A Young CEO Lost His Family Business to Rebuild Purpose and Legacy in Succession with James Kell

- If you're like most of our listeners, you love the idea of running the show, but you're constantly second guessing yourself if you're ready or the person for the job. Are you missing a key skill? Are you aware of the things you need to know, like reading a financial statement or financing the operations of a business? We are here to solve that for you.

Our new Free Ownership Readiness diagnostic will rank you from 1 to 4 on five foundational pillars of successful business ownership. It is the ultimate confidence builder that will tell you, yes, it is time to have that conversation or know these are the areas that you might need a little bit more time to develop. If you're interested in taking that assessment, you can find the link for that down in the description below. Welcome to the Art of succession podcast with Barrett Young.

Join us as we explore the strategies, stories and insights that shape the journey of leadership transitions and business success. No matter where you find yourself along the journey, this is the podcast where you'll find the tools to make it happen. My name is Barrett Young and this is the Art of succession podcast. My guest today is James Kell, co-founder of scratchy.

James took over his family's construction company during a crisis and then kept it going for another ten years. And today, through scratchy. He's taken a solution for a common problem on the job site, and he's applying it towards workplace cultures across all industries. James, welcome to the Art of succession.

Thanks, Burt. Nice to be here. One of the questions that I ask all my guests is like, what brings you to the art of succession? What is driving you to want to share your story with my audience today?

I really want to help one person. And if it's more, that's a bonus. But if listening to this podcast, in my experience, that person can come up with some ideas or make a decision that will help them, then that's great. That's a great outcome.

Okay. Very good. So I mean, let's get into that story. Just give me a little bit of background leading up to taking over the family business for me.

Yeah. So we had a family construction company and it was started in 1910 by my great grandfather. And it was and as far back as we can go in terms of the family tree, the males have been builders like 5 or 6 plus generations back. They're all builders.

And so this construction company was very well regarded and well known in Australia. And for example, when we had our the equivalent of your white House, when we had that the construction of our new Parliament House, we built the two chambers in there. So it was quite a substantial company commercial development then, not necessarily residential. Well, this is the thing.

So it was, it was it built itself on commercial development. But then we tried some residential multi-unit residential. When I was still in high school, my father was running the company that didn't go well. It was full of risk that we weren't familiar with.

And and so that had an impact on our balance sheet and so made us quite weak. And we got to a point where I was working in China and the company was in dire straits. My dad said to me, can you come back and try taking over and see if we can fix this? And I was 28 and I actually didn't want to come back, but my one of my colleagues who was, uh, who was Malaysian Chinese, said to me, that's your father.

He's asking, so, you know, he had that the the Asian kind of filial duty kind of thing that's innate in a lot of Asian cultures. And so I took that as a bit of a sign. I was like, okay, so I dropped what I was doing, came back and, um, and took over the company at 28. And the first week the board resigned the the bank had been with us for 80 or 90 years at that point, feel like they took out the overdraft.

So we were basically on the ropes and I managed to call the chairman of Macquarie Bank, who was a big investment bank in Australia. It still is. And he he knew my grandfather and he was like, okay, you know, if you've got assets, we we could probably do something. And so we came up with the deal.

So the next day when this bank who'd pulled our overdraft expected me to come with some, you know, basically undertakers. Um, and, uh, we came with this. This was Macquarie Bank, and we said, you know, they'll replace you. And so that was good news in the short term.

And that started. So I ran it for ten years. But then funnily enough, I ended up making this similar error that my father had done. And I it was very similar type of project in a similar area.

I thought we'd learned the lesson, but we hadn't. And that really was enough to. We didn't have the balance sheet resilience at that point, and that was enough to to put us I mean, essentially, we went under. Um, we we sold the company that it was like a, like a more on sale kind of appraisal.

It would, would say that we went under. Correct. Gotcha. Okay.

Um, what was I mean, was it a housing bubble in Australia at the time, or was it completely internal issues leading to the turmoil that brought you in at 28? I try and look at this as honestly as possible. It's very easy to blame because construction is so many moving parts, so it's very easy to find external factors. But really, when you're sailing a boat, the captain is responsible for everything.

And it's the same thing as when when you're a CEO of a company, if it's external issues, it's still the CEO responded to them. Totally. So, you know, you look at these equivalent companies and they didn't go under. And we did.

So obviously that was our decision making at the top of the company. And so I was trying for several years to deal with the cultural issues that had got us there, because it was it was so hard to to know what the problem was and, yeah, to try and deal with it. So I have full respect for construction companies that that managed to succeed in, in a difficult industry. Give us some context on I mean we know it's been it's about 80 years old at this point.

You guys have built two houses of your parliament. But like the size of the company, number of employees like locations across Australia. Just give us some context about how big of a of a company this was. Yeah.

So we're a general contractor. So we had about 200 odd people typically have some apprentices, but foremen and site managers and project managers. So looking after around 4000 odd subcontractors at any one point in time. So you typically have, you know, 5 to 10% of the site is your own people, and the rest of them are subcontractors.

And so that was the size of the company. So yeah, we were doing some government clients, not necessarily big, but more the, the higher end stuff. Uh, we used to have our own joinery shop, so we would make the actual joinery that was closed in around 2000. A little bit earlier I think, and yeah.

And then we did work for, for example for the Apple Stores. We did all the Apple stores around Australia, about a dozen of them. Yeah. We were the higher end of construction and uh, that was what the firm did.

That was what we trained our people for. That was, you know, everything. And I was the fourth generation in that. Gotcha.

Business. Okay. Yeah. - I mean, you you you were called to step in and the ship was already going down, but you managed to make some calls, make some decisions and keep it going for another ten years until you, you, you hit the next wall, I guess.

What kind of decisions did you have to make? What kind of skills did you bring to the table stepping into this position that that did help you kind of write the ship just a little bit? Yeah. So it's a really fine margin industry.

In the construction industry, if you make 2 to 3% net margins, then that's about what's expected. So it's a the first thing I wanted to do was stem the bleeding. There'd been a problem with residential construction in Australia is that you have this seven year warranty period. So if you make any issues?

If you have any problems with the construction of the, then you're looking after it for seven years. People typically don't price that risk in, or if they do, they'll have a structure, a corporate structure that allows them to shed that risk. So to basically avoid that risk, like start up a company for a neighborhood and then close it and start the next one for the next neighborhood, or take over the body corporate so that they can they can never launch any claims against the builder.

So there's sort of there's legal. Call it what you will, but there's legal ways of dealing with that risk that we were not set up for. So we kind of stood behind our reputation. And if the buildings were not built correctly, then we would deal with that.

In a commercial sense, that's fine, because commercial clients are one thing. But residential clients, when you're building 200 apartments or whatever, one client, the developer becomes 200 clients for for seven years. And again, if you're set up for that then that's fine. But if you're not, which we weren't, then that's a real issue, because you only need 1 or 2% of those 200 new clients that you've never established a relationship with, to have a problem with you and you have a real issue.

Like I said, one of the ways that I've subsequently learned that they deal with this is that they take over the body corporate, so they might own enough apartments, um, to have the quorum in the body corporate. So these 1 or 2 problematic clients are never really an issue. But all of these things we learned subsequently, when I took over as CEO, I ended up spending probably half my time dealing with defect issues from historical projects and chasing money. Those two things, and that is pretty soul destroying.

It's not when someone's like, wants to. Well, when someone wants to build a company to be dealing with that is really difficult. Really difficult. So and you're stepping into it.

Yeah. You're stepping into that. I mean, did did dad step out at the time or was he there like, yeah. Leading alongside you or was he just he was the end of his rope on this thing.

This is really important. And maybe this is the if there's one thing to take away, if there's any people listening to this that are in a multi-generational company. When I came in, dad said, can you have a go? Can you take over?

And I said, yeah, I'll take over, but I need to be the CEO. Is that okay? And that was actually difficult, if you could think about that, for dad to relinquish that. But he my father doesn't really have an ego to speak of.

I mean, of course everyone's got an ego, but he's got his well under control. And he was like, no, no, that's fine. So you take over. I'll support you where I can.

He would always brought me up to never look backwards in a sense, basically if there are any issues in the company. I didn't spend any waste any time blaming him for them or having any. So we never had any arguments in that sense. And then when I made my own errors, um, he would never blame me for that.

In a sense, it was like, it's pretty obvious that it's an error, so let's move on with it. Where are we now? What can we do looking forward? And so I look back on this thinking the company didn't succeed.

Okay. But the relationship between father and son is stronger than ever. Um, and if you were to say to me, what would I rather. Uh, it's very, very easy answer.

I'm very happy to be here now, even though, uh, Kelly Rigby, the construction company, didn't succeed to have a very strong relationship with my father. I'm okay with that. If that was ever a trade off, I'm okay with this outcome. So.

And it can easily go the other way, as you know. Fathers and sons. You know, fathers are projecting a lot, obviously, um, themselves because they can see themselves in their sons. So it can easily be a fractious relationship.

And I was very, very happy with how that went. And I, and I can only credit my father for that because, you know, firstly, he created me, but secondly, he also, um, behavior wise, set the scene in that way. Okay. At the time that you stepped in as a company, privately held, still in the family, is it just like his, his side of the family, or do you just have majority control?

Like, what's that look like as far as other parties involved? My father has a brother and a sister. And so they sorted out who had what. There were a couple of companies that dad had this company and.

But that was still kind of being sorted out when I came into the scene as far as CEO. And it ultimately became me owning half and my father owning the other half. All right. Um, talk to me about the recovery period or the, you know, the successes in those ten year period.

We focused a lot on leadership. I was trying to improve the culture of the company. It it was demoralized by this big project that that really eviscerated the balance sheet. So we went for and so it was very difficult to win work at the time.

So there was this vicious cycle of really trying to win work. And it was it was hard work. So I put a lot of effort into leadership development and, uh, and just winning projects that could give a bit of a dopamine hit to people and to the likes of pasta, barley, pearls and apple and those sorts of types of projects that people were proud of. Sydney Town Hall, you know, the projects that people were proud to be involved with.

And so, you know, we did that. But at the same time, I was still spending half my time on these defects issues. So it was a hot and cold kind of existence as the CEO of the firm. And, you know, five years into it, I grew a bit tired of it.

And, - uh, it might have been six years. But, you know, at a certain point in time, I grew tired of this, and I thought, I don't want to be here in 20 years in this same position, like I need to sort this out. And this large, shiny project came across and it would make us or break us. And I remember thinking at the time, I'm okay with either of those options, but what I don't want to be doing is dealing with chasing creditors and these defects projects for eternity.

Like, I couldn't stomach that. And so it was a high risk project. And so I said, let's do it. Let's have it go, let's do it.

And that project, we didn't have the right team. It wasn't the right client. It wasn't the right time. So again, external and internal factors, - um, all of all of which are the CEO's responsibility.

Uh, and so that and we didn't have the balance sheet to be able to deal with that. So that's what happened, uh, ultimately, with this one residential project in, um, in the east of Sydney. Okay. What time frame was this about at this point?

Uh, this was 2010 to 2012. Okay, yeah. So in the US, we're just coming out of a housing crisis at that point, the tail end of of a a bubble. Does that affect the construction industry down there?

How does that play into that? It did. There was also some government, um, uh, government wasn't paying people on time and things like that. There were those elements.

But like I say, our competitors, we had 2 or 3 competitors and they were okay. Like, yeah, sure, they would have, they might have had a difficult period, but they saw themselves through it. So, you know, um, and in fact, there was a radio station that, uh, that asked me a similar question, and he was a friendly at the time. And he said, um, of all the things, you know, if you could put it down to one thing, what would it be?

And I said, well, if it's one thing, it was me. You know, um, if you want to put it down to one thing. So. And I wasn't kidding.

And he, uh, of course, wasn't prepared for that response, but it has to be that way, you know? So I was, uh, I was considered a mental health risk at that point. Um, but I was just being honest. You know, uh, so - as honest as I could be, you know?

So I think that somebody says the Buddha or someone says, um, we're honest until the point that we open our mouths and and talk, you know, I mean, I definitely want to get into that because that can weigh on a lot of business owners. But before we do that, just talk to talk to me, talk to my listeners about what you mean by you didn't have a strong balance sheet. Like, what does this look like when it starts to flip upside down in $100 million construction company at this point?

The defects work of the previous projects, while the previous projects had taken out a lot of the losses created by that, had taken out a lot of the net asset base of the company. And so that was very thin. And then the any profits that were made in the first 3 or 4 years were spent on these defects projects. So let's say we'd make 2 million a year in profit.

That would be spent, 2 million would be spent on these defects works. So it was like Sisyphus. It was like rolling that that thing up the rock up the hill and then letting it fall down and then rolling it up again, you know, and then you're also paying all your, your contractors and everything you're getting extended on them to before you're receiving full payment. Yeah.

That's so what's what's that cash cycle look like at that point became extended for sure. We would. Our terms were going from two weeks to four weeks to six weeks. And you know, it was it was really difficult.

And and I think maybe one of the questions that someone might have would be, um, what would you do differently, knowing what you know now? So if I was in that position, let's say I was five years in now. So I'd kind of righted the ship. To a degree, I still had these problematic defects projects.

Legally, you can question this ethically. Actually, we could have an ethical debate on this. If I wanted the firm to survive legally in the environment that that existed, I would probably set up another company and basically shift everything towards that other company and let the first company die on the vine. So when these 2% of people that own apartments give a telephone book of defects, issues that weigh us down for longer, we would that that particular company would be worth not much and we would be sort of fresh starting On a new company.

So, you know, I actually think in the in the environment that we were in that wouldn't have I wouldn't have had an ethical problem with that personally because it's still the brand name. If the the market didn't respect the brand name, then the brand name doesn't win any work. So that's what other companies are doing quite, quite happily nowadays. We actually had an issue with that at the time, but perhaps we would kind of too naive or too purist about it, I don't know.

Yeah, that's what I want to get into because you talked about the mental health and dealing with this. I mean, it's all on your shoulders. It's all your fault is, you know, that's easy to say in retrospect, but at the time, it just weighs on you. Looking back at who you were at the time, was it a lack of skills, a lack of experience, or just the ability to handle something that size that it was that was going down?

Or, you know, how do you how do you how do you work through that? Yeah, I think it could have been a mix of those things. I think also a lack of passion. When I took over the company, I was, um, okay to do that.

It was this familial, um, kind of obligation, uh, a filial obligation. But 2 or 3 years into that, uh, whatever passion I had was not there. And - I, um, what I've noticed with the companies, I've started two companies subsequently, and the vibes and the passion that go with with that is, um, it creates success and it rides you over the tough periods. So that didn't exist.

And that can be a vicious circle when you when you sort of drag yourself, if you're the CEO and you're dragging yourself to work, then something's something's wrong, Right. And so that that was definitely I, you know, was it skills I could have been I think it's a mixture of things. But um, passion was probably the key. The team was good.

Um, the it took me a while to establish a good team, and it's almost like I had the right team at, uh. But it was too late in a sense. Uh, so, yeah, it was, um, getting the right team, of course, is key. It took me out of the ten years that I was CEO.

It took me about 5 or 6 of those years to get that team right. Gotcha. Okay. It was your dad still with you at this point in the company or is he out at this point?

Yeah. So dad was still an owner. He was still there for me. Uh, anytime I asked for his help, he was there for me, and which was really good.

Uh, so we were able to to discuss things. Um, but the decisions were made by me at that point. Okay. All right.

Um, so I do want to get into just the that second hit and deciding it's time to close it down and and move on. And then we'll get into what you've been up to since then and the lessons that you've taken into your next businesses. So, um, I mean, talk to me just about those conversations with dad and saying, we're not we're not going to make it out of this. Like, how did that come to come to light for you?

How did you face that reality? We actually had a couple of companies that were interested in buying us. Um, and so in the last 2 or 3 years, we were talking to them. So one of them was South African, wanted to buy the, the group, and, um, we wanted to sell them one part of it.

And the other one was Australian, Malaysian, Australian billionaire who had some property companies and was interested in buying us and so they their due diligence took two years. And - what so we were about to sell and that was going to be my dream because that was the elegant way out of the business, the business that I was no longer passionate about. And so we were about to sell. And they did the handshake, they gave the verbal.

And then we said to the other buyer, we're going with these guys. And - then they reneged on that deal at the 11th hour. And that was what actually caused the everything at that point. Then we had to call the administrators in because we were actually insolvent and all the rest of it.

So without their support. So they'd been they'd given us a convertible note, and that convertible was fine. And as soon as they said, no, we're not going to do it. That was the event that we said, okay, we have to call the administrators now, because if we're if we don't call them in, then we're trading insolvent.

That's that's illegal. And that was that was the event that actually happened again. Blamed them. - Yeah.

Yeah. You could. Um, but why didn't I have a plan B? Right.

Why did I rely upon these people? So again, I think it's the CEO's job to have a plan B and a plan C in these situations where I could say they don't honor their commitments, but that's kind of emotional language there. It's just business. So, um, they were a fan of it, but then they weren't.

And okay, you know, they actually lost their their convertible note with that. So they paid they paid the price for that in that sense. Gotcha. Okay.

What does that what does the wrapping up the rolling up the the bringing in the administrator of this company look like, what's that timeline? And did you end up liquidating finding another buyer. What's that look like here? Yeah.

So, uh, it was all quite quick. It happened quite quickly. From then on, I think it was February when the administrator was called in and and sort of four weeks later, it was all done. Um.

Wow. And. Yeah. Yeah, it was 4 to 6 weeks later.

- Uh, so we had a bunch of projects. They were sort of sold to, um, other. So the administrator took over, like, they'd literally take over. Um, I spoke at a creditors meeting, and I said to them pretty clearly that everything that I've said to you, you know, in two minutes because, you know, and then they were all subcontractors.

There were all people that I'd known. Um, I did my apprenticeship as a carpenter. So, you know, there's a lot of companies there that I'd known. Unknown.

And when after the meeting, uh, and there was a couple of hundred of them there, and a couple of them came up to me and asked me if I was okay, and that was what sent me over. I became a very emotional then because they were not. Um, they, they sort of regarded it as as just business in inverted commas. And they were just concerned for my welfare, and which is amazing if you think about it.

Yeah. That happened very quickly. Um, in the scheme of things, I ended up just sailing, I sailing across the Atlantic Ocean, just finding a space on a sailing boat. Nobody knew me.

It was, you know, very, very, very basic. And it was good. It was pressing control out, delete mentally just to sort of reset and refresh. And then I ended up starting a sailing business two years later.

Um, okay. And I did that. I saw a space in the market, but I also did it to sort of prove to myself that I could actually run a business, because that was a this is something that I really, really gnawed at me is the sense of failure. Uh, and I needed to, to deal with that.

So, uh, yeah. So that's called sailing Virgins. It started in the Virgin Islands and, um. Yeah, that's that's a great little business.

It's nothing in terms of the scale of rugby, but it's, uh, it's a great business. Sure. Yeah. Uh, how long was that, um, that hiatus for you and, I mean, single guy at this point and talking to your dad through the whole thing, what's that look like as your mental health is starting to, you know, heal from this?

Uh, it was 20 12th March when I, um, when I sailed across the Atlantic. And then I worked in the industry as a sailor, as a skipper for a few years. And then I started the business in 2016. In June.

So you were making money during this trip as well? You were. You were a deckhand or sailor, I guess, on that first trip. Yeah.

Be kind of a professional captain. Uh, and do it. I was photography was my passion. Um, so between those two things, I sort of saw photography.

I questioned whether I should do that full time, but I noticed that the photography is a bit like golf. The top 20 in the world do very well financially out of it, and everyone else does it for the love. And I wanted something a bit that was, um, that could use my the skills that I'd learned in business, actually. And so photography seemed just too much of an art to me, not enough of the business.

Whereas in starting the sailing business, I could, um, use what I'd learned in business and use some photography. It needed needed photography and to sort of seed that business. So that's what I did. Dad is retired at this point.

Did. How did dad. Bounce back from this? And then also just as a father.

Like watching your son go through this too. How's dad doing through all this? Dad and I've always been very close. And he did.

You know, this was his whole life. Like he'd also started as an apprentice and played in the sandpit of, you know, like, literally of the company, um, you know, the yard. And so, yeah, I mean, of course, it's it was difficult for him. Dad's really good at looking forward.

He doesn't really look backwards too much. Uh, sure. If it's if it's going to be something that's going to help you make better decisions, fine. But this whole thing about, um, obsessing about the past and trying to deconstruct the past, that's not dad.

Um, and I think that's very healthy. It's almost an art form in a sense, because it's like, easier said than done sometimes. Especially different people think differently. He, his brother, my uncle, who I'm close to, is much more of a sector of history.

He's interested in the family history, for example, the family tree, and he's that's his passion. Whereas dad, dad just isn't. Dad's not sentimental in that regard at all. Um, and I think in this sense, it's a very nice way to be, you know?

Otherwise you end up just, um, consuming yourself with your past, you know? Um, so you didn't just start the sailing company. I mean, that was the first one. That was the first, uh, company that you started.

You said about two years later, you started that, um, you're now co-founder of another company. Um, talk to me about, you know, venturing out back into services. Back into commercial sphere. Yeah.

With what you started. Yeah. Well, so I came back to Australia during Covid and, um, the sailing business was on pause. Like there was nothing happening sailing wise in the city.

Okay. Gotcha. Yeah. Yeah.

And, um, so I thought, what am I going to do? I was interested in national security, so I enrolled to National Security College for some postgraduate study, which was so interesting. It was two years master's program, and it was just completely different to what I'd been doing, both in terms of construction and then the sailing and everything else. So I was in Canberra doing that, and I caught up with our safety manager back in the Killeen Rigby days, and I had appointed him and, um, he came from a very different background to his typical safety manager.

He, he'd been a professional musician. He'd been a drummer and a bass guitarist for ten years before he joined the industry. Where that's important is that he was not your typical safety guy. So.

And he and I were very close. We always worked closely together and got on well. And so I asked him because he'd stayed in the industry. He'd done very well in the safety domain in the construction industry, leading, you know, safety in some of Australia's best construction firms.

And so I asked him who had taken on this thing that we'd experimented with with the Apple Store just before it all went down. And he said, nobody, because we'd practiced, we'd sort of done a pilot with these preprinted scratch cards and giving them to workers when they were exhibiting safe behavior, as opposed to just always punishing workers when they weren't safe. So it was the the inverse. We inverted that whole model of safety.

And so I said to Gary, who like, you know, did you do it afterwards? And he said, yeah, I did it in the other firm. And it was great. And I was like, okay, has anyone taken this on as a as its own business?

And he said, no. And so I'd already founded the sailing business on my own, and it was quite lonely. And I was used to working with dad, with Killer Ruby. And I saw how it was on your own, and I didn't want to do that again.

I wanted to start another company, but I wanted a co-founder. So I asked Gary if he'd be interested in going in. And Gary was like, yeah, let's do it. And so that was four years ago.

And, um, we turned the, the what was a physical scratch card into an app, basically. And so it's a lot the administration of it, it's a lot easier. But basically when workers are safe, then they could get an instant reward recognition from their boss. And so yeah, that's that's scratch the scratch card idea.

Um, like a lottery ticket. Like a prize, like scratch to reveal what? You've one kind of thing. That's what it was originally.

And we call them scratches in Australia because we shortened everything. Um, so the app itself is the same principle, but it's not an actual you don't have a scratch card or anything like that, but it's that same gamification. So there's that surprise, like you say, the anticipation. Oh my.

My boss has just recognized that I've done this. Well that's great. I'm going to win something. I don't know what it is.

Typically if it's we call them turbo scratches is the is the cash awards. It's ten, 20 or $50 on the spot. So it's only one of those three. And so they don't know that anticipation is a big, um, part of the dopamine hit that we all crave.

And we're all addicted to dopamine because, you know, gamification is in every other part of our lives. And so we've really gone down that sort of path. Uh, we've found this theory called self-determination theory, which is a this psychological kind of thriving. It's a very well tested theory in psychology by Deasy and Ryan.

And so we've really used that as the platform upon which we've built this app. And so last year, McDonald's Australia, well, ten stores in around McDonald's Sydney chose us to not really. It wasn't I mean, safety of course is important. But for them it was about customer service.

It was about guiding their crew that are typically in their teenage years. And they need to they need guidance, they need to feel competent, but they also need to do that in the spirit of keeping the vibe high in this family restaurant environment. So how do you do that? Will you really only can do it through encouragement?

And so they saw what we do is is key to that. So they've chosen us. We've been working with them for the last year. Yeah.

Gotcha. Okay. Um, I think self-determination theory. Popular level.

Um, Dan Pink had a book that says that we're driven by autonomy, mastery, and purpose. And I think that's the idea behind that, that carrots and sticks don't work anymore. But this is giving them a sense of, oh, wow, you did a good job with a customer and somebody noticed it, and you're getting rewarded for it then? Yeah.

That's right. So Dan Pink I think with drive he he calls it purpose what he calls purpose. DC and Ryan say um they call it relatedness. So they're not they're not the same things.

I acknowledge that. And you know, I'm not about to get into that debate on which would be more powerful, I think to be I think it's fair to say that purpose is very important. Uh, relatedness is very important. Uh, so, you know, uh, we've gone self-determination theory that.

Yeah. Dan Pink's got a really valid claim there. Okay, cool. So what does I mean?

What does that look like? Founding a company from scratch with a former coworker. Like, how does this get off the ground and test the model and say, this is bigger than the job site as you guys have been using it? Uh, it's it's it's great.

It's nice being in the construction industry. It's an industry that you really have to have been kind of almost sort of born into, like in terms of, um, people that start at their apprenticeship level really understand it because there's so many moving parts to construction. So to have been an apprentice is to really understand the industry. It's the best way to to understand the industry.

So both of us are really happy to be in the construction industry. I'm happy not to be a general contractor. I'm happy to be working with general contractors. I fully, fully respect them and I'm happy to to serve them in that sense.

Um, and, you know, so I know how they think And what we can do is to improve safety through positive means like this one. - This is a dark statistic, but it's, um, needs to be said. For every death on a construction site, there's six deaths to suicide in the industry. I call it the invisible elephant in the room.

It's not the elephant in the room because people can't see it. Um, now. So there's six deaths to suicide for every. And everyone focuses on, um, you know, personal protective equipment and delineation.

And let's not have that truck, you know, um, crush the person. Valid. Meanwhile, there are six people that are killing themselves for every one of those people. So it's difficult to know what to do.

Um, I think in the last sort of ten, 15 years, the, the overwhelming sort of advice has been that we guys don't talk enough. We need to talk more. If we talk more. That'll help solve the problem.

So then we destigmatize mental health issues, we talk more and we're still killing ourselves. So it's like, okay, don't think talking more is actually the answer. I think - almost by design, we, um, we don't talk a lot about don't talk as much as females. I think that's been well researched, well documented right from a child.

And we take more risk. That's also well documented. That's a biological thing. Right.

So there's a few things that that happen there. What we believe is that we're self-determination theory being our guide. If we can improve autonomy, competence and relatedness in the workplace. So if people can feel as though they're making their own decisions, if they can feel competent and if they can relate to others, if we can encourage that, if we can build that in the workplace, then that is known to have this mental thriving, this psychological thriving.

So we are we believe that this is going to help things. Is it going to be the answer? Not we're not we're not going to, you know, but is it going to push the needle in the right direction? We believe so.

The fact that we are on everyone's devices because we're the app that awards them cash. So, you know, they're typically on their on their phones means that we have the ability to ask them a question every now and then as well. So we've got a there's the Who five, which is a psychological questionnaire set. And so we're going to incorporate that later this year into the app.

So once every couple of weeks it'll be a case of hey Barrett for for 20 points. Do you just want to answer this question. And you go okay I'll do it for 20 points. And it's like basically it's a mental health question, how are you going.

And you, you answer it sort of 0 to 5 and it the this the framework is not ours. We've adopted the framework but we ask the question and if you give it a low score, then we'll have two follow up questions, which again is not our framework, but it's a very well researched framework. And we can then say, okay, we can either if it's really problematic, we can point you to the right sort of lifeline kind of, um, service. But generally we'll be able to know the pulse, the mental health of a site and of a company over time.

And so we believe that that's also going to help. We don't believe that to be the panacea. I don't I don't believe in for this sort of thing in silver bullets. But I do want to do something that might help, you know.

Yeah. Gotcha. So, Baz, so scratchy effectively is making people feel like they're being noticed by their coworkers, by their supervisors. It's like I saw, I saw you, I see you, I appreciate you, and it's just that little bit, ten bucks, 20 bucks, that's like, oh, wow, that was a good day.

Can change somebody's total outlook on that. Exactly, exactly right. Um, you get bonuses, managers get bonuses for strategic wins. But line workers typically don't get any micro bonuses for tactical, uh, for sort of operational wins.

And so what scratchy does is bring that same bonus, um, approach that works, that acknowledged so well in the senior levels and brings it down to it's kind of you could call it a micro bonus, you could call it even a tip. Um, it's anything that says, hey, you did that. I've just seen that. And I'm going to give you a reward.

I don't know what it is. That's not on me. That's on the system. Deliberately.

We've separated out the decision to make the award from the quantum of the award. So the reason for that is you don't want this to be controlling. If it's controlling in any way, then it goes against self-determination theory. It needs to be more acknowledgment.

I always used to joke my first employer could have kept me around another three years if they'd just given me a $25 a month book fund, and it's like it's such a small thing for me. It wasn't that I couldn't buy books for 25 bucks a month. That wasn't it. It was that they would have noticed that I'm a reader, and they would have encouraged that, and they would have been asking me, like, what are you reading at the same time?

So I really see the the value of something like this. It's amazing that you've, you've you would and it's so true. Um, you know, it's like the cup holder in the car. You must, you know, it's been well case studied that, you know, when I think it was Saturn or someone like that put a cup holder in a car all of a sudden.

That was that was the that tipped the decision in the favor of, of that particular vehicle. Right. A cup holder. So you're 25 bucks a month.

Book fund was the cup holder. It was. And so recognition of this is what we're saying is that recognition and reward that goes with the recognition is the so-called cup holder for keeping employees. And even if it doesn't keep every employee forever, um, it's the fact that it'll keep an employee for 10% longer or it'll keep 10% more employee like, whichever way you put it, it will have a positive impact in percentage terms on how long you can retain your good people.

Yeah, yeah. That's awesome. I do want to ask, just because, you know, you've learned something through the first company, like how has this made you a better CEO now? Co-Founder now and then?

Also, we talked a little bit before recording like talk to me about your own succession planning in this like goals and everything like that coming out of the multigenerational family company. I wish I could codify what it was. I haven't been able to do that yet. Codify the lessons I learned before and what I've applied to sailing versions and scratchy with sailing versions.

The sailing versions is nine years old now, so it's and it's a small team, but it's a very, very tight team. It's a, it's a joy to work with. I had my own lessons along the way for that, and I continue to learn. Of course, one of the big lessons was operationally, I need to find someone who's passionate about that part of the business.

And so I have a German woman who runs Sailing Virgin's now day to day. And she's brilliant. And we talk every other day and she's, uh, she's on top of things and, you know, so it was important that I didn't do that part of the business because I don't think I'm particularly good at it. And so I'm clearer on what I'm passionate about, what I'm good at, what I'm bad at with these businesses now.

And I make sure I, I find someone who can deal with my weaknesses. So whereas with, uh, when I was running the construction company, it was less it was less clear to me, uh, what what I was good at, what I was about at. Gotcha. Okay.

Yeah. Just fill me in on. You did mention, like, succession planning or or, you know, building that into the next company. Do you have any insight on that lessons learned or anything you want to add for that before we wrap this up?

Uh, succession planning. So with Sailing Virgins, I was considering selling it last year. Um, but it's too much. It's too enjoyable to be a part of, So, um, I and I just came back from Saint Martin from training some new instructors, and, um.

It's just so much fun. It's a nice business. So there's profit share with the team, with the general manager. And so of course I want them to be invested in the business.

I'll probably look at giving them some equity at some point in the business. So I'm not holding on to that too religiously. I think, um, that that pays back dividends in its own, in its own way with scratchy. It's very early days.

So we've just launched release three. Now we're just about to look at launching in the US. And, uh, so it's a very exciting business. Um, it's good to be doing something that feels right.

- Um, as well as whether the unit economics of software, which is it's a SaaS. So it's essentially software. Um, the unit economics is, sound unlike anything I've ever seen. I mean, I come from 2%, 3%.

Net margins are being expected. It's more like 95% margins in in SaaS businesses. Now you need to get to a certain level of subscribers that can like so that whole product market fit that they talk about is is all important. But as soon as you get to that point, it's a it's a really decent business.

So unlike anything I've ever seen in sailing or construction or anything like that. I think Marc Andreessen was said to, um, he's quoted as saying the software will eat the world, and I can understand why that's the case. I mean, if you've got software that solves a problem, then, um, then you're in a good place. Gotcha.

Okay, awesome. I mean, we're coming to the end of the show here. Uh, James, did you have anything that you wanted to add before we wrap it up and go to the lightning round? I'll just reiterate.

One thing then is to set is to suggest to fathers in a family company, Typically it's a patriarch. So. And how to how to deal with their offspring. I would say the have your priority as you you you probably do prioritize your family.

Make sure that that involves how you deal with situations in the business vis a vis your son or daughter. And do not blame them for stuff ups. Only look forward and if they blame you for stuff ups, that's actually how you've taught them. So don't don't have a problem with that.

You're just going to have to deal with that. And um, that that would be because regardless of whether the firm does well or not, whether it succeeds or fails, I think we can all agree that to have a good relationship with your parents is in life is a is a real blessing. Awesome. Thank you for sharing that.

Yeah, that's a good lesson. - All right. With that, we can jump into the lightning round if you're ready to go. Go for it.

Okay. All right. Um, coffee or tea? And how do you like it prepared?

Coffee? Uh. - Long. Black.

Okay. Um. I'm a sailor. You have.

You tend to like the, uh, the simplest ways of doing things. Gotcha. All right. Pie or cake?

And do you have a favorite kind, uh, cake. Anything my mother makes. Yeah. Uh, anything is sweet and full of full fat.

Full sugar. Um. All the things. Yeah.

Okay. Does she have a favorite kind of cake that she makes? We have this thing called pavlova. I don't know if you've heard of it.

Um, it's the best thing ever. I don't know if it's a pie or a cake. It's it's own. It's it's own genre, but, um.

Yeah, it's it's it's an ongoing. Um, it could cause a war between Australia and New Zealand, who actually came up with the pavlova. We claim it are the Kiwis. I've kind of got family, you could say, in New Zealand, so I consider myself a bit Kiwi and uh, but yeah, no serious serious issue.

Probably the most serious issue between the two countries. So Pavlova. Pavlova is a great, great cake. It's like a meringue with cream and and berries.

It's amazing. Okay, awesome. I've got some reading to do tonight. After we conclude, then.

Yeah, yeah. Um, do you have a favorite holiday and why? Yeah. So there's a I don't even know if I should say this because it's such a beautiful place, but I've got a, um.

There's an island just off Australia called Lord Howe Island, and it's it's a bit of a healing island. And, um, it's a remarkable place. There's a couple of beaches and a couple of mountains, and it's just there's 350 people who live there. And so, uh.

Yeah, time spent there is is very healing. It's very, very good. It's not cheap to get to and it's not cheap to stay at, but it's just an amazing place. Awesome.

Thank you for sharing that. Nobody go there. Leave it for me, guys. That's right.

Yeah. Yeah. Nice. Um, do you consider yourself a morning person or a night person?

And do you have a favorite routine that you enjoy? Definitely. Morning person. And this is this morning's an illustration of my morning.

So I got up early, went to the beach, did a workout, uh, did a short meditation, had a cup of coffee and got into this. So, yeah, I love the morning routine. It's, uh, it's a big part. And I live by the beach in Sydney.

So very fortunate in that regard. Start. Start with an open water swim. Yeah.

That's right. But even in Canberra, which is inland, you know, so you find what you can do in the morning routine, walk up a mountain or something like that. So what we call mountains in Australia, you guys call it hills because we don't really have mountains to speak of, but, uh. Yeah.

Awesome. Thank you. Um, what's a common belief among entrepreneurs that you would want to challenge? This one is a bit more difficult.

It's not just among entrepreneurs. I think it would be generally the one of accountability. I think that life becomes simpler and actually more refreshing when you take full responsibility for it. And like I say, not just for entrepreneurs.

In fact, entrepreneurship kind of in many ways forces this lesson. But I would say to the more people that figure it out and the quicker people learn that, the better life becomes for everyone. Yeah. Awesome.

Thank you for sharing that. I mean, this whole conversation has been a testament to that. So it's a it's a lesson that you've learned well, and I thank you for sharing it with the with the audience today. What is one thing that you would want your successor to remember you for?

I would like to have my successor unpack the business and say, this is better than I thought it was. So as the business reveals itself, because a lot of these things you learn over the months, weeks, months and years following are taking over to say, wow, this, this is better than I thought. So that that would be my aim. Gotcha.

Awesome. I'm getting way more than I paid for in this. So much more value than yeah, than I thought it was in terms of like. And it's not just financial.

Like if you look at the sailing business, I'm just loving this business. I'm loving being a part of it, loving what we do. Loving the the the instructors and the team. Like I'd want whoever purchases the business or takes it over to have that same sense of going, wow, this is this is great.

This is really awesome. Um, where are you finding creativity right now? James? Oh, in the business.

So in scratching and in sailing virgins. This is why I love, um, doing these things is that it's fully testing, fully extending me in terms of dealing with our teams. With scratchy, it's dealing with the dev teams. They're principally based in Poland.

How do we deal with marketing? What's the bleeding edge of marketing? Um, how do we get the word out? Yeah, I'm fully extended with, uh, with these businesses and loving it.

Nice. Final question for you. What do you have coming up that's got you really excited in the next year or so? Yeah.

So launching scratchy in the US is going to be I mean the US is a massive market. Like we've got 25 million people in Australia. You guys have 330 million people. So it'll be really exciting to be involved in that.

And also the American entrepreneurial ism shouldn't be underestimated or understated. Really. Like the fact that you guys celebrate entrepreneurs. It's in your cultural DNA and you also celebrate bounce back stories like if someone like, let's say, a business failure in Australia, that's kind of like a red card or maybe a yellow card.

In America, it's like it's almost a badge of honor. It's like cut down on to the next one up. I learned a lot. Americans tend to go.

All right. Cool. You know, it's it's an amazing part of your culture. And so I'm looking forward to being involved in that in your country.

Awesome. What's marketing going to look like as you guys get here? I know we're past the interview, but are you guys going primarily towards businesses? Is this something for small teams like a manager with three people under them could implement something like this?

What does that look like? Yeah. So we're a rewards platform, but we're a layer that goes on to apps like safety platforms and things like that. There's a safety platform coming out of Australia called Safety Culture.

They've had a very good go to market strategy, which involves a freemium. So you can download their app for free and use it, and then you can subscribe. So the way that scratchy will be is emulating that. So people can download our app.

They'll be able to use it with a small team of like ten people. And then when they want to go pro, like to get more features and that sort of stuff, or more people or anything, then they pay $5 per user per month. So, you know, we're saying that the return on that is it makes that $5 a trivial amount. But, you know, and that's how it will look.

So social media will be out there. Word of mouth case studies, that sort of thing. Typically word of mouth and case studies is what's what we've used today to expand people like us and that they pass on, you know, the story. So that's been good for us to today.

Awesome. When can we look for that in the States? Early next year. I was going to say late this year, but, um, I'll say I'll be coming out January February.

So yeah, just around the corner. Yeah. That's it exactly. Awesome.

Well, I look forward to that. Uh, James and I can definitely see a need for it. I run a small team of 14 total, um, and just finding ways to appreciate them without just making it cheesy or without making it, you know, the stereotypical pizza party kind of thing. Yeah.

Looking forward to to seeing this. So so I want to thank you just for your time and sharing your story with us here on the Art of succession. Where can people find out more information about you? Go to scratchy.

com or Sally virgins.com. That's the two businesses. Or they can just email me James at scratch.

Com. Very good. Thank you so much for your time James. I appreciate your sharing your story.

Thank you Barrett. Have a good day.