a conservative approach to expenses. Competitors would come and go, often bursting onto the scene with big marketing budgets that eventually fizzled out. Barry tells me there was one competitor backed by a large corporate who muscled in with a $2 million marketing budget over 1-2 years. They didn’t last in the end.

A debt-free capital structure makes sense in some environments, but not necessarily in others. Count could use its strong financial foundation as a weapon to outlast its competitors. The strategy proved effective in the financial services environment where market saturation takes time. 

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Founder Interview: The founder who beat the banks at their own game (Part 1)

First published on Firstlinks, 15 June 2022


Barry Lambert founded Count Financial in 1980, bootstrapping the business and running it whilst still juggling a full-time job at CBA. The business that started out as a “necessity to pay for three kids and a big mortgage” was eventually sold to CBA for $373 million 31 years later.

I interviewed Count Financial’s founder Barry Lambert to understand how he built the business from the ground up, bootstrapping it for many years. Investors that rode the journey with this founder were handsomely rewarded. But how did Barry do it?

In this publication I distil some of Barry’s lessons which apply not only to business, but to life. And with each interview session I delved deeper into his mindset, drawing out the behavioural differences which make founder-led companies such a special hunting ground for investors.

For those looking to find the next Barry, the clues are sprinkled in his recollections; behavioural tendencies which permeated through Count Financial’s culture and ultimately translated into business success. I see this time and time again with the founder-led companies I analyse. Sound business decision-making leads to long-term profits – the source of it all is the unrelenting heartbeat of a founder.

The heart behind a founder’s business

After Hours Tax Services. That was the name first given to Count when it was born in 1980. If ever there was a business name that aptly reflected the inner personality of it’s founder, After Hours Tax Services would be it. Barry oozes an aura of pragmatism and straight talk.

In a deep raspy voice Barry tells me he needed side income and that’s why he started working on tax returns as a side hustle. He explains how he sought approval from his then employer CBA, noting to them there was no conflict of interest, since he was working at head office and had no direct contact with customers, therefore posed no risk to the bank. He was approved, and the next day he placed an ad in the Yellow Pages.

The response from the ad was strong. Because he was busy with his day job and couldn’t travel to service all the customers, he started outsourcing the work to other accountants, taking a skim for each client he referred. That was how Count’s accounting network started in the early days.

As the network and customer base grew, so too did Barry’s income. Barry chuckles as he recalls how after a few years the side gig was making him four times the salary of his full-time job at CBA. He had achieved his original goal – the business was making ample income for him to support his family whilst concurrently developing a career in banking.

So why not keep the side business going while he built his career in banking? What motivated Barry enough to ultimately quit CBA and pursue business full-time?

The answer came down to the very core of Barry’s philosophy in business – do what’s right for the client. And he didn’t see this philosophy at all when he was at CBA. In fact he witnessed the opposite. Back then incentive frameworks were designed to push clients into low-yielding products called Non-Interest Bearing Accounts (NIBA) and with inflation at all time highs in the 1980’s, clients’ wealth were being eroded away in these NIBAs. Yet the banks continued to promote NIBAs. This didn’t sit well with Barry. As he says to me “I’m not particularly religious, but I have a strong sense of right and wrong”.

He voiced his disagreement to higher ups to no avail, and so he eventually left CBA after 18 years to pursue his business full-time, knowing that he was in control of doing the right thing by his clients. This was the fundamental crux of what Count Financial was about, and would motivate Barry for the next three decades. The concept of doing the right thing by the client proved to be a winning formula not only for Count’s corporate persona, but also because it was a genuine commercial advantage that won market share. Clients listened to technical experts (accountants), rather than salespeople with vested interests.

Speed of improvement

Barry’s matter-of-fact approach to business rubbed off on the way Count was run – if improvements made sense, they would be done quickly without bureaucratic red tape. Take for instance licencing. Count was an early adopter of Australian Financial Services (AFS) Licensing for its financial advisors, the philosophy being to remain ahead of regulations, rather than on the back foot. Back then this wasn’t the norm, many companies took a wait-and-see approach when it came to regulatory compliance. There were some of Count’s competitors that were outright complacent – Barry recalls how he raised the need for licencing at a lunch with a Big 4 bank and was told “licencing is for people like you; we don’t need to be licenced”.

Improvement is a necessity of business. Change is inevitable and that was how Barry saw it. As it turns out, he was right.

The speed at which improvements could be made at Count was enabled by its relatively flat hierarchy. Barry remained the brains of the business and all major decisions went through him. There were no convoluted committees and steering groups to contend with. If the strategy made sense, it could be executed much faster than the competition. Case in point – Count converted into a paperless operation over a few weeks, again an early adopter of emails. They lost seven accounting firms in the transition, but as Barry says, it was necessary to keep improving the efficiency of the business. Making a change this bold in any other organisation would have taken years to decide and even more years to implement. For a founder, speed is an advantage.

I can still picture Barry chuckling as he says to me “I don’t mind the banks being a competitor because I know I’ll be 5 years ahead of them”. How true.

Problem solving

Barry points out the subtle difference between speed of execution versus speed of decision-making. Executing quickly doesn’t mean decisions are rushed and ill-considered. Quite the contrary as Barry explains to me. He often took his time with decisions “it [the solution] often doesn’t come to you straight away, you usually have to sit on it a bit”.

There are two main criteria Barry uses to make big decisions:

  1. solve the problem from first principles rather than copying others; benchmarking is a flawed concept
  2. the answer should be simple to manage and not too stressful to implement

It was with this framework that Count morphed itself from an accounting network into a wealth management network. In the 1980’s there were no other hybrid accountant/financial planner firms. As with all great ideas, it always seems so obvious in hindsight; there was no one better placed to provide finance advice than accountants who knew the financial position of their clients intimately.

The solution came about not because Barry copied a competitor, but because he started receiving a lot of calls from wealth advisors who wanted referrals from Count’s network. The problem was these were all salespeople who were motivated by selling investment products, not providing the right advice for clients. Barry disagreed with that. “Clients deserve to receive financial advice from professionals and not salespeople” was how he put it to me. Count applied for its financial advisory licence and started the new service the following year.

Count had carved out a unique position in a competitive field. By not copying others, Barry created a first mover advantage because Count was truly independent and relied on accountants providing tailored financial advice, a clear differentiator from his competitors who appointed salespeople to promote the selling of financial products as though they were selling a pair of shoes.

The unique strategies Barry used to scale Count Financial will be covered in Part 2 of my interview along with how he extended the gap between Count and its competitors, and his thoughts on effective management.