SPEAKER_00 0:03

Today on Scaling McClarity, I'm Joby Yarngum, founder of Fractional Partners and an entrepreneur to an investor who has built, scaled, and exited companies, including Israel's largest e-commerce platform for military goods. After working as an entrepreneur in residence, helping distressed startups turnaround, Yaren now helps one to $20 million companies solve one of the most expensive problems in business, the planning app. We'll talk with Yaren about why strong companies solve, why strategy has to come before execution, and how founders and investors can create clarity, discipline, and ultimately higher enterprise value without getting pulled into the wheel weeds. Welcome to the show, Jaren.

SPEAKER_01 0:55

Thank you, Maxim. Thank you for having me.

SPEAKER_00 0:58

It is my pleasure. Um, you and I in a similar spot. I'm looking to uh connect with you and chat about how do you drive clarity in growing and scaling companies.

SPEAKER_01 1:10

Yeah, it's gonna be a really cool conversation today.

SPEAKER_00 1:13

But before we get into the meat of the conversation, why don't you just kind of walk us through your journey? Because my based on my research and understanding, you started your first company when you were 14.

SPEAKER_01 1:26

I did. Yeah. So uh you gave me a quite an intro, so I'll I'll try not to repeat myself. Uh, I started really young. I started when I was 14. I built my first uh company, it was a SaaS company. It wasn't called SaaS back then, uh, or at least I didn't know it was called SaaS. So I caught I did I did it while I was in high school. I opened my second one when I was 16. Then I joined um the Israeli military. There's a mandatory military service in Israel. So I was drafted. I served three years as a combat soldier. When I finished my service, I saw a really interesting gap in the marketplace. It's a whole story by itself. But basically, um, army doesn't provide you with enough equipment in Israel as you draft, remember, mandatory service, and you don't really have um the ability to purchase it online back then. So very short time, you have a very short amount of time when you go home uh to actually get what you need. And there wasn't any e-commerce platform. So I started one. That was the what's called Maytar Army Gear, and I grew it to be the largest e-commerce platform for military goods in Israel. Um fell in love with my American fiance back then. Um, and then we knew we want to go back to the States, so I sold my business, then I moved to the States, finished my MBA, did my last semester as an extensor at Kellogg, uh, joined a venture capital firm in Chicago, as you said, an entrepreneur in residence, saw a lot of companies, star a lot of founders. So I worked a thing about with over 400 different founders in like six, seven years. Saw really interesting themes coming up again and again, which I hope we're gonna talk about today. And uh yeah, and I quit about three years ago to start Factional Partners, which is my uh growth advisory firm specifically for uh post-product market fit pre-scale companies. So we'll talk a little bit about where the gap exists. Um yeah, I live in Utah. I now I live in Utah. We moved here from Austin, I have an adorable two-year-old, and yeah, I'm really happy to be here.

SPEAKER_00 3:40

How does Austin compare to Utah? I mean, obviously, Austin is kind of known as the little pocket within Texas that's like the closest to Silicon Valley, and uh many people don't think of uh youth. I mean, youth is very entrepreneurial, no question about it. Uh, but kind of like how does it compare to Austin?

SPEAKER_01 4:00

That's a really interesting question. So I'll start by saying that I'm like an off-bird, I'm a digital nomad. So I work from home, so it doesn't really matter where the local ecosystem is, because I am semi-global. I have companies all across the US mostly. Um, so the markets, the the local markets are not as big as an impact. I can say that uh Utah is actually a really interesting VC market. So as you think of it as like a secondary market, which it it is, but when I came, I I got a lot of uh green beat meetings with most of the VCs here in town. Um so Utah's actually has really strong um, really strong returns or really strong bets made in a really high trust environment between the funds. So there are a couple of funds that really um that really kind of set the tone for the industry. They're very close together, they're very Mormon. Um but which I go by saying is they trust each other and they do deals together. There's almost like a degree of trust that exists here that I don't necessarily have seen in Austin. Uh it's just there's something that connects those VCs more than just their investment thesis. It's really interesting to see as an outsider coming in.

SPEAKER_00 5:24

Yeah. You know, I I agree. We we're launching a fund, and our lead investor, or in this case, most likely a co-GP, is uh is out of South Lake City Utah, right? Um it just everything that you're saying just makes sense. Like they just this energy and trust and enemy ultimately we now work and live in the trust economy where everything is predicated upon trust and distribution.

SPEAKER_01 5:53

Yeah, yeah. Utah is a cool market, it's the strongest market in the mountain, what we call the mountain west area.

SPEAKER_00 5:59

Um so yeah. And so, what are the kind of businesses that uh proliferate and thrive in Utah or the mountain area?

SPEAKER_01 6:10

Can you ask that again?

SPEAKER_00 6:12

What kind of like is there a specific industry sector that Utah is known for?

SPEAKER_01 6:18

Uh I don't know because I again I'm slightly I'm a digital nomad here in the local ecosystem, so I'm not a huge part of the local ecosystem. I can tell you that a lot of the companies that are here, um, a lot of them are in outdoor companies. A lot of them uh are strong. The the short answer is I don't really know. Uh, because I am semi semi-adjacent to the market, but I think that all of them have kind of the same challenges that I've observed. And I kind of want to share with you how I see how I see the world, how I see companies and where I see the gap is. And it it's across almost like across territory. You see, and also you see in in Salt Lake. So here's what I've observed, and maybe our listeners are gonna hopefully feel the same. So as companies grow, there are different growth models that they need to apply as they're growing. So when we start, we start with the model that I called growth by addition. And the idea behind growth by addition is basically let's say yes to every opportunity that comes through the door. Let's have multiple different types of product, let's test multiple different types of customers, let's test multiple different types of channels and revenue streams. And the idea here that I have a very small team, I don't really have product market fit yet, I want to validate, let's say yes. So you say yes and you basically absorb whatever you can. But there's a thing that happens after you find product market fit. Sometimes it's at $1 million, sometimes it's five million dollars, but somewhere in that range where you see you seem to find some traction, you seem to find some product market fit. There needs to be a shift that rarely happens from growth by addition mindset or a growth model into a growth by subtraction. So think of it. You are a five million dollar company, you probably have a founder and a small execution team with you, and you basically want to look at everything that you have built and developed and ask yourself, okay, from the first version that I built or from the from the my current business, what is actually worth scaling and doubling down on? And then you hyper focus and you choose a lane. What happens most of the time? Well, before I happen, so growth by subtraction really works well where you're in anywhere between five and fifty million dollars. So the idea here, let's look at version one of what we built, but now we have product market fit. Let's double down on a certain area or niche or an ICP or a product and scale that become extremely good at this until we get to a point where I can then grow by expansion. So I can add more service lining. The problem is that I see it across multiple different territories in VC, in PE, in bootstrap companies, mostly in founder-led companies, is that companies never make the transition from a growth by addition into a growth by subtraction. So what happens is companies just grow everything. And it's hyper focused, or it gets hyper when they meet capital. So let's say you are in like a like a round, and you have proven a round, you've kind of proven product market fit to an extent, and now you're meet capital, you get a big fat check. And the first inclination is okay, what else can I do? Can I create more products? Can I come after more clients? Can I create more channels? What else can I add to my mix? But that's where the that is the Achilles heel because the more you add, the more complexity you add to your business. The lower margin because you're compressing basically revenue. I'm sorry, profit is the average of all of your activities. Some of them take a lot of profit, some of them give a lot of profit. You're just spreading it across multiple different activities. Some of them are more profitable than others. You're just diluting your profit, and you make it extremely hard for yourself to actually execute and become world-renowned in what you do. So you become mediocre at doing a lot of different things, and that's where they get stuck, right? They and this is crazy because you can see companies that have good products, product market fit, good team that can execute, and they're in this weird space where they're not really sure what they're doubling down on, so they just do everything and they just die of like indigestion, not starvation. Does that make sense?

SPEAKER_00 11:06

Yeah, I mean, uh absolutely. Um what have you observed? It's exactly the same. We um we we tell our founders that what they say no to is more important than what they say yes to. Um, I spent a number of years working for Deloitte, and uh at Deloitte was introduced in the Enterprise Valley Framework, so we've adopted this in terms of what we are doing, so we've made it our own. And one of the core pillars there is around capital allocation, essentially, where are you going to allocate resources, being human, being financial resources? Because like the more clarity you have on what's yielding the best, the highest ROI and benefit, the more you should focus on it. And the things that are not additive, you should just let them go. Uh, as much as like they're they're developing. It's kind of like if you're a product company, the temptation is always to focus on services because they drive revenue, right? And so, how do you uh how do you focus on like no no? I want to be a product company, I want to build the best product. The services are nice, but they want one off. Um, and so rather than like me building the any or recurring revenue off like the product. So everything that you're saying absolutely resonates. It's the same type of challenges that that we see with our clients, and we we primarily work in North America as well, but primarily Canada, we're based out of Calgary. So those challenges are geographic, geography independent, right? Like what you're seeing in Utah or across the states is the same as kind of what we've seen here. Company is a company.

SPEAKER_01 12:42

Yeah, yeah. I think you touched you said capital allocator. So let's touch on this because as there's a difference between a zero to one founder and a one to ten founder, and the difference is that once you have product market fit, your job now becomes to allocate capital and resources.

SPEAKER_00 12:59

Okay.

SPEAKER_01 13:01

The challenge is that a lot of founders just never make that that shift from I want to like try everything and be almost like a hustle mentality into like something is working, something is clicking. My job as a CEO, as the founder, is to decide where are resources spent. And resources can be capital, they can be labor, they can be assets, doesn't really matter, it's it's energy, right? Where is energy spent? And the the challenge is that because you grow you grow your company in a certain stage or a certain way that is like almost hustle focused, say yes, energy, let's build. It's a mindset shift that rarely happens. Of okay, I built this. What am I doubling down on? So stop building and hyper focus on developing the existing infrastructure that you have started to build.

SPEAKER_00 14:02

Okay. I I I can I can I completely agree with this. Um what do you think is the hardest challenge the founders have to overcome in moving from zero to one to one plus?

SPEAKER_01 14:18

They need to the hardest challenge is to move from growth by addition into growth by subtraction. But I want to share with you, Maxim, why most companies never actually do this or why is it gets skipped on. So let's take a company, let's take uh a five million dollar company that is growing by addition. So most likely it will have multiple different types of customers and multiple different types of uh customers, revenue stream channels, uh, and products. And the challenges, we as we discussed, this creates complexity and friction, right? So as you grow and you try to serve multiple different types of customers, they require different teams. If you have multiple different customers, different campaigns require uh it just becomes very complex to manage. And founders are not oblivious to this, they can see this, they're smart individuals. The challenge is that a lot of founders see this and think I have an execution problem. So let's fix execution, let's put more systems in place, let's put more accountability, let's install EOS, let's do scale up, let's make sure that we're kind of streamlining the business that we have. But that is a trap because if you look at it, the complexity, you don't want to just optimize complexity, you want to go upstream and ask, okay, what version of my company am I truly building? And what can I let go? And if you are letting go, you will have a narrow business, and a lot of these friction points that you feel will disappear by themselves. And then you take and you systemize the smaller version of your company, but they founders feel the tension, they feel the friction, they just attribute it to oh, I need better operation. Where a lot of times it's it stems from I really haven't chosen a path, so I'm just doing too much and I'm stretching my team too much, I'm stretching my business too much. So let's put systems in place to kind of help me manage, versus let's kind of figure out what version I want to scale, and can I find a smaller version that is simpler to operate that does not require so many systems in place to deliver? Does that resonate?

SPEAKER_00 16:41

I completely agree. I mean, the reason why we named our podcast Scaling with Clarity is what we're finding. Um founders have the propensity to act, and pausing to reflect or take account of what exists, driving the the analytics, driving the clarity of what works, what doesn't work, it's a bit uncomfortable. They just want to go. And so the biggest value that's that I I bring initially to to clients is just this clarity through coaching and mentoring. Like let's just take like it's hard to know where you're going without knowing where you are. Um, yes, it's super important to know where you're going because without having an end destination, you're not going to get there, or you may, but you will zigzag. But it's like getting to that clarity first and then build the plan in terms of how you're gonna get to where you're going.

SPEAKER_01 17:45

Yeah, I resonate. So we're we're we're very similar in our mindset. So when I started, I built the clarity canvas, right? And that was the name of the tool. So here's how I go about. So we talked a lot about the problem, right? The growth by addition, growth by subtraction. We talked about where where is the failure point. But then the next question is okay, so how do I actually step out of it? Or how do I actually grow by subtraction and my company or design version two of that is actually worth scaling? And here's what I found, and I'm curious to hear if you have have a similar process. So I found that the best way to do this is basically answer certain questions that the company, the founder, and the C-suite probably never answered in a linear process and then put them on a canvas as the source of truth. I'll explain what I mean by that. So let's say we have a company with a five million dollar company and they're doing just too much. Uh, I'll let's take in a real example. Let's take, let's get out of VC for a moment. Let's take a plumbing company. Plumbing company I work with multiple of those, if the great companies they do plumbing, they do HVAC, they do excavation, they do dig, they do septic, they do all these things. But you can transit into VC, it's the same deal. Yeah, and how would you even know what to what to double down on? So my thought process or my framework starts with let's go back to the problem solution thesis or the mission statement, but a little bit sharper problem solution. What is the gap in the marketplace that you've observed? And what is your high-level way of solving? Not your product, not your service, but your approach of solving that problem. Once a company has cleared declared it, you walk them through a series of questions, and each question basically creates a constraint as you go downstream. So you chose that I have a very specific problem that I want to solve. Okay. Then you outline the destination. In our case, that would be the ultimate goal. Okay, great. So what metric would you want to measure, one metric that represents success that is not cash, because cash is a legging metric, but that a metric that ties back to your problem solution thesis? So once they choose a metric, all of a sudden, okay, now there's an identity. But exactly what are we trying to achieve here and what represents success? Okay. Now, when you go through the exercise of okay, uh, out of all of your customer archetypes or all of our customer types, which one of them doesn't align with what you're trying to achieve here? Boom, cut three. Great. Now we go through a process of what is your strategic advantage? So, what do you guys know how to do extremely well that other companies don't? Oh, we know how to do XYZ. Great. So now when we look at your revenue streams, which one of them doesn't align with what you know how to do best? Where are you competing in someone else's boom? Cut more. And so the idea here is that through a linear process of decision after decision, subtraction happens because once you make a decision and you're faced with a different decision, it's no longer in vacuum. You already made a bunch of decisions and you put them on a canvas, and now they're the source of truth. Now, as you go through the process of entering cascading decisions or tactical decisions, you judge everything based on your previous decisions, and the byproduct of it is subtraction, so you end with a super tight business model that makes logically sense. That's the key. Then you take that canvas, it's called the growth decision canvas, and you just add it to your execution system. You bring it and you use your EOS, and then you take your rocks based on this. That's version two of your company for the next year. Year. These are your assumptions. One page, now go execute. And you update this as you go, usually once a year. But that is the value. We talked about clarity. Usually originally called it the clarity canvas, but people really didn't resonate with the word clarity because no one feels they need clarity or they are missing clarity. The idea here is that if you I'm extrapolating, my belief: if you have a strong team in place and have product market fit, the number one predictor of ROI, or in different ways, the number one value acceleration play that you can do to help them is to help them get clear on the set of decisions, high-level decisions, what they're building, how are they going to go about this, and then you exit and you let them execute as they high as they have before. And if you have a strong team and you just help them kind of come up with a better plan, magic happens, and I've seen it multiple times.

SPEAKER_00 23:32

How can they unlock that growth uh scale clarity?

SPEAKER_01 23:38

We go back to the same same problem. They struggle nine times. So let's talk about what is the characteristic of one to 20 million company or like five to 25. What's the characteristic of a company like this? Most of the time, you will have a company that is a founder-led company, right? The founder is still there. You will have a small but strong execution team. Because if they were able to get to anywhere between five and twenty five million, they can execute. Something is working. Um, you will most likely find that they are doing too much and stretching the resources too thin. Here is the challenge. Think we have a $10 million company. How many people are in the C-suite? Two, three, four people relax. How much can you put on their plate and have them be successful in executing their priorities? Yeah, very little. And what most companies do is they just they have too many activities inside of the companies, so they're not moving the needle in any of them. So they're just stretching themselves too. So there's really one problem is they're stretching themselves two things. The other problem is a lot of them are not, they don't really know what actually moves the needle. So we talk about when I talk about needle, I really talk about profit. Um, and what really moves Ibida. And a lot of times they're doing a lot of stuff, and they're doing a lot of stuff because they're not really sure what is the one stuff that move that will move the needle, so they're trying to do too many, and the whole work with me or without me, or the the unlock for value is the niche and the focus and the clarity, right? It's giving them the ability and the liberty to say no, and when they start to say no, growth happens. Think of it. If I have a company and they're trying to pursue multiple different types of customers or product, they by design will be mediocre in doing this. This is there's no other way because they don't have enough resources. There's really the different kinds of businesses that are tiding into one. So you want to get to a point where you choose one lane, one business, put all of your eggs into that basket, and then you validate that basket. And if you are not successful, you know that it wasn't because of your execution, it's because your original thesis was wrong. So you can update, but if you are doing too much, you're not going to be able to validate or disprove any of the things that you do. That makes sense.

SPEAKER_00 26:31

Yeah. What are you seeing? Like, are you observing any kind of notable differences in companies within that one to 25? That's um single founder versus multiple founders, and how does this play out in terms of clarity and direction?

SPEAKER_01 26:52

Yeah, that's a really interesting question. Um, so the problem is is so I don't see a let's start. I don't see a lot of differences between um multiple founders or one founder. What I see is a problem is between the leadership team as a whole, and leadership team could be comprised of two founders and and and other people, or if one founder and multiple. The challenge is that if you have a one to 20 million company, if you ask the individuals inside of that leadership team the same questions around what they're building and how they're going to go about this, and where should resource be um um deployed, you will get as many answers as as there are people. And that is the risk, right? When you have the people that execute, again, sometimes it's the founder, sometimes it's the C-suite, they have different versions in their mind of what exactly are they built, what exactly they're building and where they're taking the company and how they're getting that. That is the risk. And it can happen between multiple founders, or it can happen between the founder and a team. But at the end of the day, someone needs to execute. And when people execute on a different mental model or in different mental um a mental version of what they're building, that's where the inefficiency happens, and that's where they get stuck. So getting everybody on the same I chat founders, I challenge you. Ask your same people, not in a room, but ask them. That's what I do with companies. I start with a survey, 40 questions about your strategy, finance, and operation. Ask them what kind of company, what describes our perfect perfect customer? What revenue stream are we focusing on right now? What are our core competencies? What is the mission that we're trying to achieve here? See what you get where you have misalignment, that's where basically your resources are being drained for nothing. And it's such a solvable problem, but it usually doesn't happen because people are so focused on execution that they forget that people need to align on the bigger picture of what exactly they're building and how they're going to go about this. Not just tactical, but what's the play?

SPEAKER_00 29:09

Yeah. Um, just uh I want to keep unpacking the the this. Um, where does lack of clarity usually show up first? Um is it in revenue, kind of the revenue stalls, and in like the the founding team or the leadership team is not clear as to how to um move this past the plateau phase? Is it in hard is he in cash flow leadership meetings? Kind of like where do you start to see the cacophony and where do you see like this profound exhaustion starting to set in due to due to lack of clarity?

SPEAKER_01 29:49

Yeah, so clarity appears or missing clarity appears everywhere, and the symptom that usually indicates that there's a clarity problem is complexity. So when things are complex, when things are not progressing, nine times out of ten is because people are not really sure on their their questions are not answered, or they're thinking of things differently. And the byproduct of it is complexity, and complexity can manifest itself in very different ways. Complexity can be basically create your margin to erode and for your cash flow to disappear. Complexity can happen on your execution, complexity can show. Um, I'll give an example. So when I walk into a company and we start with that exercise, I'm trying to identify where is clarity missing, and clarity can be missing. Let's let's take an example of if clarity is missing in your, let's say you're not clear on your core values. I don't love the term core values, I use core rules, but basically the behaviors that are allowed and not allowed inside the company. If it's not clear, what usually happens is you see it as churn of employees, you see it in people that are inside the organization that shouldn't be there, you see in a lot of turnover, so you're seeing a lot of like interpersonal dynamic friction. So you'll see this stems from missing clarity around what is okay and what's not okay. If you're missing clarity around your ICP, your ideal customer profile, what it looks like is your churn is going up because not churn, I'm sorry, your CAC is going up because you're trying to basically uh find multiple customers, different type of customers with multiple different channels, your conversion rate goes down uh because you're trying to convert multiple different people with multiple different problems with the same message. So this is just two examples. Everything stems. So, what I invite people to do next time you're faced with friction point in your business, instead of just going and having the first inclination of what can I systemize, what else can I put in place to fix it? Ask yourself, is it a clarity problem? Is I'm not am I really clear on what I'm how I'm going to go about this? Are my people clear? So just because you as a founder is clear doesn't mean your team is clear. And are they clear? Because if they are clear, do you have a strong team that can execute? It shouldn't really be a problem. Clarity is the byproduct, or in my opinion, of everything. People rarely say that they have a clarity problem, they don't think in terms of clarity, they feel pain, executional pain, tactical pain. My CAC has gone up. What am I doing? And the first inclination is what else can I do? The the better idea is where am I not clear? What's not clear that causes my CAC to go up? Different mindset, different altitude of thinking, much more valuable as you grow and you become a larger business and larger companies. Uh, you will burn less resources trying to fix stuff that shouldn't be fixed.

SPEAKER_00 33:18

So we have a problem. How do you go about solving it? Like what kind of systems do you embed? What kind of processes do you embed? Sort of because clarity is an ongoing journey. It's not do it once and it's done. It's like it has to be faster. So, how do you go about helping founders and companies solve that problem?

SPEAKER_01 33:42

Okay, so I help them solve, I help companies solve their basically designing version two of their business. So I believe, and my my belief as I go through this as an operator myself, that most founders don't need me to tell them how to run their business, and they don't need me to help them execute on what they do well. They probably do it significantly better than I would. What they need is going through a process of really this designing the version of the real that is worth scaling. And once you have this, a lot of these tactical problems disappear and they can solve it like anecdotally on themselves. The biggest problems that our founders are really having problems. The problem is every problem. The the hardest problems for founders to solve usually are questions that what they were never asked. No one ever asked you what are your core competencies. Okay, but it's super important for you to know what your core competencies as you're making decisions. Let's answer that question, have that mindset that that constraint in your mind, and then go and look at every tactical problem with almost like with a semi-different lens. Yeah, that's that's my that's my belief. And it goes back to like the root in everything we do. Why is it happening? Why is it so? Here's here's the tactic. So if you're looking for like a method, as you go and you observe a problem in your business, let's say let's take the CAC example, you are noticing that your cost of acquisition is going up. I want you as you sit with your leadership team to keep asking basically the the why method, why is it happening? And people are gonna give you responses, and you keep asking why until you get to the reason that you can't explain any any other way. That is the true problem that you want to solve. So let's say my tech has gone up, okay. Why? Because my campaign becomes more expensive, okay. Why? Because I am trying to target multiple different personas uh in the same campaign. Why? Because I'm not clear on whose persona I really want to go about. Bingo. Okay, if I solve that, if I got clear on who am I really trying to build my company around, would that downstream problem disappear? Most likely. Solve that higher level problem.

SPEAKER_00 36:22

Yeah, I agree. And and for our listeners and viewers, it's uh uh this is a uh a core approach in uh um LinSec Sigma. It's called the 5Y, so they can look for the fish bone diagram, lots of resources, but it's an incredibly useful tool in getting to root cause analysis.

SPEAKER_01 36:45

Root cause analysis is what we want to do as founders. I don't want to fix them, it's just not a good use of time, right? We go back to our our goal as capital allocators to be successful capital allocators. We have to understand the mechanics of the machine. Once you understand the mechanic and the dynamic of your business, then you can decide where you want to deploy resources and allocate resources, really. But I invite listeners, with me or without me, it doesn't really matter. Go back to the root cause, really try to identify and spell, spend 80% of your time identifying the root cause and 20% of your time coming up with a solution. Usually what happens is people identify very shallow, very shallow uh symptoms and spend 80% of their time kind of thinking of things they can do to solve it. Where if you spend a little bit more time thinking about that problem, you might have seen that this is not even a problem worth solving, or it would have been solved with a different approach. Very philosophical, but this is the game of business. It's chess. It's just it's a thinking business, really thinking game.

SPEAKER_00 38:01

Yeah, I mean, uh, couldn't agree more in uh um in this in the space of Lin Six Sigma? Um the Japanese have come out with the word Muda, and Muda means waste. So, how do you remove the waste out of process? How do you remove like waste out of companies so that you're focusing on the things that would yield the benefit? Um so in the vein of this, um, you talk about trades behind every stalled companies. Uh, what are the three, four, five, six trades that you see like that it from your pattern recognition is like, oh, okay, I know why they've stole beside besides clarity. I mean, clarity is obviously key, but kind of like what are you seeing is like okay, I know why they're struggling.

SPEAKER_01 38:46

Oof, different companies, different, different situations. Um, so some of it has to do with the owner or the owner, founder, and their ability to distribute decision making to other people, right? Where a founder is either um when a founder either holds too tight of control, um, and doesn't allow doesn't allow basically people to make decisions that are not just tactical decisions. Another thing that comes up a lot is I go back, we talked about clarity, but a lot of it is about profit clarity, which it's different, a little different than strategy. It's more like people don't know their numbers and they don't know their metrics. And because you don't know your metrics, you don't really know where it goes back. It's like your dashboard. If you don't, if you're not clear on your dashboard, how would you allocate resources? So they just fly blind. And if you fly blind, you just try to basically do whatever feels right, but you're fine without your dashboard. Um, other problems is a shiny, shiny object syndrome I see all the time. Basically, founders get bored of what they built, and is about okay, great, we're gonna go do X. And I see it a lot with companies that want to grow. It goes back to the growth by addition mindset, but the idea here is that basically let's build something new. And the risk in building something new is you have to validate that something, but you are no longer a zero-to-one company, you are a bigger company, and you're basically spending more resources validating stuff that um might not be beneficial. A it's distracting you from your core, and it's there's opportunity cost in doing that. So they I have a business, and this business does X and it's great, and it's doing five million dollars a year, but now I want to be adjacent and I want to try Y. Great, but Y hasn't been validated at all. And when you go and you explore Y, you basically take people out of X that X pays the bills, and you move them into this Y that might pay the bill, but it's not, it's unvalidated. So it's just not from a risk of from a risk perspective, from a capital allocation. Uh, it doesn't make a lot of sense. If I take all of my resources and I just put it back to X and I hyper focus on X, from risk return, it's much less risky for me to focus my effort on X versus Y. X is not that sexy, X is kind of boring, X is like what I know, not as exciting, but from a profit perspective and growth perspective, X is much less risky to grow than Y. I don't think that makes sense.

SPEAKER_00 41:40

All right, absolutely. Um so you talked about founders and and and kind of like the the difference there's essentially founders for zero to one, one to a hundred. Like they're there's a different founders. What's the toughest conversation that you typically have with founders? The the one conversation that feels the most uncomfortable but yields the highest returns.

SPEAKER_01 42:08

Yeah. Um the hardest conversation for a founder usually revolves around adding a part of their business. So when we get when we get to a point where you'll have to start making an allocation decision that is an allocation decision that is not just by adding, but it's by subtracting. That's where the discomfort comes, right? When I say, okay, I can look at a business and very easily, not easily, I don't want to touch my own horn, but I've seen so many of them. I I can very quickly figure out what needs to be cut. But just because I can figure this out doesn't mean that the founders buy in and the leadership team buys in too. So the work or what I've designed is going through a process of this, we talked a little bit about that at the beginning, decision stacked upon decision, it becomes self-evident that things need to be cut, and it's not because I said it, it's because you chose the direction. And then their conversations become a little bit easier, right? If I told you you should cut these five products and services, you will be, what are you talking about? This is for that, and that's the reason, and this brings cash, and I'm not doing that. But if we go through a process of kind of deciding what companies we want to be, what is the ultimate goal, what company, what is our core competency, who's the client we want to serve, and then we get to that conversation, then I don't have to be a bad guy anymore. The conversation becomes easier, and more than just easier, they absorb it. And the C suite and the leadership team and the founder actually internalize the fact that wow, maybe I am doing too much, maybe I should cut this. And it's a logical decision. The challenge is it's very hard to make these strategic decisions without context or in a vacuum. If we just approach a decision without any filter mechanism on why you should make, you can make an argument towards any product you currently have or any kind of customer you're currently serving. But if you create a filtering mechanism or decision after decision, and then you approach these strategic conversations much easier and much more interesting and much more beneficial.

SPEAKER_00 44:34

Yeah, I agree. Um I mean, yeah, like this continuous filtering has to be absolutely part of it, and uh we um we've we're very blunt around the topic that uh um unless you go unless you're gonna be number one or number two in a particular space, don't waste your time and use like this a plethora of frameworks that you can use to evaluate this decision. But I know we come at a time, so I want to close this with a choice of a question. Um and what's the kindest thing somebody has ever done for you, or what's the best advice you have ever received? You can choose to answer one or both questions.

SPEAKER_01 45:19

Oh wow, these are difficult. Um, what other is the kind of thing that every somebody ever done for me? Um I was very fortunate to have very strong mentors around me, uh, volunteering mentors, as I was growing me and my businesses. And I share with you, I started when I was 14. And 14 is like I was in middle school, and having strong mentors around me that was selfless and selfless and were there for me as I was navigating decisions that are a little bit way above the pay grade of a 14-year-old. I am very grateful to my two mentors that I'm still in touch to in touch with uh today. The power of mentors uh is real. Uh, so as you go through um and you find your VC, find someone you want to mentor or you want to mint the mentors you don't just take capital. Capital is not a problem. If you have a strong product, you'll find capital. Find individuals that you want to get their capital, but you also want to get their guidance and you want them in the room. This is, I think, this is the really cool filtering mechanism for people like looking to raise capital. Find the people or find the funds or the the individuals that you will want in the room as you are navigating decisions. And if the first inclination you have is I want my I want my uh VCs to really meet me once a quarter, and I don't want to hear and hear from them ever again, give me your check and shut up. You are probably choosing the wrong capital partner.

SPEAKER_00 47:08

For sure. It yeah, Aaron, it was an absolute pleasure having you on the podcast and for you to share insights around how do you get to clarity, how do you plan um any parting thoughts?

SPEAKER_01 47:23

Yes. So what I want to share with you guys that what I talked about, the growth decisions canvas is free. The whole methodology is available and publicly available because I believe the knowledge shouldn't be the barrier. So, what I invite founders to do is do a clarity challenge for yourself. They're inside of the uh growth decisions canvas, there's what we call the growth bottleneck um snapshot. And what he does, it's very simple. Going back to what we discussed about today, you answer 18 questions about your mostly about your strategy, and it would show you on a heat map where you're not clear and what are the symptoms that you might be noticing that are actually a bypost of missing clarity. Do it, see we again with me or without me, you don't need me for that, but it would show you where value kind of like flows out the company and where you're not clear on your decision making, so you can solve it. It's better to know it's free, it's at canvas.factional.partners, use it, it's valuable.

SPEAKER_00 48:32

Awesome, cool yaren. Pleasure to have you. Um, same. Let's continue the conversation some out of time.

SPEAKER_01 48:40

Thank you for having me, Maxim.

SPEAKER_00 48:43

My pleasure.