Decision Vision Episode 101: Should I Enter Into A Business Partnership? – An Interview with Kenji Kuramoto and Matthew May of Acuity

Intro: [00:00:01] Welcome to Decision Vision, a podcast series focusing on critical business decisions. Brought to you by Brady Ware & Company. Brady Ware is a regional, full service accounting and advisory firm that helps businesses and entrepreneurs make visions a reality.

Mike Blake: [00:00:21] Welcome to Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic from the business owners’ or executives’ perspective. We aren’t necessarily telling you what to do, but we can put you in a position to make an informed decision on your own and understand when you might need help along the way.

Mike Blake: [00:00:40] My name is Mike Blake, and I’m your host for today’s program. I’m a director at Brady Ware & Company, a full service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia. And Brady Ware is sponsoring this podcast. This podcast is being recorded in Atlanta per social distancing protocols. If you like this podcast, please subscribe on your favorite podcast aggregator, and please consider leaving a review of the podcast as well.

Mike Blake: [00:01:07] So, today we’re going to talk about the decision of entering into a business partnership. And I feel I need to do a little bit of a preamble to this, because if you’ve been listening to the show or if you can count, you know that this is episode number 101 that we are recording. So, we just passed the century mark and we’re very pleased about that, and we’re pleased that people choose to listen. There are lots of things you can do on the Internet, and we’re glad that you decided to make us one of those things.

Mike Blake: [00:01:41] But we are going to kind of change the tenor of the show just a little bit. Now, we’re not going to go away from talking about individual business decisions, that’s why we do this. And, frankly, I can’t think of anything interesting that I could talk about with others or with you for a 45 minute period. But we are going to do something a little bit different because we are always looking to improve, of course. And that is, most of our guests up to this point have been expert advisors. And look, there’s nothing wrong with that. I consider myself an adviser. Some of my best friends are expert advisers. Our guests are, in fact, expert advisors, although they’re not coming on the show today necessarily in that capacity.

Mike Blake: [00:02:29] But I do think there’s value to having a conversation, not just with an expert about a particular decision, but somebody who has actually done it. Somebody who actually had to pull the trigger, do the analysis or not, and live with the results, whatever they may be, positive or negative, because I think that’s just a different perspective. And so, that’s going to mean two things in addition to the fact that the nature of our guests will change. Now, we’re still going to have experts on, don’t worry about that. But, also, I’m not going to be afraid necessarily to repeat a topic, because if I think that somebody has a different take on a topic and everybody comes into a decision with a different background and a different bias and, frankly, a different set of priorities and circumstances, you can have, I think, a constructive interview or conversation multiple times about the same topic and learn something different.

Mike Blake: [00:03:30] So, if you come on, you start to see these episodes, download into your phone or your computer or you look on our website, and you see repeats, don’t worry. We haven’t all of a sudden become a skipping record. But simply that we’re changing the tenor of the show, that we’re just not going to be afraid to go back and look at the same topic from a different angle. And, as you know, we can’t cover everything that we would like to in a 45 minute period. There are times when we could have easily had a three hour conversation. So, I hope you’ll agree with that. I think that’s going to be an improvement to the show.

Mike Blake: [00:04:05] Finally, a bit of housekeeping. We looked at our numbers today – really, I looked at them for the first time in a long time – and in addition to now 101 shows, I learned that we have now exceeded 15 million downloads and we’re getting into 25,000 to 30,000 downloads in the first 30 days territory, which puts us in the top 2 percent of all podcasts. And I just want to take a moment to acknowledge everybody that has made that possible.

Mike Blake: [00:04:38] I’m the front man, the ugliest one we could possibly find. But between Brady Ware’s support of the show – and I’ve mentioned this before, they’ve given me a blank check – they don’t tell me what to say or not to say. They don’t tell me what to talk about or not to talk about. I’ve been critical of my firm on occasion on the show. And it’s to their credit, they allow me to do that. Maybe it means they haven’t listened, but I’m just going to take the sunny side of the equation. You know, our marketing department has done a great job with us. Our business partner, Business RadioX, has helped get the show exposure that it could not have obtained organically.

Mike Blake: [00:05:13] And our guests that have devoted their time to being on the show. You know, me speaking into a microphone, that’s bad radio, even by Internet standards. And so, having guests that are willing to come on and take time out of their busy day to be on the show, you know, there is no show without them. So, as you can tell, this is a massive team effort.

Mike Blake: [00:05:32] And then, finally, you, the listeners. The listeners that have tuned in and have commented, have left reviews, and helped the show get out to help other people. Again, if there’s no listeners, I may just as well speak into this microphone turned off. And that’s not really my jam. So, I just wanted to acknowledge that the show has come a long way in under two years, and we hope for even better and more powerful things in the year ahead. All right. Stump speech over.

Mike Blake: [00:06:07] Today, we’re going to talk about this decision about entering in a business partnership with two longtime friends, Kenji Kuramoto, who is Chief Executive Officer, and Matthew May, who is Vice-president of Sales and Marketing, of Acuity, which is an Atlanta based firm that provides a wide array of accounting related support services. And they’ll probably correct me in how I’m describing it, but that’s the way that I described it. And I’ve known them before they’re in this partnership. And they’ve been in this partnership for a bit now.

Mike Blake: [00:06:40] And just as one person observer, you know, I think they are the fastest growing accounting services firm, certainly from an organic standpoint in the Atlanta market. There may be a couple of others that have exceeded them because they’ve gone on a massive acquisition spree. But in terms of organic, I mean, these guys are just killing it. You see them on social media, it’s all smiles. They don’t look like accountants. They almost make me want to be an accountant, except I’m a lousy accountant myself. But what I want to do is, I want to find out about these guys and what makes their partnership tick. It seems to work so well, but we’ll find that out. Maybe there’s dirty laundry that’s going to be aired right on the show. Kenji and Matthew, thank you for coming onto the program.

Kenji Kuramoto: [00:07:25] Happy to be here, Mike.

Matthew May: [00:07:27] Thanks for having us, man.

Mike Blake: [00:07:28] So, I’d like you guys to talk about your origin stories. I’m going to just invoke my inner nerd here. You know, before you became partners of Acuity, what were the tracks that kind of led you up to that point? Kenji, let’s start with you.

Kenji Kuramoto: [00:07:45] Sure. So, coming out of college with an accounting degree, I did what I thought everyone was supposed to do, you go work in big global public accounting. So, my first stop was in the Atlanta office of Arthur Andersen. You know, that firm that people used to know about that –

Mike Blake: [00:08:01] I remember them.

Kenji Kuramoto: [00:08:02] Crazy things happened too. I was in their audit practice for about four, almost five years. I got out before that crazy Enron thing or whatever happened, but it was during the dot com kind of the initial kind of take off back around 2000. So, I jumped over to a technology services company who I thought was going public because that’s what everybody did back then, was to go public.

Mike Blake: [00:08:31] Absolutely.

Kenji Kuramoto: [00:08:31] I went over as their controller, ultimately became their CFO after the bubble burst. And so, I was a young CFO for about three or four years at a technology company in Atlanta called Intelenet. And that’s actually after Intelenet got together with, actually, another former business partner – so I’m sure we’ll talk about that later – to start Acuity. And that was around ’04, and ran that up for a number of years, bought out my other partner, ran it by myself for a little while – which is an interesting period – and quickly got Matthew to come join up with Acuity.

Mike Blake: [00:09:10] All right. So, let’s put a pin on that. And now, we’ll do a screen wipe here. Matthew, what about your origin story? What radioactive insect bit you to become the man you are today?

Matthew May: [00:09:22] Well, first, I’m a lot younger than Kenji. Let’s just get that out there. Everybody thinks Kenji is younger than me, but I am a lot younger than Kenji.

Mike Blake: [00:09:30] I didn’t want to have to be the person to say it.

Matthew May: [00:09:32] It’s like a-year-and-three months, I think, he’s older than me. And he’s, like, not just – because this is how he bicker. He’s like ‘You’re older than me. It’s a-year-and-three months.” So, I went to Baylor University. I was an accounting grad. I did the same thing, I went to Big Six right out of college. I did do a little more kicking around Big Six than Kenji did. I switched firms once. I did a startup in ’99, where I was the controller. I was like the 11th hire. We ended up selling that right before the bubble burst for cash instead of stock, which was really smart. You know, that’s one of the days when a million dollar revenue company could sell for $100 million dollars, which was kind of crazy.

Matthew May: [00:10:18] I worked for the Fortune 500 company, [Levanos], it was like the 15th largest company in the world or something at the time. I think we used to call it Fortune 15. I learned about kind of working in a big environment in the shared service center. I actually came back to public accounting. Then, when I moved to Atlanta, I switched from Ernst and Young, where I’d been almost ten years, to Cherry Bekaert, where I made partner. And then, I decided to become a recovering auditor, which, I really am a fan of recovering auditors out there. I sympathize with you. So, we’re a large and growing group. And, you know, what was seven or eight years ago, I joined up with Kenji and bought half of Acuity from him. And the rest, as they say, is history.

Mike Blake: [00:11:06] So, Matthew, you brought up something I’ve always wanted to ask you about and, finally, I get the chance. And that is, I mean, you accomplished what many in public accounting spend their entire lives trying to accomplish is to make partner in a significant firm. Although Cherry Bekaert is not a Big Four, it is a significant – I don’t know what size rank it is, but it’s bigger than my firm.

Matthew May: [00:11:33] It’s number 25. It’s a top 25 at the time. I think it’s somewhere between 20 and 25 today. It’s a big firm with smart people that challenged me that we’re great. It was a wonderful experience to be able to do that. That was a great achievement.

Mike Blake: [00:11:53] So, you do that, right? And I mean, when you reached partner – I haven’t done it myself. I think many people feel like you’re sort of at the top of the steps of the Philadelphia Museum in Rocky. You sort of put your hands up and there’s music going on in the background. That’s the top of the profession, unless you get to managing partner, et cetera. You do that and then, really, in my mind, not that long afterwards, just say, “I’m going to go hang with Kenji and do what he’s doing.” What was in your mind that said once you kind of accomplished that thing, you’re like you’re just going to do something else?

Matthew May: [00:12:37] Well, it’s kind of like the analogy I give when tech clients, like, raise money. Like, it’s not the destination. So, making partner is not the destination in accounting. Although, in your early years, your first ten years or 15 years period, that’s all you go for. If you split your career up and when I reflected on it, that was like basically saying, “Now, I have to make the decision. Do I want this to be my career for the next 20 years?” So, this is kind of like when you raise money in a tech firm, raising money is not the thing. It’s what you do with that money is how you’re judged and things like that. And I did some reflection – and we’re going to get into the story a little bit – when this opportunity came up and I did what do I want the next 20 years to look out and went this way instead of sticking with it.

Mike Blake: [00:13:32] And I promise we’ll get to the actual topic, but I do got to ask sort of a follow up. In my view, being partner now is not the same as it was 25 years ago. My father was a partner in Ernst & Young in the Boston office, and he was there forever until Sarbanes-Oxley, basically, killed his business overnight. But, you know, I think, in our generation – and I’m older than Kenji so maybe I’m painting this with a too broad a brush but bear with me. I think in our generation just becoming a partner at a CPA firm is just different. I’m not going to say it’s better or worse, but I think the experience itself is different. Would you agree with that?

Matthew May: [00:14:12] I would agree with that. But I think there’s just part of it there’s a little bit of mystique to it as well that once you get there, you realize, “Oh, do I want this to be my career? Or was I just a type A? Like, I have been told all my life you need to make partner,” right? I left public and came back so I could make partner. I think I left for four years.

Mike Blake: [00:14:36] So, you have these two tracks. Interestingly, both of you came in from partnerships in one way or another – I didn’t think of that until just now. But one way or another, you decided that another partnership was a good thing. So, talk about the story, how did you become business partners? Who asked who out first? Who said I like you first? How did that all sort of work out?

Kenji Kuramoto: [00:15:03] I’ll tell this one. I love telling this one. It’s a distinct possibility, Mike, you may have been almost in the room or very close by when this was happening, because this actually occurred at – we used to host this Acuity friends and clients kind of party at the end of every year. Actually, we wait until January –

Mike Blake: [00:15:28] I’ve been to one of those.

Kenji Kuramoto: [00:15:28] – just after the holidays. Yes.

Mike Blake: [00:15:29] Those are mad joint, man. I’ve been to one of those.

Kenji Kuramoto: [00:15:33] That’s right. And so, the funny thing was because all of our friends and clients, all of our friends are other accountants. Honestly, you look around the room and there’s just a whole bunch of our other fellow accountants who are friends there that we’re referral partners and such. And we always have it at a local watering hole in Atlanta. Taco Mac from back in the day, they let us use that, they were a client. And, honestly, we get after a whole bunch of beer and hang with a bunch of our friends. And so, at one of those events, Matthew, of course, was there. Again, Mike, you may probably be in the room somewhere.

Kenji Kuramoto: [00:16:07] And he and I, after maybe a few beverages, started sort of talking about it more. And I had already at this point bought out my former business partner. And Matthew and I had been friends. We had Falcons tickets together. And so, it was certainly good to see him. But we stepped outside, kind of January in Atlanta, out of this kind of little speakeasy little bar kind of area and, you know, trying to clear my head a little bit. But I said, “Listen, this is hard. This is hard going alone and this is tough stuff.” And Matthew is always interested in what we were doing over at Acuity. He’s kind of inquiring. And just like you had pointed out earlier, with him grabbing that kind of partnership brass ring, you know, I’m thinking, “Oh, he’s found that lifelong career piece.” But I’m kind of in his ear a bit like a, “Ha. Ha.” I turn away from that like, “I could really use you over here at Acuity.” And I always remember – do you remember what you said, Matthew, when I was joking, like, “You should come work with me.” What you said?

Matthew May: [00:17:03] I probably said, “Don’t joke around about stuff like that.”

Kenji Kuramoto: [00:17:07] Don’t joke around. He said, “Don’t joke about that.” I thought, “Wait a minute. Is this guy actually, like – come on. He’s not really considering. He’s a partner at a great firm.” But that’s actually how it started outside after many beers at one of our annual events. Just kind of talking about the work –

Matthew May: [00:17:28] I was interested. He was drunk. I was actually leaving to go home early and he was already in. So, when he was walking me out, like, I thought he was just being nice and walk around as we went out.

Mike Blake: [00:17:40] He was walking you home, basically.

Matthew May: [00:17:44] He did. I think he even had his arm around me.

Kenji Kuramoto: [00:17:46] I made my move right there. I knew he was vulnerable.

Mike Blake: [00:17:49] So, is the key to initiating a partnership is there should be alcohol involved? Is that a learning point from this conversation?

Matthew May: [00:17:57] For at least one of the people over in his end –

Kenji Kuramoto: [00:18:00] Well, I will say –

Matthew May: [00:18:02] I mean, you do have to ask.

Kenji Kuramoto: [00:18:03] It stayed a recurring theme in our partnership. We certainly enjoy that time together having a beer for ourselves.

Mike Blake: [00:18:13] And you know, that part, I think, is important all joking aside, you know, especially at the outset. I think you may have added a partner since then. I’m not sure. But at the outset, if it’s just the two of you guys, you know, you better enjoy spending time together because you’re going to be doing a lot.

Kenji Kuramoto: [00:18:32] That is for sure. For sure.

Mike Blake: [00:18:40] So, I’m guessing that then because of the – well, no. I’m not going to guess anything. I’ll let you answer the damn question. After you guys had decided that a partnership was a possibility, something that is potentially desirable, what were the steps after that? I mean, it’s one thing to have – and I can speak from experience – it’s one thing to have Falcons tickets with somebody. It’s another thing to make them your business partner and place your livelihood in their hands. And so, was there any kind of vetting process, a feeling out process, anything that happened after that one initial date? Or did you rush right to Vegas and and go to the chapel?

Matthew May: [00:19:24] Wow. So, yeah, we had some interesting discussions. So, we used the same attorney to draft the documents. We did it in relatively short order as far as the fielding points I did take. After we kind of have this kind of mapped out, I did go back to Cherry Bekaert and talk about what my long term thing looks like there so I could make a decision and figure out what was going on. So, that took probably 30 days. And then, I ended up having a 90 day stick to my contract where my partnership agreement required me to stay 90 more days after that.

Matthew May: [00:20:02] But we had some great discussions. I think we got, like, the bigger points done in about an-hour-and-a-half, probably, at a Mexican food restaurant about a week later — to what ends up there. But we had some funny discussions in there, some things that would probably say a lot to us. Like, I initially wanted the deal to be 40.95 to 50.5 or 49.51. And Kenji was adamantly opposed to that. I mean, I was going to take the minority. And Kenji was adamantly opposed to that because in his previous partnership they had been not 50/50. So, we were negotiating each other backwards. It was weird. So, it was kind of some odd discussions. That was the oddest one for me. I was like, “You know, I think I need to have 49 percent.” And you’re like, “Nope. Not doing that.”

Mike Blake: [00:20:57] So, Kenji, why was that important to you? And I’m really sort of drilled down on this because there’s a lot of common wisdom out there that says that a 50/50 partnership is a bad idea. In fact, I make a lot of money helping 50/50 partnerships unwind, unfortunately. Hopefully, that will never be the case with you guys. But why did you want to do that?

Kenji Kuramoto: [00:21:20] Like Matthew mentioned, part of that had been from previous experience. I had bought out a previous partner, he was the majority and I was the minority partner. And that ended very amicably. That partner is still a friend of mine today. He’s a huge supporter and cheerleader for Acuity. But that was always something that was challenging for me as a minority partner of just feeling like we were imbalanced. And even my previous partner realized that, too. He felt like it was difficult too. Kind of as time progressed, we felt like that should have evened out a bit more. But just some of the mechanics of equity made that challenging.

Kenji Kuramoto: [00:22:02] And so, I had that experience of not feeling equal, even though we tried our best to operate that way, we did a pretty good job operating as equals. That said, I knew kind of in my heart of hearts coming into this the next time around that I wanted to make sure we were equally kind of hitched up and yoked on this one. Like, it just wanted that all of our decisions that you can never kind of look at one another and go, “Well, of course, you like it this way because that benefits you.” So, that was after, I guess – gosh – eight, nine years. So, I had a little bit of experience under my belt. I had a short window of time, about a year of doing it solo, which I thought was going to be fantastic. And I ended up coming away from that going, “That’s terrible. I hate it. It was awful.” I mean, the business was just on a downhill trajectory, which is probably why I was out drunk begging Matthew, “Please help me.” Everyone thinks this is going great. I’m struggling here.

Kenji Kuramoto: [00:22:57] So, I knew I needed a partner. And I needed a partner, you know, one that I just could feel completely vulnerable with. And likewise, he should too. And I think having that aligned equity, a perfectly aligned equity, was at least one way to make sure we didn’t get on different pages.

Mike Blake: [00:23:14] So, let me follow up on that, what is it that you felt that you’re missing at the time that Matthew was the solution to?

Kenji Kuramoto: [00:23:23] So, it was interesting because being such good friends – and, actually, Matthew and I were really strong referral partners, that was another thing we actually talked about was, “Wait a minute. Are we better together or apart?” Because we do a lot to help each other as referral partners in each other’s firms. And we got over that and realized we think we’re better together.

Kenji Kuramoto: [00:23:50] But when I bought out my previous partner, I had a number of ideas that I wanted to kind of get rolling that I thought could be beneficial for the startup business community, and entrepreneurs, and for us as a firm. And I had some good foresight on that and got some of those going, but, essentially, created another line of business that operated very different from the traditional CFO services that we were providing. And I just failed to take into account that we’re really kind of running almost two different business models and businesses. It just doubled kind of the workload. I’m still trying a little bit to manage. Should I be out there billing myself as the owner, doing all those things, that I’m actually working on the business? And all those are kind of happening at once, realizing that I need some help.

Kenji Kuramoto: [00:24:35] I had tried empowering a couple of our other more senior employees to say, “Hey, maybe I can get them to help share some of this management strategy kind of leadership load.” And it didn’t work. And so, I realized like, “Okay. This may be a good idea of this new direction line of business we’re going in.” I don’t think I can get it off the ground. There’s just not enough hours to the day for me to pour into it, to try to keep the other lines of business going, to keep cash flow in the firm going enough. So, it was, I needed someone else who saw the vision – and this is something Matt and I talked about what we were building and believed in it. It just had the energy and some of that. Not just an employees vision of like, “Hey, that sounds good. If you pay me a salary, I’ll do it.” It was a, “No. I’m a believer. I’m willing to stake some of my reputation and some equity in this thing to go forward.” And so, that’s where I knew I needed help there. And Matthew was the perfect one to bring in to do that.

Mike Blake: [00:25:33] So, Matthew, on your side, you know, what was it that made you so attracted to this particular partnership? Because a guy as capable as you with your pedigree, you could have done a lot of things. You could have flown a lot of airlines, but you chose to fly Acuity. And Kenji, what made that attractive to you?

Matthew May: [00:25:59] Well, the sad reality of being a partner at a bigger firm is that you have to deal with bigger clients. And I’ve always had that passion for the smaller clients, the million dollar revenue clients, not the $100 million revenue clients. You come and do their audit like it’s a check-a-box thing, you know. We add any value. And I felt like I’ve always enjoyed just getting in the ecosystem. Being in a lot of businesses, helping out a bunch, and helping five or six $100 million clients versus how could we help one hundred startups. You know, like, do things better just got my juices flowing.

Matthew May: [00:26:39] And then, when kind of the other things kind of – I did a bunch of checklist stuff about the pros and cons of keeping with this joker. But one of the couple of things that I – and my dad is an entrepreneur so I talked to him a lot. He had two failed partnerships, so I assumed he was going to be, like, really anti-partnership. But it started a bunch of great conversations with him about how long we had been, that’s why he kept trying to do the partnerships even though two of them failed. It’s just a lonely place to be if you try to do it by yourself. So, I could have tried to do something by myself, but then I would have been in that same spot with my dad where it was very lonely.

Matthew May: [00:27:23] And then, a couple of things aligned really well with Kenji. And the oddest one, I think, that I keep always pointing back to is our kids are the same age, so I knew that we were going to be able to invest in the company at the same time and need cash from the company at the same time. And I think a lot of people underestimate kind of those kind of things. So, I knew I had seven years before my kid goes to college that we could invest in the business and grow it as big as we could. And then, we would need some cash flow so we could send the kids to college. So, we had a bunch of things like that lining up outside of our kind of mutual interest.

Matthew May: [00:27:59] And then, the biggest negative is, I was like, “Well, you’re one of my best friends. I’m probably losing my best friend at this point because I would put us more like very sibling like now versus friend like.” And that was kind of a negative to me at the time. I was like losing kind of one of those friendships which are hard to come by, right?

Mike Blake: [00:28:23] They are. So, you said a couple of things I want to pause on, because I think they’re so insightful and underrated. That loneliness thing, you know, I’ve been a sole practitioner and the loneliness of being in business for yourself is underrated. And if you’re a social person – I’m not. I’m an excessive introvert. You can bury me in the ground in a missile silo for six years, I’ll be fine. But I’m weird. My wife, on the other hand, has had a number of businesses. And without fail, the times when she has been happiest and most successful was when she simply had a business partner. Someone to shoulder the load, that could shoulder the emotional toll that being a business owner takes on you. And it does, even if you’re successful. It does.

Mike Blake: [00:29:16] And the fact that you bring that up, I think, is a really important point to bring up to anybody listening to this podcast thinking about a partnership, is that, that social is such a big difference. Even if you only have one business partner, there’s such a big difference in the dynamics and the emotional support you get for running a business, if it’s the right business partner. And it seems like that’s – I see Kenji nodding, so it sounds like you find that to be the case as well.

Kenji Kuramoto: [00:29:42] That was my experience, not as long as Matthew’s dad, who is the entrepreneur so much longer than I was by himself. But that year that I was getting to run the business the way I wanted to, which was exciting, I failed to recognize that aspect of loneliness. And I am an extrovert. I like being out and about. And I’ve learned, especially as I’ve kind of matured, that I operate better with a partner. I operate better in a group in community. And I saw it firsthand for that year of where, “Gosh. I’m at one of the most exciting points. I own my own business. And I’m getting pats on the back from everybody. And I’ve got new things launching.” But it was incredibly frustrating and lonely.

Kenji Kuramoto: [00:30:25] And, you know, even I tried to empower some employees to kind of help offset that, it didn’t work. And so, I do think it’s incredibly underestimated. So, knowing yourself a bit, what you like, are you going to be kind of missile silo Mike or are you going to need to kind of be a little bit more of someone who you need someone. There’s probably other aspects of your life you can look at and say, “Well, where have I gotten better productivity or achievement out of it? Has it been like when I’ve gone into that silo or is it when, like, I just had to get around other people who are helping push me?” And that may help you get some thought process and direction around the partnership concept.

Mike Blake: [00:31:03] And, you know, there’s another kind of lesson point there, too. And something I tell my clients is that, you know, you can try to get your employees to behave like owners all you want, but unless they’re owners, you just ain’t going to get there.

Kenji Kuramoto: [00:31:20] Absolutely. I mean, it’s very rare. We’ve tried it a few times. We have one exception to that today, I mean, Matthew and I don’t have any other partners, but we do. Our COO, Lisa, we absolutely refer to as a partner. And I think at this point, we just probably haven’t wanted to burden her with some of the aspects that some people don’t think about coming with Acuity. But she’s been one exception of, again, the vast minority of people that really helped us think about the business. We consider her and call her a partner. But by and large, it’s not a direction that I’ve seen most of our employees step up to.

Mike Blake: [00:31:57] Probably the exception that proves the rule as much as anything else.

Kenji Kuramoto: [00:32:00] Absolutely. Absolutely.

Kenji Kuramoto: [00:32:02] And the other part Matthew brought up that I think does not get talked about enough as partnerships are formed, is the priority to take out cash. And, boy, does that come up. If you walk into a partnership assuming that your cash needs or desires are the same as other partners, then they aren’t, that is just a killer. So, you know, whether you said that explicitly – or, again, I think taking the cues from the fact you’re in a similar life stage and, probably, similar kind of financial position, if you will, but understanding disposition of cash and profits, boy, that’s really important to get on the table early. Because if you have one person that just wants to leave it in because maybe they can, but another person that needs to draw because otherwise you’re on food stamps. Boy, don’t assume that, right?

Matthew May: [00:32:54] That was probably the hardest part of our partnership where we were most disaligned was while I was paying off a debt buying the company. Like, we had fundamentally different cashflow for the first four or five years of the company, because most of my cashflow – almost all my free cashflow was going to debt service. And Kenji’s is going to whatever Kenji wants to do, you know.

Mike Blake: [00:33:18] Falcons tickets for some reason.

Kenji Kuramoto: [00:33:18] Falcons ticket, that’s right.

Matthew May: [00:33:21] That was the biggest disalignment that we ever had in our partnership. It was that for several years.

Kenji Kuramoto: [00:33:30] And it was the number one thing with my previous partner – as close as you and I were, as amicable as it was – which is an age difference. Like, he was older than I was. He had kids. Just like Matthew mentioned, seven years ago, they were heading off to college. My kids were still in middle school, elementary school. And so, he needed a different cash situation, which causes you to make different decisions about the business and how you invested it. And so, that was probably the number one reason why he said, “Hey, I’m going to go do something else.” Just because we were at different stages of life personally and had different needs. It’s an incredibly important aspect to consider before getting into a partnership with someone.

Mike Blake: [00:34:11] And this touches upon an important thing too. Matthew, you weren’t just given shares, right? If you’re on the outside of the accounting and legal world, you’re not given shares because they’d be taxable. If you do, you normally buy in. The company lends you money to buy into the company, basically. And it sounds like that happened here as well. And interestingly, you know, because of the debt service, you did have a bit of a cash disconnect. Did that ever become a source of friction? And if so, how did you work through it?

Matthew May: [00:34:47] It was hard. I worked to getting a home equity line of credit and then bothered Kenji with it.

Mike Blake: [00:34:51] Okay. That’s an answer.

Matthew May: [00:34:57] No. And I do encourage every business owner, too, before you get off W2s to get a home equity line of credit for the max value that you possibly can, because once you start drawing on that home equity line of credit, you have to make some big changes in your business to make cashflow different changes. But I don’t know if I did. Maybe I was stress for you, but –

Kenji Kuramoto: [00:35:20] Well, I think that one of the ways that we offset that, I think for me, it does cause stress. Because, again, I had a proclivity from day one to have just this very clear, perfect alignment. Because then, every issue that we’re approaching were coming from a common framework and a common place. So, it did stress me out. It stressed me out that you had that. But one thing, I think, what we did to mitigate that was, we were just very open. We know everything about each other. We know each other’s personal financials. I mean, we don’t just, “Hey, how much are you drawing out this month?” It is, we know each other’s mortgages. We know what our investments look like together.

Kenji Kuramoto: [00:36:01] I know it’s a little unusual, but for us having transparency and understanding of the situation that each other was in, I mean, it just allows for, if one of us needs something, we can help each other out. We get into this whole thing to help each other out. So, I know he and I don’t want each other to be in a place where, you know, one of us needs help and the other doesn’t know about that. That would be the most ridiculous aspect of the partnership or the friendship. It’s like, “Gosh. You just don’t step up and say something.” So, we’ve always been really good about just, “Yep. Here you go. You want to see the personal financials? Boom. Here they are.”

Mike Blake: [00:36:34] And I think another learning element from that is, perhaps a driver of the success that you guys have enjoyed with Acuity is your ability and willingness to be vulnerable with one another. I mean, really open the kimono like that that’s important to building relationships and trust. And I think a lot of partnerships do fall apart because there isn’t that level of trust and there isn’t that level of vulnerability. And, you know, like in a marriage, if you don’t have that, then, all of a sudden, you find yourself one day you think your marriage is great, the next day you’re hit with divorce papers because one of your partners was just simmering for 20 years, basically. And it sounds like you’ve taken intentional steps to avoid that.

Kenji Kuramoto: [00:37:26] We have. I think we’ve been very focused on being vulnerable and trusting each other. I will say that, however, we’ve been really lucky. And I mean that luck in that we realized there was just unique things about both he and I and our situations that I also felt like we have to take advantage of. For example, you heard we have this very eerie similarities in so many parts of our life. Matthew mentioned our oldest kids being – having kids being the same age, boy and a girl. One of each, the same age. We both married our college sweethearts. We both worked at Arthur Andersen right out of college. We worked in the same exact job in different offices. We’re both the oldest of three boys in our household. We have all these very interesting similarities. I was just at Matthew’s house this morning because we get together on Tuesdays to do our partner meeting.

Kenji Kuramoto: [00:38:19] And, you know, we find out that – this is kind of a silly one – but it does feel like this happens all the time with he and I. Both of our refrigerators broke down the last couple of weeks. I’m like, “You got a new refrigerator?” Like, “That’s the exact same one that I have too.” We didn’t talk about that. Like, that seems weird. And then, we find out that his 18 year old son starts his first job today at a restaurant. And my 18 year old started his first job yesterday. And so, we have all these interesting similarities. And I think that’s very fortunate and lucky. But I think that you take advantage of that. And this is just too – I don’t know what you want to call it to this matter or anything else, but that’s really special and awesome so why not take advantage of that? Because it’s showing us there’s some already good alignment there just in the way that life has kind of unfolded for us. Maybe that means we need to kind of be doing more together as business partners.

Mike Blake: [00:39:09] Well, I’ve heard – and I haven’t looked this up to see if it’s medically true, but I’ve heard that when women spend enough time with each other, that their monthly cycles will synchronize. But I’ve never heard about business people that have refrigerators synchronized if they work together long enough.

Kenji Kuramoto: [00:39:26] Like, it’s amazing.

Mike Blake: [00:39:28] Somebody is going to do a dissertation on that, I promise you. Someone is going to take this and go do a PhD on that. So, let me switch gears here for a little bit, because I want to take advantage of the fact that you guys work with so many clients and have over the years. And I’m sure many of those have been partnerships as well. Is that fair? And you’ve seen some of them succeed. You’ve seen some of them not succeed. And I love each of you to offer a couple of observations in terms of what’s made other partnerships successful broadly. And what has made other partnerships unsuccessful that might be cautionary tales for somebody listening on the program.

Matthew May: [00:40:09] Well, I think alignment is really key when you’re having that. When I think about alignment, I often think about what people have to contribute to earn their equity in the company. And I see a lot of startups, in particular, make the mistake of just saying, “Hey, you own a third, you own a third, you own a third.” And then, ten months later, one of the founders goes off and owns a third of the company. So, I like places where you have to actually buy in. Or if you don’t buy in, there is some portion of time that has to elapse for you to earn what your determined contribution is. But that’s a big red flag to me when I see companies that even though it started as a napkin, I still like to see you have to earn kind of your ownership somehow or buy your ownership somehow.

Mike Blake: [00:41:07] So, skin the game, right?

Matthew May: [00:41:09] Yeah. I mean, when you give things away for free, people tend to devalue them. I know that as a service provider. When we give away free services, nobody cares. But if we give service away for $10, they’ll be like, “I have to write a check for $10.” They respond to your emails and things like that. It’s the same thing with equity, like, you’ve got to be careful.

Mike Blake: [00:41:31] Kenji?

Kenji Kuramoto: [00:41:33] I agree. I think, Matthew started down this path as well, too, about kind of your values. Every time I see a partnership work well, they tend to be very aligned values of the owners involved. So, there’s really smart ways that he mentioned to mechanically build some components of equity. You know, it’s got to start from a sense of values. And it doesn’t mean you have to be exactly the same or buy the same refrigerators necessarily. There are plenty of differences that Matthew and I have. But when it comes to values, whether it’s us or other successful partnerships I’ve seen, all of them are very consistent where the partners share very much the same values and beliefs and desires for what they want out of that business. And the ones that get put together really, really quickly or treat equity as being some cheap, easy, free thing, where you just got to have a lawyer paper up, those are the ones that tend to be the problematic ones.

Mike Blake: [00:42:35] Well, that’s interesting. And that’s really sort of an interesting tale, too, because I know you do a lot of work with tech companies as well as I do. You know, there can sometimes be a tendency to treat stock certificates like you’re pulling them off of a roll of paper towels, basically. And, you know, one of the worst things you can have in any team, whether it’s a partnership or not, I guess, is a sense of entitlement.

Kenji Kuramoto: [00:43:02] Absolutely. And I think that from an accounting perspective – we’ll take it there as, in fact, I know there a lot who, maybe, who listen to the show or part of it – I was also very much shaped by looking at cap tables. I’ve had so many clients over the years, you look at these cap tables and they were just like, “How in the world did this happen?” You’re looking at this thing and we’re trying to write crazy formulas and tabs and things that well before there was such a thing as kind of equity software just to keep track of like, “What is happening? I get there’s been multiple rounds of funding, but what are all these people doing on the cap table?” And, ultimately, those are always problematic.

Kenji Kuramoto: [00:43:39] And I think Matthew and I have talked a lot about this. Others have been successful in their partnerships have talked about how much they honor and respect equity. Like, “Wow. The cleanliness of our cap table. The simpleness of our cap table. It’s something that when I hear people talk in those terms, those are people that have taken great care in how they distribute the equity and how they manage it. And I’ve seen the opposite side again, when it’s any kind of a spreadsheet that’s got the cap table on huge crazy spreadsheet, those are the problematic ones.

Mike Blake: [00:44:14] That’s actually interesting. I’m going to let that sink in and think about that. I think that’s a really interesting observation. So, in your partnership, I would characterize the two of you as, I guess, having complementary skill sets, but fairly compatible personalities. Is that a fair characterization?

Kenji Kuramoto: [00:44:38] I think so.

Mike Blake: [00:44:39] Or not? Are you different? I can tell, one of you is about to livethrough the Internet saying, “I’m a complex human being. What are you talking about?”

Kenji Kuramoto: [00:44:49] In fact, we’re very different in many ways. But like I mentioned, our values are super aligned, which is the basis of it. But we are very complementary. There’s some things that each other does that, you know, helps the other person. Like for me, for example, Matthew, in the way that he analytically thinks about deals or does some very strategic, very complex thinking, I mean, very non-linear, like, out there thinking is just mind blowing. It’s very frustrating at times, too. But it’s just something that I don’t have the capacity for. I’ve got to have this very concrete, linear process to my thinking. I have to kind of see the data. Matthew has just a very interesting abstract mind and, again, a lot of times it drives me nuts. But it fills a huge gap for us, especially when we’re in situations.

Kenji Kuramoto: [00:45:46] We just did our first acquisition of another firm, and, really, Matthew was the real architect of that. Like he, really, from a deal structure standpoint, is excellent at that and enjoys doing that. Whereas, me, that’s kind of stressful. Like, that doesn’t feel quite right, and I kind of muddle my way through it, and I second guess myself. Whereas, I think Matthew sees deals and complexity and kind of salivates. Like, “Yes. Let me get after this thing.” Is that fair?

Matthew May: [00:46:17] Oh, you’re asking me now?

Kenji Kuramoto: [00:46:20] I used to tell you but I’m doing nice with Mike here.

Matthew May: [00:46:22] I mean, if you flip that around and you say – you know, so we have a hundred people now. So, I mean, back in the day when we had eight or nine, it was not the same. But we have a hundred people now and Kenji is the one that’s predisposed to like, “Hey. Yeah. We’ve got to have, like, constant messaging.” And he’s doing the async videos where he’s getting our team updates every single week in that cadence and things like that. And that’s not something that I have the strength for. I believe in community building. I believe in investing in our team. But he’s got the DNA where it’s like built in where he’s going to do that stuff for our people.

Matthew May: [00:47:09] I think it’s really funny, our teams, we all did personality profiles and it ended up in one of those ones where you could be in one in four quadrants. We knew Kenji and I were going to be in opposite quadrants, but similar quadrants. But the top four people at our firm were all in different quadrants, it was crazy. So, our COO was more of the methodology person, will take ideas and put them into action and things like that. Then, we have, you know, our head of bookkeeping was the compliance minded person. I forget where we were. We were the crazy ones. We always are.

Matthew May: [00:47:44] But it was weird. I expected that he and I. But we had also unintentionally surrounded ourselves with people that also complemented ourselves, which I think as partners you’ve got to be really okay in your own skin in acknowledging that somebody can do things better than you. Because there’s lots of times where you got to set your ego aside. And if you have a big ego like me, those are tough days. You know, those are tough times.

Mike Blake: [00:48:19] We’re talking with Kenji Kuramoto and Matthew May of Acuity, and we’re talking about entering into a business partnership with the Decision Vision podcast. We’re running out of time but I have a couple questions I want to make sure we, at least, try to get to before we let you guys skedaddle and go back to helping clients and thinking about what the Falcons are going to do next year or are they going to draft.

Matthew May: [00:48:44] When in your mind does it make sense not to be in a partnership? Are there times where you just – you’ve probably had people come to you asking for advice and they’re thinking about entering a partnership. And maybe you’ve just sort of done, you know, the Warning! Warning! Will Robinson kind of thing and say don’t do it. What sort of things have you seen that are warning signs that maybe a partnership is not the right way for somebody to go?

Matthew May: [00:49:15] For me, when I came back from industry back into public accounting, that was a time where, I mean, I could have started something. But I realized I really needed to learn more. Like, I needed to kind of have a bigger baseline of a certain skill set and piece together some of the things I’m still working. And I guess the number one thing to me was kind of when you feel like you’ve stopped learning, I think is an okay time to start thinking about. Because I think a partnership is going out on my own and doing something new. When you stop that kind of big – I mean, you always keep learning – hurdle learning and you start kind of telling out the curve. I made partner, right? So, I think those are times when it’s great to think about.

Mike Blake: [00:50:07] Kenji?

Kenji Kuramoto: [00:50:07] I guess I have a harder time because majority of my career has been spent as an owner of something and being a partner to someone. So, certainly, I’m personally predisposed to that. But I’ll take it from a perspective of bringing another partner in, having to have to make that choice a few times, or when to encourage someone and when not to encourage someone. And, again, I think that so often when you’re trying to convince someone to join you as a partner, it gets a little easy to talk about all the wonderful great things. The profits we’re going to share. When we exit, here’s what’s going to happen. And you’re kind of the boss and the leader of things that no one can tell us what to do.

Kenji Kuramoto: [00:50:52] And when you start digging into, “Well, when we get sued, because basically, I guess, as a business, guess what happens? Pretty much everybody’s going to get sued.” You’re dealing with lawyers. You’re dealing with issues. You have to lay people off. And not to be the Debbie Downer, but it is important to speak to people who sometimes have, maybe, glamorized the, “I’m a hustler. I’m going to go and start up my own thing.” There’s a lot of people out there that say that. But, really, what they got to think about, you’re the person that’s going to be on-call to impact people’s lives and the lives of their families. And that could come in terms of, again, disastrous things happening with a client or in the business. And we’re going to count on you as a business partner. That’s someone you need to be held to be accountable to say, “Yep. I’m willing to jump in and help with that.” And that’s okay.

Kenji Kuramoto: [00:51:45] It’s completely okay if someone says, “You know what? I’m not really down for that. Like, I want to learn and progress in my career more. I want to be a contributor. But like, I’m also not looking to have to wear some of the burdens of being a business partner.” And I think it’s important to be able to have someone think through that as well too. Because if someone’s not ready for that responsibility yet, boy, you certainly don’t want to put them in there. There’s other ways to engage them within your organization as opposed to saying, “Great. Let me get you the stock certificate. Let me get you on here. We’re going to need to go ahead and get, you know, some signatures on the mortgage on your house and things like that stuff.” You got to make sure they’re all on board before that happens.

Mike Blake: [00:52:28] Guys, this have been a great conversation. I’ve only gotten through about half the questions I had prepared, which I expected, so maybe we’ll have you back on at some point. But if people want to learn more about building a successful partnership, can they contact you to ask a question or two? And if so, what’s the best way to do that?

Matthew May: [00:52:45] Oh, I’m TheTechCPA on Twitter, so you can reach out to me.

Mike Blake: [00:52:48] Yes, you are.

Matthew May: [00:52:48] TheTechCPA on Twitter. Or you can LinkedIn, too, I’m TheTechCPA.

Kenji Kuramoto: [00:52:53] I keep mine a little more simple, a little more humble than Matthew, I’m just kenjikuramoto on Twitter. A little harder to spell, probably. But you can find us both on Twitter.

Matthew May: [00:53:04] I just said tech, TheTech —

Mike Blake: [00:53:09] The Tech, I mean, that’s it. Don’t look no further.

Matthew May: [00:53:12] Look no further, folks.

Mike Blake: [00:53:14] Well, that’s going to wrap it up for today’s program. I’d like to thank Matthew May and Kenji Kuramoto so much for joining us and sharing their expertise with us.

Mike Blake: [00:53:22] We’ll be exploring a new topic each week, so please tune in so that when you’re faced with your next executive decision, you have clear vision when making it. If you enjoy these podcasts, please consider leaving a review with your favorite podcast aggregator. It helps people find us that we can help them. Once again, this is Mike Blake. Our sponsor is Brady Ware & Company. And this has been the Decision Vision podcast.