Maxim 0:02

Most founders are taught to follow best practices, chase growth, and prepare their companies for an eventual exit. But what if that conventional wisdom and playbook is holding them back? Today's guest is Jeff Spence, founder of WithFuel and author of Unconstrained. Over three decades, Jeff has worked with more than 400 leadership teams across 100 countries, building, investing in as well as acquiring businesses. He is here to challenge how we think about growth, capital, and enterprise value, as well as explain why the best businesses don't simply compete for resources, they attract them. Jeff, welcome to Scaling with Clarity. Ah, it's good to be here with you, man. It's absolutely my pleasure. Jeff, I really enjoyed our conversation. Um, the last time we can we quickly got into something that I think is incredibly uh relevant to founders. Um, and when it comes to founders, there's absolutely no shortage of advice on how to build, how to scale a business. There's a ton of frameworks, best practice, operating system, endless expert, and endless amount of videos telling founders what they need to to grow. And yet you make the argument that following that conventional playbook may be precisely what's preventing many businesses from becoming truly valuable. So let me start there. What have you seen across the hundreds of businesses? I think you said 400 leadership teamers or founders that you've worked with. Um many, many countries. Um from your perspective, uh what have you seen um about building successful companies and why do you hold these beliefs that uh following a playbook doesn't result in uh um in in driving, I guess, in conventional value.

Jeff Spence 2:02

It's a great question. And I think that I think my argument would be that a a playbook is fantastic. You can you can use a playbook to be successful, but you can't be using the playbook that businesses that are so unlike yours created. So when you when you think about the I'll give you a little a quick a quick history on this one really fast, is that I think the World Federation of Exchanges, that's all the public markets in the world. I think they put the put the value of those markets at about 170 trillion dollars. Okay, it's 170 trillion dollars. All of the money that flows into those into those markets does so competitively for very, very large companies, public companies globally, these companies are all over the place. And the investment into those businesses are now become effectively like the new financial instruments. And so if I'm a large company going into or a large investor, pension funds, insurance companies, high net worths, I'm going into these public exchanges because I know that my returns are going to be, although mediocre, they're gonna be predictable. So everything about running a big company, if I want to attract capital and I'm on these large, these big, large exchanges, then I needed to run a business that's predictable and mediocre. And there's no argument about that. If you've been in large companies, that's the that is the playbook that allows you to get the money to fall from the ceiling tiles, and you can continue to go and build your business, maybe go acquire competitors, whatever that might be. And so it's all about being predictable and mediocre, and that's great, but there's a third piece to it predictable, mediocre, and huge. And if I'm those three things, I've access to capital. So I build the business schools, the curriculum for for you know for teaching all the students about how business should work. I've built all the best practices, all of the infrastructure around is all around being predictable and mediocre. They don't call it that because it doesn't sound very sexy, but that's truly what it is. Yeah, and so what happens is that we go to business school or we rub shoulders with people who are super successful and they've got themselves a cool boat and a cool car, and we begin listening to them about how we should run our business. Even I say worse, but we also are connecting with attorneys, accountants, all the advisors out there in the world. And I know, and we're by the way, they're my best friends. I use them in every deal that I do. But I'm working with people that if they start giving me advice like Alcoa used to secure more capital, then it's the wrong advice for me. So what happens is we have this epidemic globally, actually, where so many companies who've got great products and great services, enormous, amazing talent, great supporting infrastructure around them, are running their businesses like microversion of very large companies and wondering why I'm not attracting resources. And resources come from everywhere. It comes from talent, it comes from you know partners and whatever. But that's that's the that's the major, the major thrust of why these why we get sucked into running this big company playbook that has absolutely nothing to do with our company. And there's there's a far a far better and simplistic way of doing that for sure.

Maxim 5:27

Can you I I do have a hypothesis, but I'm curious why do you believe that the public market's rewards reward predictable and mediocre?

Jeff Spence 5:40

The the reason the reason that it does, and and if you're in a if you're in a company, if you're in a public company, it doesn't feel that way because you're believing that you're you're creating exceptional results. And you and by the way, you can be an exceptional company that's creating mediocre results. And the media, the mediocrity is the fact that everything in that space has been commoditized. So if I'm fun the top hundred companies in the world are competing for the same talent, they're competing for the same capital resources, they're competing for everything's the same, and it becomes a commodity. So they can be exceptional themselves. They've got extraordinary management teams, and they've got they've got great talent, they've got everything in there and their infrastructure to do it. But the reality is, is as they are going after all these resources and trying to get customers, they are creating what anyone else, you and I running a smaller company, yeah, which they're absolutely mediocre results. To them, it doesn't feel like mediocrity. And by the way, if I'm a if I'm a $10 billion company and I grow my company by 10%, there's it doesn't feel me, you know, doesn't feel mediocre at all. And there's a ton of ton of money can fall in from the sky. But if you are a owner of a of a uh car washes and you choose to run that same playbook and you choose to be commoditized like them, and you grow by 10%, you're running out of runway runway. You're you are you're you are you would absolutely believe that you had a terribly mediocre year and your resources are not flowing to you whatsoever.

Maxim 7:19

I don't know if you've seen. Um, I was just looking at at stats while we're talking to uh to refresh my memory. Um there's they there's there are a couple of stats that are etched in my mind. More than half of innovations adopted by companies originate from outside the organization, and I believe I I might have the the company wrong, but it's it's I want to say Patagonia, but it doesn't sound right. Um, it's one of those outdoor clothing manufacturers that they have the rule that like the tribal rule that is is is organization organization meeting to increase 150, they have to spot a spin up a separate because yeah, at that point it just bureaucracy started to settle in, and so companies just uh fail to innovate from inside. It just because I mean to you like yeah, I've seen it. I've worked for a ton of big companies, and uh career risk is probably the guiding light as to uh why comp why companies stay uh predictable and mediocre. I've worked for great brands, E and Deloitte. Yeah, and uh um they're great. Um, it's a lot easier to win work with their brand names, with their logos, with their colors. Yeah, uh when I started my consulting company, it was hell of a lot harder to win work on my own, even though with the same person, I just didn't have the banner behind me. Um yeah, and for people it's the same. Like if you're if you're a leader inside a company, you cut you you can hide behind the logo, you you you can be predictable.

Jeff Spence 8:55

Yeah, yes, you're you're you're spot on. So a couple things. One is we just concluded a deal this last week and and EY was all over it, and and and the reason and they did a great job. So I'm this I'm not disparaging them in any way, they were great. Uh, but the reason that they were there was because they were EY and it makes everybody's it makes their answers you know beyond reproach. But you're to your point about you know, you have the the great colors in their logo, and that's uh it's an obvious deal. So when they say that we're blessing the financials, they've now been blessed. It's fantastic. So um, but to your point about the tribe size, you know, so that the the 150 people is kind of that is that tribe size, and you get beyond that, and it and it it begins, it moves beyond your ability to to not say control is the wrong route, say, but to to gain the leverage of the human talent in it. But I would argue with these larger, larger companies, it's by design. Because when I said about predictable and mediocre, predictable is the big one, and pre-prodicting uh predictability is what drives mediocrity. Is and you could go to a large company, go to EY and say, Hey, Mr. CFO at this large public company, um, would it be okay if I gave us a chance to to blow our number out by 25%, but it gives us a 25% chance of not hitting our number.

Maxim 10:17

Yeah, yeah, yeah.

Jeff Spence 10:18

I go, not a chance in hell. There's there's no way, right? Not no way it's gonna happen. I can't miss it by a penny. I'm not missing it. And the other part that we don't that we don't see in large public companies is that you'll have a company that will go out and blow their number away, surprisingly. And for the next quarter, their stock price looks amazing because they just blew the number out. But the big the big pension funds and the large allocations of capital are going, thank you very much for that wonderful return. That was fantastic. You killed it. But you didn't know you're gonna do that well, which means you may not know you're gonna do that poorly the following quarter. So we're gonna take our big money out and we're gonna give you a smaller allotment of growth capital to continue your whimsical approach to growth as you go forward. And that's the piece that that that large the larger companies are realizing is that I need to be like a treasury bond. You know, I need to I need to have very, very predictable returns. And when I do that well and I continue to grow predictably, money flows in. Small companies can't, they just they cannot do that effectively. And also the third piece, sorry, I'm I'm I'm going back to your your question in order. You talked about when you leave those major companies and you don't have now, I don't have their banner behind me. And my argument is my argument is that that's only painful when I continue to run the playbook that I was running at EY. So if I leave EY and move out, right? There's a ton of things that I'm now disadvantaged at, right? That I can no longer can I can no longer can play that game. But I've got a whole host of other things that EY can't do. I can make promises and deliver on things that EY can't do because they're they're afraid of getting it wrong. They can't choose to pour in an additional you know, 100 hours this week like you can as an entrepreneur to get something done. You can't change, they can't change their product, they can't go through and just tweak their product by 45 degrees because the the downstream ramifications of that, trying to track that through product management and product marketing and compliance and all the stuff that comes with it, they can't do it. So the so the smaller companies that divorce themselves from those those the big company playbooks and begin to operate like a small company, it's a whole series and the simplest thing in the world. You move to very simple blocks when you're a smaller company and they allow you to be you know dexterous and they allow you to be be you know be uh more aligned with a company's needs. How about that?

Maxim 12:55

Oh, I I mean I I I couldn't agree more with you. I'm working with a company, um, and it's amazing. Um, the the the leader of the company has this mantra, which is surprising because they're uh of size, there's several hundred uh employees. Um his perspective is speed over perfection, which I find unusual for a bigger company, but he's comfortable with making mistakes. Um big companies reward consistency, the market rewards consistency to your point. If you have volatility in your results, your investors are saying you don't know how to predict what's going to happen next quarter and and they kind of live and die by it by the quarterly results. Um, so that's why, but uh I just want to tell you a personal story. I finished like today, I finished reading uh Ben Horowitz's book on the hard things about hard things, and yeah, Ben Horowitz and Mark and Dreeson, obviously the the two founders of uh uh A16Z, Netscape, different companies. Um and so Ben came out in the book saying, I absolutely hate EY. And I spent 10 years there, it's an absolutely amazing firm quality. Uh like at the time, the slogan was quality and everything we do, amazing focus on quality, amazing people culture. They they really embrace people. But the the example he was giving was when um when they were selling ops wear and they were doing do doing due diligence with BMC, and what he was saying at that time, EY was their audit partner, and they had signed off on the financial statements. BMC had an EY as the audit partner as well, and then obviously two forms doing diligence, two partners coming up with different opinion on revenue recognition, yeah, yeah. And then obviously that has to go to national in terms of technical accounting pronouncement, and the the national partners said nope, you have to restate your financial statements. Uh otherwise, no deal. And so that would have taken the the value. He's like, after I absolutely like I love the firm, it's a great firm, but this is an example. I mean, I think KY is a 130, 140,000 people. So when you're this big, you can't afford to take a chance on on any risk that's of any size.

Jeff Spence 15:28

No, yeah, you're you're and that's that's it's a great example in that. I would say on that continuum, and they're obviously at the top end of that continuum. You you could find it at every segment as you go down that continuum, that's same that same Discord. But you know, I it's easy for me to beat up, and I always do because it's fun because they move slowly, it's easy to do it. A beat up on the large companies, the EY large public companies. Yeah, the reality is if I am running those companies, I run them exactly the same way. And the reason for it is because they're being rewarded by the capital markets rewarding them in a very particular way, which drives their playbook. And so what they're doing is actually brilliant. And I and by the way, there's got they've got tons of resources. If there was a better way of doing it, they would find the resources to come and do it a better way. But when pension funds are doling out capital for absolute guaranteed returns, then EY will continue to deliver products and services exactly like they do, and thank God, because that's what their customer, pension funds, are actually asking them to do. So that's a perfect, a perfect thing. I would actually say that the selection of EY was a bad choice if you didn't want them to act that way. And that's totally okay. There's a lot of deals that that I'm in, and the last company I would go to is EY. And the reason for it is because I want them to, I want the elements to dance. I want, I want things to move quickly. I want, you know, I want uh response to your point, it gets you know time over, you know, accuracy is okay, but I'll actually derate my financials to get everybody happy so that we can get these things through. And you know, it's so to me that for a smaller company or people trying to get things done quickly, I want to get to an answer fast. And many times getting falling down two or three times is still better. It's almost like saying, hey, you're gonna, I'm going to be the large public company and I'm going to walk for the next mile and you're gonna run for the next mile, but you're gonna fall down five times on the way. You're gonna make that many mistakes, you're gonna fall down five times. You're still gonna beat my ass, right? I'm gonna, I'm still gonna come in 15 minutes or 10 minutes after you, even though when I get there, you're all bloodied. Well, that's small company mentality is get ready to be bloodied. Get ready to fall down, get up, we'll we'll nurse you, we'll nurse you back to hell the next time. But it's about it's about doing the very most you possibly can and getting over the tips of your shoes. And sometimes you're gonna fall down, but that's the only way you can beat the big company. You can't walk next to them and think that you're gonna survive in that in that battle. Their wake is too great, their the center of mass is too large. They buy products cheaper than you, they can pay employees more than you, they are trustworthy, meaning they're they're lower risk to all of your customers. We can there's a laundry list of reasons why when you stand shoulder to shoulder against a very large company and try to compete on their playbook, it's going to be a dismal disaster. It's going to be absolutely miserable. And that's and that's the and that's the you know, kind of coming back to your very first question is that's why we continue to fail with best practices because it's not that we don't like best practices, we just choose the wrong ones.

Maxim 18:55

Yeah, I completely agree with you. Um one thing that um um that always surprises me. Um, and and I haven't studied enough to know, but I'm always surprised. Um I completely agree for small business, it has to be a cage fight, every opportunity. Uh, you you have to get yourself bloodied, you have to be not afraid to uh to get knocked down, and and but you have to be ready to get up. You cannot fully establish playbooks because the placebo playbooks are defined for incumbents. Um but the companies that surprise me is like companies like Meta who are delivering double digit growth, yeah, consistently. I'm like, this is a giant company. Like if if the Roman editor was small, I get it. Like, okay, 15, 20, 30 growth, like yeah, yeah. But when you're that big, what's your hypothesis around them?

Jeff Spence 19:54

So handful of things, and it's it's it's super impressive and not that impressive all the same time. And I'll I'll say it this way. Um, one is it's the type of the type of the type of revenue that they have is what drives it, which is the same same reason why you don't have you know rolled steel companies doing the same thing. So because of the type of revenue that they sell, the multiples on that revenue is very high. So meta, google, everybody else. Those those multiples are exceptionally high, which means that their cash reserves, the amount of money, like I was saying, that falls from the ceiling tiles is really high because of that. And that's why they they they own the world, that's why they're they're worth you know trillions of dollars and not and not millions or billions. They don't take that money and could do and innovate. We believe that they do, and there are a small number of companies out there that do it. And we could talk about Musk and some others, of course. They've you know they innovate like crazy, they've got flipping flipping roadsters and all these all these wonderful things.

Maxim 20:58

But when you love all the beatings that are coming out of this, man, I felt bad for Porsche.

Jeff Spence 21:04

Porsche launches their roadster the same time that Tesla does. There's amazing corporate espionage in there. The timing of that was beautiful. But the but when you look at it, you look at a company, you'll take Google as an example. I know their numbers a little bit better, but Meta's on the same on the same track. We look at Google's growth and it's exceptional. Now just back out the over 300 acquisitions that they've done. Okay, so you back out the value of the 300 acquisitions, you go, oh, it's a very different company. Yeah, you well, they're they're an innovation genius. Well, are they an innovation genius or are they exceptional at using the capital that they have because of their exceptionally high PE ratio to go acquire businesses that are huge? And you talk about you know how much did Meta spend on WhatsApp as an example, right? Billions. So now I I acquire, I'm acquiring these. These businesses, those technologies now magically appear inside my inside my company. The best part about that is I had zero risk. I say zero risk, uh de minimis risk. And the reason for it was is I got to watch when I'm sitting here with a massive bucket of cash in my lap, I get to watch the 15, the 15 major providers of these different technologies battle it out, and they become 10, then they become five, and invariably they become three, and three becomes the massive bidding war. So, but when I've got that much cash, I will always outbid. But remember, this the top technology, the top two or three technologies that win, which means that when you when you were the writer of the eighth best, whatever it was, technology, uh, sorry, that that that that didn't play. And so with so now all of these wonderful innovations are coming from their ability and an exceptional talent. This is not uh this is not a whimsical thing, it's difficult to do. I've been in these discussions, I've sold to these people, they're very, very good at what they do. Um, but when they can do that, it looks like from the outside that they've invented all these exceptional things, but they haven't. They've acquired all these exceptional things. What they've done is a good job of fully integrating those things into their into their their downstream you know demand chain, and uh, and they've gotten really, really good at that. And so that's and that's something that um you know it's there's so much power and there's so much value there. But that's also what happens. You get a critical mass, it's almost like a like a uh like like a nuclear chain reaction where I'm big, I'm able to acquire the best technology, I'm getting bigger, I can acquire everybody else's best technology, I'm bigger still, and you can't catch them. You really can't, and I there's it requires such an outlier, it requires something to come in from so far outside of their purview where where that can be you know can be unsettled. But that's what's happening, and there's a very few examples where these things are actually being engineered inside, and I'm not saying it's completely this way, but SpaceX has been a better example of a lot of that technology has been built. They've acquired tons, but they've done a great job of innovating internally.

Maxim 24:17

I mean, I I could completely agree with you, and and so it's it's interesting uh that that you bring the the acquisition channel. Facebook was or Meta was not always the big giant that can buy their way to success. Um, so they had to be scrappy in the beginning, and and and and now um as an investor, not necessarily as uh as a as a person, I uh I love Pierre Tio. And so I don't know if you read his book or like listen to like what he's talking about, but uh he's like he's he's got a few principles and and they're spot on, they're spot on. But one of his principles is that uh competition is distraction, and so if you take the the concept in in a big company perspective, if you're a small scrappy startup, you can afford to niche and pursue something really, really small for a big company, it's just not worth the hassle, right? You complete it's not that you don't see it, you just overlook it because the ry just don't it's not worth the effort. And so he one of his key concepts is like you gotta build a business where no close substitute exists, otherwise, you're in a cage match all the time fighting for sharing a crowded category. And the other thing that that he that that he says that I completely agree and resonates with me is like you have to know some kind of a secret that people overlook, like um, yeah, what like like something conventional thinking disagrees with you, but you know that it's true, and yeah, and that's where you find the information like okay, I'm going to go dabble down on is because yeah, people are just overlooking it, people were blind to it.

Jeff Spence 26:03

Yeah, it's yeah, and I I I love um uh I agree with him. There's a lot of things I don't disagree with him on, but typically those are those are not business discussions, they're other ones, but I will say there's a couple things, and I'll go back to large company versus the small company. When I'm a large company and I'm driven by the financial rewards that come with predictability, and by the way, but same thing with meta. I'm still looking for predictability. I'm just the number that I put out there was high, and I'm chasing a bigger number because I got pools of cash, but it's still predictability. The um what happens is when I do that, I look inside of the resources that I have because when I look at what I have in my in my my bag of goods, whether it's humans, talent, technology, whether it's partnerships, cash, whatever that might be, IP, I can craft a plan for this next year. So right now we're in we're in October, all of these guys have now submitted their you know, their their 2027 budgets. And and what they've done that based on is what they have. Because if I go outside of what I have, then I'm risking if I don't get it, and what's gonna happen here? It's an unknown, it risks my predictability piece. So I don't do that. That's also I can go division by division. You're gonna have you know 10.127 million dollars of budget. What can you get me for this cash, this talent? You can hire two FTEs. We've all been in that world, right? This so that's a it's a bottoms-up stacking of resources that are allocated to them and they're in their possession, and that's great. By the way, if I'm the CEO of that company, I get like I said, I run it exactly the same way. Now I'm a smaller company. If I do the same thing, then I am fighting the same fight in the same commoditized market as the big company, but with with scraps, I've got nothing. And so what Teal is talking about, I believe, and what I and it's and it's it's a it's an approach that I everything in my life is based on this, is it's top down. And the top down is, and you you said it, you said it very well, uh, one is what's the problem that customers actually don't know exists, and and we think, well, if a customer doesn't know it exists, no, no, no, they would never articulate it because they don't think there's a solution to it. Yeah, and we've got examples of this. We could say, well, um shoot. Um, how about you know, Uber? Before Uber came out, we weren't sitting here going, man, I wish a car would have some random person would happen to pull up in their car, and I could hop in the back of the car, we could drive off. We didn't think of it as a problem. We thought that there was too few taxis, or we thought whatever. We just our answer was different. Well, we thought the problem was different. Uber solved the problem we didn't know existed, and now we're now we can't unthink it, it's gone. And so when I when I when I pick a problem, so I gotta know what my customer, um, I know my customer's issues better than they do, and we should. If we're supplying them, we should do it. Like a neurosurgeon should know more about my about my back than I do. And so if I know my customer more, then I should be a I should be identifying problems that they haven't been able to solve because they don't even know there's a solution for it. And and almost invariably that solution is outside of those resources that I currently have, it's outside of them. And it's a small company. I better be looking for some a problem that's outside of my resources because if I solve one that's inside my resources, I'm going to lose because I have less resources than somebody else. But as soon as I define that problem and I and I call it a big ass problem, it's part of this entire beast, it's you know, it's this beast that you're going after. Now I can start identifying and saying what's the value, or I can figure out what's the value of solving that problem for my clients? What's the value for solving that problem to my investors, for partners that want to join me, for talent that wants to join me? And instantly, if that opportunity is big enough, I've got resources jumping in the boat. I've got people saying, I would love to come work with you, Jeff, because you're solving a problem that's worth a lot more. I'm a little bit of a flyer. We might, we, we might get our asses handed to us, but if we win this thing, it's great. I've got partners leaving their existing uh partners and coming to me because they want they think we could win this thing. And if we win it, it's worth a lot. Investors are joining, clients are joining. And now I'm again I'm solving something meaningful, I'm solving something that no one else is touching yet. And that's we say, well, shoot, but once we do it, then big companies are gonna jump in. Yeah, how do they jump in? They buy me. Yeah, exactly. They have they they can't innovate, and not that they're not smart enough, it's too risky. So large companies, the low cost of capital, they'll buy me. And then, and if they don't buy me, guess what? My next turn through this, the same thing. What's the next problem I can solve? What are the other resources I could draw in? And that's it's a simplistic view to business, but it's it's a never-ending process. And I could walk through that in detail, but it's a process that you go through where if you do this and you're just don't do the right way, the entire thing can be done with crayon or you know, with with you know, on a whiteboard that you just erase and keep writing on. This is not crazy detail, but just knowing your customers well enough to solve a problem for them that no one else is solving and creating an opportunity for all these different resources, resources to join you. I can't get it from the capital markets, I'm not large enough. Now everybody's gonna join me because I'm solving something that's meaningful. Well, that's a never-ending process. And I can either run that business for 20 years, I could run that business and start acquiring other businesses, I could run the business until it's worth more to somebody else than it is to me, and they acquire me. So there's a you have uh you have so much optionality if you're changing your model from trying to beat them with budgets, trying to beat them, you know, and uh and so that's that's the that's so yeah. So that's my that's my super long-winded answer to an easy question about Peter Thiel. He's spot on. You know, you you have to go somewhere where others aren't, or you are in this commoditized pool, and man, you you you just can't move. You just you're you're you're getting killed.

Maxim 32:24

Yeah, completely agree with you. I I want to double-click on something that you said that I don't know, like I don't believe it's it's conventional wisdom, at least uh, at least not uh um widely accepted truth amongst founders, and it's like if you're successful, you're going to get bought. And what I mean, like the the reason why this is such an important statement is because a lot of founders start with a vision, I'm going to be a billion-dollar company and take over the world. Whereas when we work with founders, like our our guidance is like you should start a company, and from day zero, you should know who can potentially acquire you. That's not to say that you're with sale, that you're ready to sell, that you're planning to sell, but you have to know who can who can buy you.

Jeff Spence 33:26

Yes, yes, yeah, yeah. So um I I'm a I'm a firm believer that that your biggest product, the product that matters is actually the company itself. So your company is your product, and your your product has a whole bunch of features, and those features are actually the product you're selling to other company to you know to uh you know to to your customers. And so when you think in terms of your company being your product, you are always talking because by the way, if I'm gonna attract great talent, I'm not attracting talent by hey, I sell pens, right? That's that's people aren't joining you because of that. They join you because of the trajectory and the value and the upside potential of the business that you're running, that company. You can say the same thing about clients, partners, and investors, they're all the same way. And my my view at the right time to sell, people have to your point about all these this grandiose views of what am I going to become. Uh, my view on that is you sell your business when it's worth more to somebody else than it is to you. That's that's the answer. And I've had it, we've had a couple of businesses where they sold before our first client, literally. Really? Yeah, we built a company, we had a great, great business plan. We hired the great great people that to come into it. We secured licenses for certain things that were very interesting to us because we had to have those in place. And instantly the work that we did, these were a couple things were in Poland and a couple other spots. The work that we did was speculative, high-value work, the larger companies couldn't go do on their own. And they paid us, I mean, like 20 times what we'd spent to get there.

Maxim 35:08

It's a fantastic can I just jump in and unpack this idea because it's really, really important. What you're actually describing is not an easy thing to do, and this is not just about ideating and incubating company. What you're describing here is doing hard things like getting permitting or approvals or regulars, it's real work, yeah. So, yeah, the reason why somebody's paying you is because you've accompanied something that they may not be able to do. Um, and and you're giving them like a turnkey solution, or you're giving them something that they can just it's kind of like buying a cock, it can just jump in and drive, like you've given them a solution, yeah.

Jeff Spence 35:50

Yeah, and the and the easiest way to think about this, think about your your company, go back to EY or any large company like that. I'm a huge public company. Um, I an entrepreneur, I I the the cost to me to go have my team stop doing what they're doing and focus on some new ass, some new business of any kind is exceptionally high because I perfected my business. There's so much efficiency in my business right now that if if 20 people stop working to go do something different, that impacts my PL. I mean, it a hundred percent impacts my business. Bad news. I go, great, no problem. How about I pay them um overtime to go do it? Good luck with that. Good luck getting them to go home and work on stuff for eight hours at home, right? To the entire team to go do it because I've got labor laws, I've got all these things around it that I can't manage around that work. So I'm EY, I've got an infinite amount of resources, but I'm handcuffed. I'm literally, I'm literally I'm impotent. I can't, I can't go do things that I want to go do. And now you take a small group of entrepreneurs and I say, great, hey, um, entrepreneur, how much are you paying yourself? I'm paying myself $100,000, whatever, start out. Wonderful. Calculate it per hour. Uh I'm paying myself I'm paying myself $4 an hour, right? Because I will work an endless number of hours. And at the end of this, in the end of this process, when I have everybody committed to do that amount of work and we're working a hundred-hour weeks, I don't sell the business based on the amount of hours that I worked. I'm selling the business based on the work product that I delivered. That's it. Yeah. And when you're signed, when you sign your your the the sales contract, you know, the the stock purchase agreement or whatever it is at the end, and they hand you a check and a transaction, it's rare that I've heard anybody look at that big check and go, ah, but man, I spent a lot of hours. Or a lot of hours. We don't care. We actually don't care. And so the large companies know that if I go down, I go down several orders of magnitude to exact to exceptionally high cost of capital that that you know that small entrepreneurs have, if I allow them to race around and do all the hard work, I can I can wave money at them and they'll trade all those all the scars and all of the you know the the the calluses on their hands and the the sleepless nights and staring at the ceiling for this check. And that check is huge for the entrepreneur, it's very tiny when you look at the price, you know, priced earnings or whatever for a large company. And so it is the easiest calculus in the world. And I wish that more, and this is kind of my my mission in life, I guess, is to get entrepreneurs, founders, CEOs, business leaders of every kind just to understand the economics of this entire food chain of buyers. And when you do, when you truly see that, you realize that you know we've been beating ourselves to death in their arena. Talk about a cage match. We're in their environment trying to compete with them in this very commoditized environment. All we need to do is just step the side a little bit where they can't go, they physically can't go there. It's almost like a it's like a big muscly guy can't scratch his back, right? You could stand right behind him, he can't touch you. So they are huge, they can't move there. So it's tiny things that we can do, and it looks tiny to them, it's huge for us, but tiny things that we can do that add extraordinary value to what they're to what they're trying to do for their clients. So if I can look through a big company into their clients, and one way to do it, and this is just this like a nice little nice little takeaway right now, is if you're not spending, you know, say a couple hours a week, a month, whatever it might be, reading 10 K's and 10 Q's of the public companies in your sector, and you're reading their issues, they're they're they're they're telling you, they're tell you right up, right? You know, they tell you this is this is the issues we're having. We're trying to get into this space, we're trying to move this way. My compensation is based on X. It's return on assets, it's market growth, it's whatever. I now have the keys to what makes them the money that they need to have. They just have an infinite amount of money. Now they can come to me, I'll solve that problem for them, they'll buy it from me. I'm happy, they're happy. It might have been six months, it might have been six years, it doesn't matter, right? There, that's that's the deal. When we look at becoming a billion-dollar company, my point is this you'll become a billion-dollar company by accident because you raced through that window where you didn't get a big enough offer to pin you down, right? You were you were you're accelerating so much, you race through there. If you spend any time and you slow down at all, either you know, growing fast, but you slow down at all, you're gonna have tons of offers in your business and you're gonna exit happily. And by the way, you can do it again. Now you can there's you can 100% do it again. And great entrepreneurs are re or are repeating entrepreneurs, right? They they don't look at it and say, that was my one shot at this thing. And so, you know, we you know, there's a lot of guys out there that have had 10, 15, 20 exits, and and to them, they're going, well, I'm 50, I can do this for the next 30 years, I'll be at 40 exits by the time I by the time I'm done.

Maxim 41:19

What I mean the one thing that people have to realize, um sorry, that sounds a little preachy. Um, what I'm saying in practice is great companies attract great valuations, great companies are bought not so you have to follow like everyone wants something that's working. If things are not working in business, figure out, make them work because yeah, you are not going to achieve the exit you want if uh if you have a half-baked recipe uh yeah, yeah.

Jeff Spence 42:02

And and again, that comes from knowing knowing your buyers, and you you could be wrong about which buyer it is, but knowing your buyers, what problem am I solving for them? Yeah, because as an example, that one I was talking about earlier where we sold it because we established that we we'd secured the licenses that we knew were very difficult for everyone else to secure. Had I chosen to build the proper company, meaning I'd gone out and got customers, and my gross margin was the right amount, and I had an ERP system in place, and I'd made myself indispensable, all those things we want to do as business operators, all the great, the great best practices again and how to how to sell a company, uh that would have been a dismal failure. I knew that our buyers in that situation couldn't secure the licenses that we were securing. They couldn't, they couldn't get the permitting done, they couldn't get those things done. It was difficult. Now, if I want to sell to an operating company and it's a company that rolls up entities, but they but they keep them separate and keep in separate management. Well, guess what? I've got to do I'm selling to United Technologies, for instance. I got Sikorsky on one side and I've got Ingersoll Rand on the other, whatever. These are separate brands. I better build a company that 100% can run by itself without without a bunch of intervention. And if I don't, then my valuation is going to be painfully low. And so you're there are so many different ways of doing it, but we just need to think through and say, who do I want to sell to? Uh, what's what's their driving pain right now? And my my view on this always is I want to be the person who crafts the message that my buyer takes to their investment committee. So if I if I can if I can craft that message for them, then they can carry it into investment committee. I've won and I get the valuation that I that I want to have. If I'm just standing around and trying to sell, sell, sell, or trying to trying to convince them that I'm that I'm the more I'm trying. To convince them of something, the less interesting it is to them, so that's that's the yeah, there's a lot of different ways of going about this, and there's a ton of different buyers out there, and we just need to know our customers, yeah.

Maxim 44:10

Jeff um from your perspective, what are the top three mistakes that the founders make in terms of building a great company?

Jeff Spence 44:27

Man, I gotta stop at three, don't I? Um I'm gonna I'm gonna get super preachy too on this one.

Maxim 44:33

Psychology suggests that anything more than three is hard to remember.

Jeff Spence 44:36

So I it is exactly three three's good. Three's good. Uh I think that I think that the top three mistakes that founders make are um one is is um is not solving a problem beyond your current resources. Okay, so solving a big enough problem that extends out beyond your resources. It we we've gone through business school and everything is about resource allocation, everything is about budgeting and maximizing and accounting and creating you know an effective and efficient use of existing resources. That's where that's where we've been taught. That's what big companies are teaching us, that's what all the management books behind me have are telling us. If we're not solving a problem that requires resources beyond our control, outside of us, then we're not growing. There's then you are you're just perfecting something.

Maxim 45:33

Please this is super important. I want you to restate what you just said in a different way because I want I want to make sure that this concept is taken away. Like this is super important. No, no, I would like you to restate it. Oh, maybe okay, okay. Yeah, yeah.

Jeff Spence 45:55

Yeah. I um I there's been there's been definitions of entrepreneurship that that truly is the pursuit, you know, pursuit of opportunity beyond resources control. I think it was Howard Stevenson from Harvard that had used that terminology. I think it was a very good one. Uh there when you when you look at the ability to grow, everybody will everybody will tell you, well, if I if I could raise some capital, if I had more resources, the number one, the number one response from any CEO out there is if I had, then I would. There's always right, if I had more resources, then I would do such and such. If I had such and such. When I'm saying that, there are there's like I think five trillion dollars right now of of committed capital on the sidelines in private equity alone right now in in the in the US. So trillion. There's a lot, there's a lot of cash out there, about the same number, maybe a little less in venture capital. Public markets, an infinite amount of money. We talked about that earlier, those numbers are large, 170 trillion dollars of market value. So when we're talking about a lack of resources, what we're really talking about is a lack of meaningful investable opportunities to put the resources into. That's what we're talking about. And so if you are not securing resources, it's because your idea sucks. I hate to say it that way, but it's just it's just true. If you have an idea that's actually executable and there's an actual plan behind it, you've created an opportunity based on that for talent and for all the things I keep talking about, talent partners, clients who love these things, and investors, then you can secure as much resources as you want to have. The greatest, the number one thing, I would say the greatest challenge these business owners have is they look at what they currently have and they do their damnedest to perfect the execution with their existing resources. What you're rewarded with is steady state commoditized returns, and you wake up January 1 with exactly the resources you had last year. And that's so we've every company out there does this, and that's and what we're we're doing in that situation is that's the S-curve, right? We we started at nothing, we grew our company, we grew our company, we were actually endeavoring to do something beyond what we could actually what we had in our hands, and we're creating it. And as soon as we began to grow, we create efficiencies and we S-curve and we flat we flatline this thing out, and then we're trying to take our existing resources and trying to beat them up and perfect them. Hey, Maxim, do me a favor, let's let's tweak these numbers by two or three percent. Let's try to eke out more. If we can drop our DSO from 50 days to 47 days, it's gonna increase our it's a wonderful thing for large companies with institutional capital because they want you to tweak those knobs and they make a lot of sense. It's not something for for entrepreneurial, um, high growth-minded business business owners to be going after. So that's that that's that point. You must be endeavoring to solve a problem for a client that that extends beyond your current resources. And if you can do that well and you do it over and over and over again, you might be wrong a handful of times, it doesn't matter. When you do that, you will see an exceptional amount of growth in your business. That's the number one. That's the number one thing I'd say. Okay, okay. Number two, what's the entry? I said number two is is that we believe that our customer is our customer, the guys that we sell our products and services to. We have four. Every business leader in the world has four customers. And those four customers, and there's there, you could you could move them around a little bit, you take everybody they're going to land in one of these buckets. You have your clients, you have your internal talent, the talent you recruit into your business, you have your partners, any kind of partner that's out there. Um, you know, Microsoft is a partner. I I couldn't build my business without Excel, so Microsoft's a partner. Um, but you just any partners um and investors. And investors could be, could be you, you're the you're the money guy, um, it could be you know your bank, it could be anything. I have four customers, and those four customers all, and I could I could say about all customers or all investors, it doesn't matter. All of them, my client or my the customer that's got my products and services, they are trading, they're trading something, cash, right now for some sort of future value. That's what they're doing. I'm gonna I'm gonna pay you right now in cash, or I'm gonna get rid of this money that I have, and what I get is great accounting services from you, Maxim. Fantastic. That's an exchange. Great. They're my customer. Okay, how about this? Talent. I'm giving you my hopes and my dreams and my my future treasure. I'm giving you my time, I'm giving you my opportunity, I'm giving you my my my native skills that I'm bringing in exchange for future growth opportunities, for you know, for job security, for whatever it might be. You know, that's it's an exchange. It's plain and simple and it's an exchange. I got partners. Partners are bringing resources and capabilities and technology, market reach, whatever that might be that that they're bringing to you in exchange for, typically, um, known sales, you know, sales uh uh flow or whatever into them. Fantastic. Investors, same thing. They're sitting here saying, and we this is another thing we we don't do. I'm I'm sitting on the world's largest and most commoditized thing in the world that's called cash. That's what an investor is. I'm sitting on cash and I'm begging for somebody with something that's got value into it, something that actually isn't depreciating over time, that I can exchange my cash for that for that thing, equity or whatever else, whatever else I'm gonna get. So I have four customers, except for most business leaders, think they have one and they sell to one and one only. And when I sell to one only, what happens is is I fail to extract resources and gain and really allow these different customer constituencies to join me. That's all I'm doing, is I'm asking them to join me on my on my venture. But I am not, I'm doing a horrible job of selling my venture because I'm not selling to each one of these people. I should have it, I should have a customer, a client deck, or an investment deck, however you want to look at it, for each one of these customer constituencies. I should be able to pull that out my back pocket and say, Maxim, this is why you should come work for me.

Maxim 52:40

Okay.

Jeff Spence 52:41

Same same way I'd go to a client. This is why you should buy my product and service. I don't go up there and just say, Hey, and by the way, buy my buy my product. So all four of these um customer constituencies are that's that's my number two is are you targeting all four of these things aggressively? And if you are, your your your your trajectory is changing overnight.

Maxim 53:03

And what is number three?

Jeff Spence 53:04

Number three is am I am I meaningfully taking everything that happened in one and two, and am I finding a way to recycle those things and to compound what I've just what I've just learned? Remember, if I start at A and I solve for something that's beyond A, well, as I go through this process and now I'm selling that and I'm I'm I'm let getting people to attract or getting people to want to join me, what happens invariably is I go right back and I continue to sell the same thing. Well, if I sell the same thing I did yesterday, I'm commoditizing myself, I'm not improving on the business. As simple and it sounds, oh, of course we're we're upticking and doing better, but most people think in terms of um becoming more efficient and effective in a business. What I'm talking about is are you taking what you just learned, the new partners, the new talent, the new investment capabilities, the new clients, and recrafting a better problem? Now that I've recrafted a better problem, am I recrafting my pitch to my four customer constituencies? Am I continuingly to upshift and spiral up? And if I do those things well, just those three things, and they're all major mistakes that I would say that maybe two or three percentage of the of the entrepreneurs in the world will actually do when they do it, it's an unstoppable mode. You can't you can't get out of it. 100% of it can be done with crayon. It's it's it's the easiest thing to get your team excited about. And it's also, as I'm explaining it to you right now, I can sit in a room, ideally with less than 150 people, and you're my tribe, and I could use the same language and write the same things on the board, and I get 150 of them knowing exactly where I am and knowing exactly what we need to do to be successful. They all get it. It's not rocket science, it's not this is it's not again, it's not DSOs, it's not, it's not, you know, perfecting, you know, supply chain, all that stuff's fantastic. I'm not saying that management's bad at all, it's a wonderful thing. I'm a bad manager, but it's not that's a great thing. But that management in a vacuum of what I just talked about is a is a perfection of an acquiescence to commoditization. I am perfecting my existence in a world of commoditization because I'm not doing those things. If I do them well, it's all good. One, two, and three.

Maxim 55:33

Do you know what is the irony of what he just said? It's almost like a it's almost like a roadmap. Number one, clear me out. Are you in the right path? Are you chasing the right opportunity? Number two, map your stakeholders and pay attention. Be always always be doing customer discoveries who are the key. And number three, reinforce learning, just perfect the things that are working.

Jeff Spence 56:00

There we go.

Maxim 56:01

Yes, but yeah, I'm obviously being facetious, but but like what you're describing is super, super important for founders to pay attention. And the most critical mistake founders make is the first one to make. That you pointed is like they're not on the right journey, the opportunity is not big enough, or the opportunity is not differentiated enough, and it kind of gets tiring if you're not if if you're not on purchasing the right opportunity.

Jeff Spence 56:29

It's it's um, you know, I I think the number of um, and I and I wish this for everybody out there, there are so many people who can and should at some point because they're wired the right, that's the right way, they're wired in a particular way, to leave the large corporate enterprise and go build their own businesses. And I and I love it, and man, there's nothing that warms my soul than when somebody who does this and does it successfully and they and they they truly are getting everything out of it. But the difference is most people leave because they think I could do more without this bureaucracy, I could, I could be more successful. But what they forget though is that there was there were the resources, the systems, all that stuff that was in place. If you leave and you run the same play minus the bureaucracy, but you're doing it the same way that they are, you're doing it also without the resources. And so what happens is it would be as an example. I'll say that you're you're out there, you work for a company that does grading, and they've got big, huge DC9 caterpillars out there that push massive amounts of land, and you're saying, but man, I hate it here, so bureaucratic. So I'm gonna go buy a bobcat and I'm gonna come out here and I'm gonna grade the same land that they're doing, but I'm gonna do without the bureaucracy. Well, no matter how bureaucratic they are on their side, they still have a DC9, they're pushing a lot more earth than you are. If you you're great to leave, it's wonderful to leave. Take your bobcat and go do all of the work that the DC9 is too big for. And when you choose to do that, you do that's a very, very specific problem that you couldn't solve when you were there in that big, huge caterpillar. That's when things change. And it's just a subtle shift. It's not the bureaucracy was killing you, is that you you you need to go find something new that you can go, you can bite off that they're not doing. If you do it right, it's great, it's a good, it's it's a wonderful life.

Maxim 58:28

You absolutely need to be uniquely positioned. It's uh I I I live in an area in Calgary that's probably the hottest area in town. So there's a ton of infill development. And three blocks from me, there's uh um they're building a house. Yellow piece of equipment. I don't know if it was a caterpillar, it was a backhoe, it was yellow. Um yellow iron, yeah. Love it. It it flipped on the side. So I I was I was driving by, I see like fire trucks and police and ambulance there, and it but it was kind of funny because like the the previous day I saw the backhoe operator, he was just on his phone, just like kind of like cigarettes in one hand, phone in the other. Like I um it was a break, so but the backhoe had flipped, literally had flipped, and so this is where you have to be uniquely positioned, you have to know your strength. Big companies. I mean, I've worked for a lot of big companies where, like, for example, uh, we show up on site, we're not allowed to drive in, we have to back in in case of an emergency. You have to be able to drive. They have procedures, and the procedures are there for a reason. Yeah, if this was a big company, they would have had a ton of safety protocols and procedures around how to operate a piece of equipment still. Yeah, exactly.

Jeff Spence 59:52

Not in this, yes. Hopefully, they hopefully the back operator is okay. I don't know. Um they open the site two days later, yeah.

Maxim 1:00:01

But what's uh be abuse, what's important here is what you just said. I I don't know what a DC9 is, I'm sure it's some kind of a piece of equipment, it's a big, huge yeah, tractor, yeah. But he it it's about being uniquely positioned around a particular area that you and maybe only you uh are the ones can pursue it.

Jeff Spence 1:00:24

Yes, yes, and that it's um it is a wonderful space to be, and you realize very quickly that most of the resources around the ones that are actually interested in you know that the size that would fit you, yeah, if you're solving a problem that's interesting, you will find this venturi effect of those resources sucking into your business, and there's nothing like that feeling. And you and that's a great way to test whether you're doing something meaningful and worthwhile is are people jumping in? And if they're not, if you're trying to, if you're trying to push and push and push yourself on others to get them to join, that's there's a lot of energy spent there. Spend the energy on reinvesting into what you're working on, what you're trying to solve for. And that's and it's it's something that we that we don't do enough. And and I think because we've also come from a world with the big companies where that changes so slowly, and it should. They're huge. They're solving, they're solving middle of the world problems in these large companies, and it's not gonna change a whole lot. McDonald's is not going to move quickly and start solving another problem. They've got a very particular problem they're solving. Smaller companies, the problem's gonna change because they're fringe, and that's and that's what you you you have to constantly interrogate those, and that's how you're gonna evaluate how how how many resources and what quality resources you could bring into your business.

Maxim 1:01:54

Completely, Jeff.

Jeff Spence 1:01:55

Good.

Maxim 1:01:56

I I know we had time, but I'd like to close my interviews with a question. What's the best advice you have ever received?

Jeff Spence 1:02:06

Uh best advice I've ever received, um, other than like socks then shoes. I'm thinking um thinking um uh I think the best advice I've ever received um was from a uh he's a Thai uh business, a business uh friend of mine. Okay and um and we were we were in a transaction that was not going sideways, but was not progressing the way the way that it should. And um and he he pulled me aside and he said and he said, whenever you feel like you're pushing harder than somebody else, right? Um stop interrogating them and start interrogating yourself. So when you feel that pressure, your your first thing you think is they're dragging their feet, they're being slow, they're not getting things done. And back a little bit to defining the problem, like we just said, the the what he was suggesting, and he was right, is that I was approaching things the wrong way. Either I had the wrong solution I was trying to thrust upon them, my approach was incorrect, I was meeting them where they were not, whatever it was. But as whenever you get that feeling like you're pushing harder than everybody else, you probably are. It's not their fault, it's your fault.

Maxim 1:03:34

Yeah, yeah. Yeah, no, I couldn't agree more. Um, Jeff, it's been an absolute pleasure having you on. Love it. Yeah, thank you. We'll drop you in the show notes where people can find you and how to uh how to get in touch. But it's been uh it's been fantastic having you on.

Jeff Spence 1:03:49

I've enjoyed it. I've enjoyed it, Maxim. Thank you so much.

Maxim 1:03:52

Thank you, Jeff. Uh my friend. We'll talk soon.