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Founder's Story
From the Slums to Global CEO: How Divakar Vijayasarathy Is Disrupting a $160B Industry | Ep. 202
00:27:57
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- [00:00]
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- [01:03]
Dan
Everyone, welcome back to founder story. Today we have Devakar Vijay Sarthi and you are the founder and CEO of DVS Advisory Group. And Devakar, I really like this title here, thought capitalist. And I know you've authored 16 books on taxation and you have offices around the world, both in the US in the Middle east and Asia. And I, I really like to understand what your thoughts on and building a global company. Normally we just kick it off with your background but before we do that, I want to understand what is a thought capitalist.
- [01:44]
Devakar Vijay Sarthi
Okay, I mean let's get to the thought part of it later. Let's start with the capitalism part of it. To begin with. I'm sure we are in the Mecca of capitalism us right now. What is capitalism? That if you, you are a product of the American society. Right. We see the capitalist capitalist as a culture, as a cult, as a religion. Now to you, what does capitalism mean?
- [02:09]
Dan
That's. Are you asking me? Yes, man, that's a good question. You know like if I was to think of a non definition, my own definition, that's you know, people being able to be entrepreneurs and thrive and make money and have the freedom to work where they want to work.
- [02:25]
Devakar Vijay Sarthi
Absolutely right. I mean, so you're talking about people being able to be themselves, express themselves and create value. Now where does this value get created? On what basis? You look at someone like okay, who's the richest man on the planet Elon Musk or Jeff Bezos or whomsaver? Where does their value come from? Where does the wealth comes from? Shares, price of their shares. There is a thriving stock market, which either basis, it's not only a function of what Elon does, it's also a function of what he believes. And whether I resonate with what he believes, whether what he produces. It's not only about whether it's of utility value to me. Is it something which I believe can sustain over a period of time? So ultimately, if you look at capitalism, there's a huge element of human quotient behind it. Be it the belief, be it the perception, and be it the real utility. Now, when you pull all of this, we call it as value. This is what capitalism was all about. And thought capitalism is actually seeing through it. You see through what ultimately drives capitalism. It's not what you do, it's not why you do it is how whatever you do is being perceived by the society or economy that drives your value. It might sound really crude, we can speak for hours and days on this, but that's the ultimate core of thought. Capitalism. Going to the depths of what drives capitalism. It's. It might sound strange, but it's ultimately perception which drives capitalism.
- [04:19]
Dan
It reminds me of the phrase perceived reality. That's really what it is. It, it might not be what it actually is.
- [04:27]
Devakar Vijay Sarthi
Correct.
- [04:28]
Dan
It's how people perceive it to be something.
- [04:31]
Devakar Vijay Sarthi
Absolutely.
- [04:31]
Dan
Which is why it's so important to write books, to do things, to build up the perception about you in the public eye. Thank you.
- [04:42]
Gus
That was deep, man.
- [04:43]
Dan
That, that was. That's the deepest thought we've ever had on this show. Right as we started, by the way. So I, I appreciate that. And I can tell that you are a very deep thinker. Gus. Before we started, we were talking about all these books that you're reading, and I'm very fascinated by your thirst for knowledge. So take me back in your life. When did you realize that you have this thirst for understanding and this thirst.
- [05:10]
Gus
For seeking out knowledge?
- [05:11]
Devakar Vijay Sarthi
I mean, first of all, thanks for the kind words, but it's more than a thirst for knowledge. It's a search for truth. We could say now I started. I mean, I literally grew up in slums in India. So at that time, I passed out CA which was at that time one of the most toughest examinations in the world. We used to have a parse percentage of 0.3%, meaning for every thousand people who. You who write three people will qualify the exam. That, that used to be the Past percentage. And then after all this, I worked. I was not happy. I quit my job and started DBS in 2007. And in 2008 I went to Mauritius. And that's where my real search for truth came in. It was a small island nation in Indian Ocean. And there I saw firms which are like 10 by 10 in their size offices. They were doing millions of dollars of revenue. Whereas back home in my country, even if you were doing say 2, $300,000 revenue, we were a large organization. I was like wondering why? Why is it that the same function or same activity delivered in a much smaller economy carries much larger means of prosperity? So that's when I realized prosperity is not a function of effort. Then what is it a function of? Then came the quest for search. It was entirely about trying to understand what it takes, right? So there is a. And the more deeper you get into it, the study of trying to get to what it takes took me towards spirituality, towards religion, towards economics. And at the deepest of all, what it takes. There was an answer which I was refusing to believe. Just to give you a simple question. Why should oil be sold in dollars? Why should there be a gold standard? Why not any other metal? Why not the silver standard? Why not platinum standard? Why not aluminum standard? Now why should. Even if you're talking about Bitcoin, okay, why Bitcoin? Why is the non fungibility of Bitcoin be an attribute which mankind should believe in? So you get to the depths of all of this and start questioning the why at the deepest level. There's just one word beneath all of this illusion. When you actually understand that's what it takes. The game is so different. It's absolutely different. And this was a journey which took almost a couple of decades in life to unravel, which took me from a sole proprietary practitioner across three, three bankruptcies trying to figure out what it takes to scale an industry which was so fragmented globally, so. So fragment. In the US you have 6 and 6 and I mean 650,000 CPAs. In the US, 45,000 CPA firms. Only about a thousand firms have done more than $10 million or less than that, more than $10 million of revenue. Why is that? So on a $160 billion market. So now get to the deepest part of it, why the industry was so fragmented. I found one word. Fear. It was entirely the fear of the unknown, the fear of being cheated, the fear of not knowing how to engage with people, the fear of getting into a bad partnership that dominated the spirit of accountants world over. So that they did not. They said, okay, I'm happy being in my own well, because I at least know I won't lose. But they also real never had a chance to gain big. The accounting fraternity all along was only playing to not lose. They were never playing to win. That's why they were fragmented. They were so small in size, they were dispersed despite the size of the opportunity. That is what we are trying to solve for in devious, if that makes sense.
- [09:20]
Dan
I like the illusion part, by the way. I think the illusion. I think we could insert perception for the sake of this conversation, right? You know, creating, creating a perception around your organization, around you as the founder, CEO. And then the fear part. I think if you asked, you know, you know, there's over 3,000 stated billionaires right now on the Forbes list. I'm sure if you asked all of them, what's one thing that differentiates them from others is they had no fear and they were able to take the leap and to do the things that no one else is willing to do. And I think that's very hard. So I'm, I am very fascinated that you took many years through religion, through, through seeking, through doing all these things, through traveling, and you figured this out. And then you realize this, this or this, you know, this group of organizations in this industry, the successful ones are this A and unsuccessful ones are B. And now you want to solve that. I mean, this is a, it's a big solve to, to say I'm going to help companies within an organization succeed versus just solving a problem for a consumer. You know, it's way bigger when you're like, I'm going to help hundreds of thousands or thousands of organizations scale and exit. So let's talk about the scaling part. So you figured all these things out. You understand the industry, you see where the problem lies. How do you start helping these companies scale?
- [10:59]
Devakar Vijay Sarthi
So Dan, let's assume you are a CP, right? You, you're, you're running a two or three member firm and you're, let's say, about 5 million in revenue. Now, what's your way of. You've spent 25 years of your life building up this practice. The normal way is for you to sell out at 1 or 1.25 times your revenue. And again, you will have to stay for three, four years to be, you know, to be in the game. Now, similar to what Dan does, there is, let's say an A tech company which has spent 20, 25 years, built a portfolio of customers to build their expertise. They're able to go either they're able to go public. Being part of a larger organization, they're able to sell it for a larger multiple. But that's not possible in the accounting industry because it's not being done. So what we do, we come on board as growth partners. We invest in your company, you get an exit on day zero, anywhere from 60 to 80% you want to exit. Ideally, we recommend take 60% cash today on today's value. And we bring in our team leadership, cross sell technology, smart shoring, you call it. We bring that. We help you with growing your own practice by merging smaller organizations below you. If that's an option, if you're entrepreneurial, we are more than welcome. Then we make this 5 million firm into a 10 or 12 million firm in a matter of two years, three years. We've done that. We've got numerous examples of where we've been able to grow businesses from three, four times in three years to as much as 10 times in two years. The moment you liberate them, the scale, what they will be able to achieve is enormous. And the promoter still owns up to 40% stake in the company. It's like owning 100% of a lemon versus a 40% of a watermelon, right? The game is so different. The game is so different. That's how we try and solve for it. Because the biggest challenge in the accounting industry where I come from is the accountant is the head of. He's the head of hr, head of finance, head of client relationships, head of execution, head of technology, head of operations. You name it. It is one man who studied one particular course but manages 10 different profiles, right? That's the problem we are solving for. We declutter the person's profile, his head first, then his profile, and then his organization. The outcome is phenomenal. It's magical. I mean, just imagine then rather if you enjoyed podcasting, right? But if you had to sit and edit, you had to market, you had to reach out, you do a zillion things around it, you end up spending 80% of your time around the function rather than on the function alone. It's such a suboptimal state of existence. That's what we relieve a CPA from. And that's where the real value creation happens.
- [13:57]
Dan
This reminds me of the book the E Myth. Have you ever read this book?
- [14:01]
Devakar Vijay Sarthi
No, no E Myth. Okay.
- [14:04]
Dan
This is like the first. I mean, this book is old, 30 years old. And in the beginning of the book, it talks about somebody who wants to create a bakery and they Create the bakery. But they realize that not only do they have to bake, they also have to provide customer service. They have to provide front desk, they have to check people out, they have to do a million other hr. They have to do a million things that they didn't want to do. They just wanted to bake. And then they go out of business because they realize it's or, or they can't scale. Like you said, it's impossible because they do every job. What you said is like almost every service company that I know or service industry falls into that same trap of starting with one person who wants to do one job and they're stuck. They can never scale past that.
- [14:56]
Gus
And then like you said, the multiple is very small.
- [14:58]
Dan
When they want to sell, so many of them just close. I don't know, I forget the number, but it's like, you know, 50,000 or something businesses, I'm making that number up, but it's, it's a huge number of. How many businesses just close every year because they, they can't sell or they can't exit or it's too complicated and they just want to retire. So let's. I love what you said. I'm very fascinated. So you go through this, this human transformation in your life. You realize how things are in the world. You then realize what's holding people back in this industry. You start to provide the abilities for people to scale, which is genius. Like this is. This might be one of the most genius business models. And We've interviewed over 600 people. This is incredible what you're doing. So you're helping these people. They must be like, what's. After a few months or a year when you've been working with these people? I mean, how do you. What's the, what's their personal transformation that happens in that time?
- [16:01]
Devakar Vijay Sarthi
I mean, it's a great question. So typically, Dan, we have a very simple three step process. If you want to scale, someone joins us even before they join, we go through this process. The first change is in the mindset we need, the person needs to understand what took me here won't take me there. Marshall Goldsmith, I'm just borrowing his terms. If you are from a 1 million to a 5 million or a 5 million to a 15 million, the game is completely different. It's like imagine driving a car with a 80 horsepower capacity. With a car with a 200 horsepower. You could get a Toyota at 200, but you would need a Lamborghini at 500 horsepower. It might say just two and a half times, but it's ten times the price. That's what it takes because the engineering prowess required to scale to that level of a different orbit. So the first change has to happen in the mindset of the promoter of the partner. And what I'm saying is universal, universally applicable to all service industries. Second phase of change is visioning. You should know what you want in life. I mean, a simple question, that which I asked many people, what is your dream? They would say, like, I would want a big house. Okay, what does a big house mean? It'll be a massive boss. It could be 5,000 square foot. It could be 50,000 square foot or 500,000 square foot based on what your definition of big is. But that needs to be defined. So the visioning exercise is a serious part of what we do. There are three steps in visioning and then we get to what we call the action. We get to the numbers part of the game. Okay, what does it take from here to the vision? And then we solve for it. That's a process changing mindset, visioning action. And once we do that, the outcome is actually magic. What comes out is the unadulterated human spirit in motion. It's a real force of nature at that time. If you are an accountant, you could be great at doing your tax returns, but you may not be the best person to be managing HR or people or whatever. Now if you are only put to manage tax returns from managing thousand, you could even be managing 10,000. That's you enjoy it, gains energy for you. We keep saying know your energy gainers and drainers. So we identify in the mindset part. The second part is know who you are. So in that know who you are, you we really get down to the person in terms of what that person actually is made for. There is no judgment here. It is a discovery of what it is. And then when you end up doing what you are actually born to do, what your real purpose in life is, you are a beast beyond belief. So that's the stage mindset, which will also include discovery, visioning, which where we reduce your aspiration to clear numbers and action, where we move from point A to point B be. That's the game, that's the process, man.
- [19:07]
Dan
So many things that you said in there resonated well. Un unadulterated spirit. Seriously, I'm very fascinated with that. And then the ability to scale and grow because you're not doing the things that you don't love. You're only focused on the thing that you really love doing. I'VE heard so many people, like, you know, don't follow your passion because your passion may not make you money. But I think in the end of the day, if you are allowed to do something, it's because we can't do it. Right. Like you're saying you normally can't do the things that you really love in business, because in business you have to.
- [19:51]
Gus
Do all the things.
- [19:52]
Dan
And many of them we know, like, most people don't like to do sales. That's what I've noticed. Or marketing. Right. Or branding, or they don't know how. They just want to open the business and they want people to come to them and they want to do taxes or whatever it is that they love to do. They don't want to do the other things. And that's why most businesses fail, I believe. And they're definitely so, like, in the U.S. only a few percent, 7% or whatever, 6% of companies will ever even reach a million dollars in revenue. It's very small. So I can totally, like, I'm just. I'm. I'm thinking of, like, wow, this could be applied to so many industries. This model of business, it's. It's incredible. So now I want to talk about the exit. I've never personally had an exit with the company that I had started, but I would love to, and I think that's very interesting. So you're putting in this work. I think every entrepreneur, the goal is to exit some someday, at least in the US Outside the US Many times it's legacy and they pass it down to their kids. But the US at least most of the time, I think most people want to exit. So how does this, how does this play out? You're seeing success, you're doing all this stuff, and then what?
- [21:12]
Devakar Vijay Sarthi
So once you grow with us, you've got two options. I mean, rather three. Three options, I would say. One is we ourselves will buy you out if that's something which you don't want to. Dan, you've run your distance 3, 5 years, and then now you want to shift or you want to retire, you just want to chill in life, or you're just bored of what you're doing, right? I mean, that's something which is new to the. That's the. That's the innate sense of the US market, right? I mean, people retire in their 20s, 30s, and 40s or 50s. There is no retirement dates because they just want to exit. In such circumstances, we can buy them out. Because by now, yours is not a business. It's a Function transition is so easy. If you are the whole and soul of your venture, transition is impossible. But the fact that we've been able to come and work on you, what you've been doing is now reduced to a function which can be replaced. That is what gives value to what you've done also. Now it is not just a business based on your expertise, it's a business which is it's an engine what is being built. So we ourselves will do a full buyback or if you're buying a home, you want to sell 5%, 10% of your business, we can do a fractional buyback. And the third which is a much most lucrative option, we are going in for a public market listing in 2027 28. You can convert your shares for public stock and you can always exit at your convenience. These are the three models what we offer.
- [22:47]
Dan
So what does a company need to get to be in order to exit? Is is there certain things in place that need to happen before it's viable for any of these types of exits.
- [23:00]
Devakar Vijay Sarthi
So once they come on board into the DBS platform, we work with them. There's a nine stage process. What we take take them on where we study each and every function of theirs. We figure out what we can automate, what we can productize.
- [23:17]
Gus
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Dan
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Dan
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- [23:53]
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- [26:32]
Devakar Vijay Sarthi
Because the biggest challenge, and I'll give you an example is the most simplest activity when a client comes on board. Sending a letter of engagement is a two to three week activity in the US with most CPA firms this is I'm speaking from personal experience now. It's because that it's a very simple process because what is a fee is an iterative experience. Just look at the amount of energy which goes to conclude a letter of engagement between the client and the that's the least of the areas where you would want to spend your time on, right? We have automated that. It might look like a small automation, but it has saved three to five hours of every transaction which someone gets in. That's a significant chunk. This is how we just try to simplify each and every element of the game and over the first 12 to 18 months the game is completely automated or structured at that time. A CPA's business is something which we can do 100% buyout because by then the first 12 to 18 months your role in the organization from being the fulcrum, it becomes a function and that function can be replaced by another person who is passionate about doing what you want to replace. And then we don't go in for a complete exit or you want to grow Your ambitious Dan, you saying okay, I can go and build my empire, I can go and conquer. I just need support, I need capital. We can give you, I need leadership. We can give you, I need technology. We can give you, we can support you to whatever limit you want to grow. Because ultimately everyone's going to bring in make the every growth is going to make the platform richer. Right. At the end of the day makes gives more options for clients to engage with us, adds additional levers of growth. So that's the gate. That's the game we are playing in there is we firmly believe that one plus one is infinity. It's not more than two, it's not more than three. It's absolutely infinite possibilities which can happen. It's, it's what you can imagine that is the height of your group possibilities. That's what we found.
- [28:39]
Dan
So I'm going to go to sleep tonight thinking about one plus one equals infinity. And tomorrow when I wake up I feel like I'm going to have a different mindset. Talking to you today has given me a mindset shift. And I'm not, I'm not just saying that. As you were talking out I was thinking about a lot of things and it's really, it's really a complete mindset shift. It's amazing how a service business gets held up because of the proposal process. Like you were saying. I can tell you so many times where somebody never got back to me and I was ready to spend money like it happens all the time where I'm ready to spend money or even, even at businesses that I've owned where I didn't send out that proposal or it wasn't in the way that I thought it was going to be. And that was the holdup. And then, then we didn't do business together when on the phone call we were like wow, this is going to be great. But that follow up process fell through the cracks and, and I, I can.
- [29:42]
Gus
Totally understand what you're saying.
- [29:43]
Dan
That might be the most important part. Yes.
- [29:47]
Devakar Vijay Sarthi
What happens exactly? Exactly. I mean the small, small thing. I mean there are a zillion things they can keep all these small, small nuggets. These are not rocket Science. Absolutely not rocket science. I mean, last week I was in the World Economic Forum and most of the large organizations have at least a thousand cyber attacks on a daily basis. And you know, there is one simple solution which can eliminate 99% of the attacks. Cyber attacks. It's the most basic solution which all of us know but rarely use. Multi factor authentication. The moment you use a multi factor authentication, you have eliminated the possibility of 99% of cyber attacks. We don't do that because all what it takes to succeed. One thing I've again realized is nothing flamboyant, just one word. Discipline. That's all. Discipline plus direction is success. That's something we firmly believe. Once you know your direction, just stay on course. Success is a question of time.
- [30:56]
Dan
Well, I need to read your books. I feel like you can have, you should have a book that's not just about CPA or taxation. Every phrase that you have said today I think you can apply to a book. Man, this has been very interesting, fascinating. I, I'm really inspired by what you're doing and I feel like we can leverage that in many different points. So people want to get in touch with you. I think many CPAs need this service. Like you said, maybe even hundreds of thousands of people can leverage this. And then I think other people in other industries can also learn from you.
- [31:33]
Gus
So if they want to get in.
- [31:34]
Dan
Touch, how can they do so?
- [31:35]
Devakar Vijay Sarthi
I mean, of course LinkedIn is the easiest way, but I can always share my email. DV dbs.com.
- [31:43]
Dan
Well, amazing. Thank you so much for joining us today on Founder Story and all the wisdom you shared. I'm going to come back. We need to reconnect in a few weeks. Let's have you back on and let's talk through the meaning of life because I feel like we could break this down. We could figure it out together. We're multi thinkers, but I super appreciate you sharing everything today and I think the audience is going to learn a lot.
- [32:07]
Devakar Vijay Sarthi
Thank you. Thanks, Dan. Wonderfully chatting with you.
- [32:14]
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