Ep46: Inside the Mind of a Serial Entrepreneur Scaling 4 Companies at Once

Thomas Woudwyk, Australian-born serial entrepreneur is scaling a portfolio of 4 companies in parallel in developing markets in Asia.

Few people build and sell one business.  But even fewer build a portfolio of businesses and run them in parallel.  But there can be a lot of benefits. 


If you’re already running a business, but have a few other ideas you want to pursue that could become separate companies then you need to start thinking about bringing a portfolio mentality to your ventures.  


Today we unpack the story of Thomas Woudwyk, Australian-born serial entrepreneur who’s scaling 4 companies at the same time through a clever approach to building a portfolio of related companies in Asia.  We unpack the psychology of making a portfolio of businesses work together, financing growth and what it takes to unlock the full potential of your businesses.

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[00:00:47] Sean: G’day everyone, and welcome to the ScaleUps Podcast, where we help first-time Founders learn the secrets of scaling so they can fulfill the potential of their businesses, make bigger decisions with greater confidence and maximise the value and impact they can have in the world. I am your host, Sean Steele, and I am joined today by my very exciting guest. I've been waiting for this conversation for a long-time, Thomas Woudwyk. Serial entrepreneur, Founder of five businesses, four of which is still running today, and one of which actually was where we probably met about 10 years ago. How are you today, mate?


[00:01:18] Thomas: Good, mates. Thank you for having me on. I appreciate it. Glad to see I made the cut


[00:01:26] Sean: You're finally in. Well, welcome mate. I'm really looking forward to our conversation. There's a bit of background and context, you know, there's always a bit of context I set up front for people's backgrounds, but yours a little bit longer than most because you're doing so many things. So, let me have a crack. You're the former Founder, I guess you're the Former Co-Founder and Managing Director of Colleges Online. That was a student recruitment business you were running in Australia. That's where you and I first met. You were recruiting students into some of the college brands, I was responsible, but that wrapped up in around 2016. You moved to Philippines full-time permanently, and you've since founded four other businesses, which are all currently operating and scaling. The first one, Social Desk Tower, which I've been to, and is an incredible facility. So, a 20-story wellness focused tech campus, kind of like a fusion between, I guess, co-working and a tech campus. You have like custom headquarters for some of the largest tech companies in Australia. And almost, I'm sure there's a proper description for this, but I would say like a six star kind of wellness accreditation, you know, like living gardens and totally unique approaches to how you manage air and light and movement and comfort and sound and just an incredible facility for the, I guess the wellbeing of the people that work from there. Then you have ProSource and ProSource is a significant sized business where your teams build, I guess you sort of source and build and manage highly technical distributed teams. So, this is not a sort of typical BPO that my people might think about in the context of the Philippines. These are really skilled software developers, the kinds of people that you end up paying $300,000 to in Australia and the US. And you're doing that for some of the most innovative companies in the world. You've got NASDAQ listed businesses in there in. You've got ASX 20 in there. You've got more than 25% of the 100 largest technology companies in Australia in there, that's a lot of clients. And then you have Pickup. Do I don’t know if you just call this Pickup or you call it Pickup.ph? 


[00:03:25] Thomas: Pickup.ph, I think.


[00:03:26] Sean: Pickup.ph, whatever you like, which is a zero-commission based online ordering and delivery marketplace that allows vendors to build branded online stores, take payments, collect, and manage orders, fulfill delivery. So, these would be hospitality businesses, I imagine in the main, but you're doing it with zero commission, which has been really, no doubt, upsetting the competitors, the people who are already in that market. You’re enjoying probably disrupting everybody and annoying everyone in the process, which is good. And then you have Crosta and Crosta is a rapidly expanding pizzeria, with a super focused menu that has pizzas from Detroit and from Sicily, along with your own signature stuff. And you guys, I saw were recently awarded number one pizzeria in the Philippines and number 32 in APAC. And you guys started that out of a container food van, which I remember going to, you took me there in the very early days. I think it'd only been up a few months and you've now got five branches opening this year of like a full store format kind of model. And I feel like this is, you know, people talk about serial entrepreneurship, but I think generally people are thinking about sequences of businesses, not generally running like four at the same time. So, there's probably some new phrase we've got like parallel entrepreneurship or something or perpendicular, I don’t know which way it works. But when you hear all of that set out loud and that's the end of my spiel, but when you hear all that said out loud, Tom, and you kind of get a chance. Whilst I'm saying that to reflect on what you've actually created in last six or seven years. How do you feel about that journey?


[00:05:00] Thomas: Well, I mean, in fairness, I think everything sounds better when you have such a great introduction like that, but, you know, I think in reality it's maybe not as kind of glamorous as it always kind of sounds, there's a lot to it. There's a lot of moving parts. But how do I feel with regards to it, look, I love what I do. I really love kind of building what I would consider sort of contrarian businesses. And so, for me, you know, I wake up on a Monday morning, And I'm really excited to go to work. And I work during the week and I just really love what I do. So, it's pretty easy for me, I'd say. 


[00:05:44] Sean: You know, what's interesting, that's easy for people to lose sight of is the fact that you have not only successfully founded and seated and are running these four businesses in parallel, but you're doing this in a country that you didn't even grow up in. So, you've had to navigate and entirely, you obviously had a fair bit of familiarity with the Philippines. I know you studied with a lot of Filipinos when you were in university, you had a lot of friends there. And so no doubt you'd been there plenty. And of course your beautiful wife is Filipino, but you're still having to enter and become a business guy in a country with a different political system and different cultural system. And I'm sure you learned a lot through that process. And I'm going to ask you, but I'm going to come full circle on that because I'm interested if you could maybe just give people a sense. I mean, some people may not get whether these are sort of still at start-up stage or some like really well scaled. Like, can you give us just a few metrics to give people a short sense of the scale of these different businesses with whatever you're happy to share?


[00:06:42] Thomas: Yeah, look, I mean, firstly, we've done all this without kind of raising any money from VCs and all of that sort of stuff. So, I think it's a little bit maybe unique in that sense as well. So, you know, firstly, I think the main business is ProSource. In terms of kind of size, I would say we're pretty small in the whole scheme of things in, I guess in the industry, in which we play. You know, we have kind of 1200 seats, and we've been growing at several hundred percent year on year since we started. And so, you know, we're looking at kind of getting to 2,500 by the end of next year, And those are kind of big numbers, but again, I think in the industry, in which we play in, when you've got players who have a 100,000 - 50,000 kind of seats, you know, we are really just kind of breadcrumbs that sort of fall off the plate. So, I think it's maybe a …


[00:07:38] Sean: But at a very different price point, it would be fair to say, I mean, you are hiring super highly paid technical resources, and these are a hundred thousand people who are not earning a hell of a lot and doing, you know, sort of voice or chat or some lower skilled roles.


[00:07:53] Thomas: Yeah. I mean, fundamentally what we do is very, very different, I think from like rote outsourcing, which is waterfall and handing over ownership of a process to kind of what we do, which is kind of agile and highly technical in salaries, which might 20 or 30 times a call centre person would get paid. So very, very different in which we operate, but that's probably my first business, the main business. The next business is Social Desk Tower, which is a 20-story vertical campus. That's focused around wellness. You know, we have a huge gym with personal training, we have a cold plunge pool and an eight-person sauna, which was thanks to David Sinclair in his book. But really, you know, those two businesses are kind of very ingrained together because we had to go down the path of doing social desk because businesses like ProSource are inherently bad businesses to earn, because they kind of never really become profitable for a very long-time because you have to make these commitments on workspace. And so, you know, Social Desk Tower was really born from us wanting to create a workspace that was, what I experienced when I was in Sydney and doing that in a Philippine context, but then also kind of helping us to kind of build a business where we don't have to build the entire stadium and hope that the people come because that's just a really big risk.


[00:09:25] Sean: So, just to be clear, then ProSource has space inside the Social Desk Tower, and then there are other floors where other clients will have space within the tower?


[00:09:36] Thomas: That's correct. So, as you know, we occupy probably close to 50% of the building, and that'll continue to grow as we grow. But yeah, that's the whole, the whole purpose of it was really bring together a tech campus that's just focused on wellness and we are the anchor tenant, but we have a lot of other tenants in there as well. The third business is Cross Star. And you gave obviously a really good introduction. I don't think I could even probably give one the same, but you know that one really is, I would say the brain behind that is really my wife. She's completely obsessed with pizza and Artisan pizza. And so, she's been kind of making and working on her recipe actually for the last 10 years. In fact, we just came back from CNN, Philippines as she was just doing an interview with the awarding as the number one pizzeria in the Philippines and number 32 in APAC, which is pretty crazy, because we started it from a container van. I think, our capital expenditure to set it up was maybe like $7,000. So, you know, it was next to nothing. And so, it's really exciting to see where that is starting to go. And I think that's a great business it really started out more as like a passion and something that we started out kind of just doing for fun and it's kind of led into being an actual full-blown business. And so, it's really exciting for us, but I really have to, as much as I'd like to see here and tip my hat, it would be remiss me to do that because that actually. I would say the vast majority of the success of Crosta is really because of her hard work and not mine. So, I'm the pizza taster. And maybe you can say I do some strategy and that sort of stuff, but really it's all really because of her. And the last one was Pickup and that one was just born out of, I think the challenges that we faced. So, we have this, let's say growing pizza business, and before COVID 80% of our sales would come from walk-ins and 20% would come from these delivery applications. Like, you know, so you've got Grab and you've got FoodPanda and we don't have Uber Eats in the Philippines. And so, when COVID struck a hundred percent of our orders suddenly became online and ordering through these marketplaces and you know, the commissions from these marketplace are quite onerous, you know, it's sort of 25 to 30% and we are running Crosta to try and kind of make money and build a profitable business. And our net margins are not that great to be able to give away effectively sort of 90% of our net margin to a food commission place. So, it was really untenable for us. And I went out and looked for some solutions and I didn't really find anything that was solving the problem. And so, I guess as a person in the F and B space that kind of experienced this problem firsthand and I happened to have a software development business, I just said; well, stuff it, why don't I just build the solution that we want, and part of that was also because, you know, my wife would come home and kind of chew my ear about all the issues that she was kind of facing. So, happy wife, happy life. And so here we are. So, we kind of did that to solve the problem with Crosta, and then what we found is, more broadly I think a lot of restaurants have outsourced their sales and online ordering to these marketplaces and these marketplaces, I think, they're wonderful in what they do. And there's a reason for them. They're there for a purpose and they serve their purpose really well. But I think for businesses that have a strong following, you're basically giving away the vast majority of your net income when you could be focused more on building your own and controlling your own digital presence. And the benefit from that is that you don't need to pay a commission. And that's really what we wanted to do with pickup. So, we wanted to create this platform for Crosta and then we later just made it available to everyone else. And we said, well, we are benefiting from it. And we've got a lot of friends that want to use it as well. And so, I think today we have maybe 300 or so merchants on it and I think we're looking at onboarding another 200 in the next couple of months. So, it's exciting.


[00:13:53] Sean: Can you share Tom, how the business makes money or is it a sort …given that it’s not commission-based?


[00:13:57] Thomas: Yeah, no, absolutely. It's not a charity. Look, I think, so we looked at the current solutions and we said that is a good example of what we don't want to be. And we want to take the path of, so I think, the marketplaces do a great job but they focus really on getting the customer's eyes onto the site. And in return for the marketing spend that they do to make their own super apps, they charge a pretty onerous kind of commission. And what we wanted was something that was more merchant-focused and solving the problem that merchants see and saying, okay, well, what if the merchant looked after their own customer service? What if the merchant managed aspects around refunds and those sorts of things, and what if they managed their own promotion? So, going on to Instagram, spending money on Facebook, spending money on TikTok, what does that model look like? Because that's what we were doing with Crosta and that's why we had experienced some success. And so is there a different model there where you don't have to rely on a marketplace and kind of giving the vast majority of your net income. And is it worthwhile you kind of doing that? And so that was the path we went. And so how we make our money is really in the payment processing. So, we have a very strong partnership with the payment processor that we work with, and it's effectively a JV where we share revenue. So, the money that we get from it is not a lot, but the whole purpose is really about, I think if you can get the vast majority of the merchants on board, because you're creating a product that is in order of magnitude better than the existing solution, I think you get the volumes on the tail end, hopefully who knows, that's what we're trying to do. And then I think it makes it all worthwhile, but I think more broadly, we are really trying to create a product that solves a problem that we've experienced. And so, I think the easy option would be; let's be a marketplace and charge a similar price to grab and to food panda and that, but those guys are already there. They have a great solution, and we want to be something different. So, we just had to reimagine that revenue model. And so, that's how it works. It's effectively, we make our money for the payment gateway, revenue, and we also charge a subscription fee for some of the premium products. So, think about businesses like Canva, for example, you know, you have a very, very strong freemium product. It gets the users using. Gets them becoming very familiar with it. And then they just suddenly want to upgrade and to get those kind of premium products because they're reaping the benefits of the free product. So, that's what we do. 


[00:16:48] Sean: Awesome. So, so many questions for you. First one is, why? Like, you could just have double down on one business, instead you founded four, which you're running in parallel. And if I know anything about you, you've probably got others bubbling away in the background that you're itching to get out of the box as well. Like why not double down on one business? Why build four businesses, and in very different spaces? Obviously there's a strong relationship between Social Desk and ProSource, so I understand that, and clearly there's a strong alignment between Crosta and the and Pickup. But how do you think about that in terms of doubling down versus the spreading of effort and therefore resources and attention and focus and all the rest?


[00:17:40] Thomas: Yeah, so I actually would challenge that and say, you know, to think that it is mutually exclusive, that you can't double down and have more than one business, I think is already kind of, I think a mistake and I think it depends on just really how you build that business. The stage in with the business is in, the type of business that it is, you know, are you the bottleneck to the business? Do you have somebody that you can bring in who's smarter than you that can help you take that business to the next level, do you need to be all in everything and then be one person? Do you need to be that executive chef that goes to the restaurant every day, customers expect him to make the food. He can never go on a holiday. He can never leave the restaurant because everyone goes there to eat his food. So, you know, I think that there's obviously a case to be had for both. But I don't believe that you need to be purely focused only a one in order to be doubling down on that business. In fact, you know, if that was kind of what I thought, then we wouldn't be going down the path of these other ones, but you know, there is. When you look at some of the, maybe more traditional kind of like Uber wealthy people, you often see a re-occurring theme here of vertically integrated businesses and businesses that kind of operate in kind of multiple industries and not just one. And look, we all know the Mark Zuckerbergs of this world, and we all know of the Brooks Canon guys, Canon Brooks guys, But for every one of them, you also have the Frank Lowes of this world and you have the Frank Hargraves of this world. And so, I think that there is space to be able to do that. I think it depends on I guess, how you want to run your business. I guess it depends on your thesis and methodology and how you're going to get to those certain things. But, you know, I have a pretty strong kind of reasoning behind why we are doing what we do, and I think your question that you sent me before kind of goes into that. So maybe I won't kind of go into it now, but I think from my point of view…


[00:19:56] Sean: Sorry, go ahead.


[00:19:58] Thomas: No, no, no, you go.


[00:20:00] Sean: I guess my question was, I know we we'd had a chat a few weeks back around the difference between sort of cashflow businesses and equity businesses. And if you're thinking about this as a, I guess almost as a portfolio, you also think about the relationships of the different businesses, the stages are at, the business model they've got going on. Can you tell us a bit about your, because this today's episode is really about getting inside the mindset of somebody who's doing things a bit differently. And I think that's a real opportunity, because many people grow up in a typical, yeah many people build some great businesses, you know, they grow up in one sector, they understand it might be quite traditional. They decide they can do it better. They go out on their own, they make it a bit better and they build a nice business. But you tend to think about things a little bit differently. So, yeah, talk to me about kind of cashflow versus equity. Like how do you think about this sort of portfolio mix?


[00:20:47] Thomas: Yeah. So, I've probably, this may sound like I know something, but actually I'm stealing it from advice that somebody else gave me. So, Russell Small, who you know very well, a good mate of mine and also business partner in the Colleges Online business, was a very successful businessman in his own and still is. He co-founded Service Stream which during its time I think was a ASX 200 - ASX 100 company, and it's still around today, even though he is not involved in it. And so, I think, it's a public company and it turns over probably close to a billion dollars today. And so he started that business. And one of the advice that he gave me was from one of his mentors, his mentor was Frank Hargrave, he's obviously passed away, he is not with us, but he was the Founder of Skilled Limited and had a whole range of other businesses and started his life as a Sparky and kind of went on to be extremely successful. And one of the things that he said was that you need two types of businesses. You need cash flow businesses and you need equity type businesses, equity play businesses. And so, you know, you have these businesses that you might be building to sell for instance, but if you don't have the basis of strong cash flow of businesses, then if you never get to that liquidity event, then you're stuck with a business that maybe isn't performing the way it show and you're staring down the barrel of maybe a five to seven year commitment, no buyer, and then you're sort of the music stopped and you say, well, what do I do now? Whereas, if you have strong cash flow businesses then you have the ability to weather storms as well. So, he used to say, you need. Multimillion dollar businesses, because at any point in time, and those are a mix of equity play and cash flow play, because at any point in time, you're going to have an issue with two of those businesses. And so, if you only had one business, you fall over, you're done. And if you're lucky enough to never have that issue, then yeah, you go on and you grow it. But I think the nature of business, especially today and the pace in which change happens in a business, competition happens in a business, you see ups and downs. I mean, COVID is a really great example. And so, you know, even for our business, we were heavily impacted because of COVID, but we are lucky to have these other businesses that were generating revenue and cash flow from other areas to help weather that storm so that we don't go, and so, that is something that I learned from Russell and it's really kind of a methodology that I stick to in my life. And so, I view it in that frame and in touch wood, you know, today where we're still alive, we're still there. And we've had some pretty unprecedented challenges over the last couple of years with covid..


[00:23:46] Sean: That's really interesting, mate, and you know, as you were speaking, I was thinking about, there's a couple of property guys I've known really well over the last 10 years, they'd bought a number of investment properties buying for me and their strategy was very much from a property perspective, what they call Pigeon Pairing. So, it was always about pairing the right cash flow properties that were unlikely to dazzle you with any of their capital growth. But then, there were going to be others that were going to be other bets that were going to make a lot of sense over the long-term. But we're probably going to suck a fair bit of cash flow along the way. And at some point, they'd start to take care of themselves, but it could be a while. And so, getting that balance right, always gave optionality, because as they said, the one thing that can bring this entire house of cards down is cash flow. It's not equity. You probably have no equity issue, but if you have a cash flow problem, you've got a real problem, you know, and that's when people have to make poor decisions, fire sale stuff, you know, things that you've spent time building because they run out of oxygen. That's really interesting hearing that applied to a sort of business portfolio perspective. What’s your sort of thesis or your thoughts around funding because you've mentioned upfront, you know, you've chosen not to take on capital and we did a, for those who've been listening in the last few weeks, you would've heard us talk to Mark McNally who's the co-Founder of Nobody Studios and they're building a hundred companies in five years and they're basically sort of their own accelerator and they're spitting these businesses out and they're actually selling them relatively early, like pretty crazy guys done some pretty impressive things. But one of the comments was, his view was that the vast majority of businesses, particularly technology-led ones take on way too much capital and way too early at some crazy valuations and it causes huge problems for them because inevitably it actually really limits their ability to sell to who they want to when they want, when the price is right, because now they've got everybody else's expectations on top of them. Everybody wants a 10x return. So, the bigger that initial valuation, the bigger the problem in actually selling the business in the future, he said, it's just… and that was kind of his comment. I'm interested in your thesis because you've built these businesses all sort of through organic cash flow. 


[00:25:55] Thomas: Yeah. So look, I think, for me personally, we've been lucky to kind of not have to raise money from VCs and stuff like that. And it's not that there's anything kind of problematic with it. For me, I just think that it's looking at kind of opportunity costs. And I think what I see that I take maybe slight objection to is that we tend to put the people who have raised large amounts of money on a pedestal and that capital raising is some kind of measure of success of you're a business, and then we kind of look at net worth and rich lists and all these sorts of things to start looking at kind of how a business is successful. And so, I think people just, they want to start a business. They go, I want to raise a hundred million dollars. I want to be worth $50 million or a billion dollars or whatever it is, and rather than actually looking at the fundamentals of the business. And, you know, if you are raising money, that person needs a return. If I give you a dollar, I want $5 back, $10 back, $20 back. So now if I raise too much money too soon, I create a whole lot of pressure to deliver. And if I don't, I walk away with nothing. That's a very big risk. And I think that people are attracted to that, I think because there was a lot of access to money in the market, interest rates were really low. There was money everywhere. Everyone was raising a lot of money. You know, there was this gentleman, an Aussie guy who raised over $109 million US for a company based on an idea. And that's crazy. I mean, I think it's good because you got so much money.


[00:27:41] Sean: You’ve got 10 times return on that. Or you can't sell till it's worth a billion


[00:27:45] Thomas: You've got so much money that you can probably, you know, there's a good chance that you can kind of get through and build what you need to build. But, oh, man, that is a lot of pressure. And then it comes back down to like what's important, and I think getting the fundamentals of business right is important. And so, building a profitable focused business, whether that is in technology or whatever it is, should be the basis of whatever you're doing. And if you're building a business to sell it, that's a problem. If you're building a business to raise money, that's also a problem because, you know, if the business doesn't find a buyer, if you don't get the next round of funding, you're dead. And I have friends who have given the best part of half a decade to a company, raised money in various different stages and walked away with nothing, but basically a salary the entire time. And that's tough. And I think that, if you're too dazzled by the money and the check that someone that offers to you, I think we often don't realise that it comes with expectations, and those expectations can actually often mean that they get their money back and in return and you maybe don't get and anything. And so you have to kind of think like, do I really want this, or can I just build a business with my own money, raising money from friends and family and doing everything I can and actually focus on building a business that has the right fundamental so that if I don't sell it, if I don't raise money, then I'm not dead. In fact, I'm doing really well. I may not be where I want to be, but I'm certainly not under the ground. And I think so to, you know, I saw that kind of podcast with Mark McNally and I thought that that was great. And we need more people like that that are talking about building scalable, profitable businesses, even technology businesses that aren't this mentality of growth at all costs and will somehow get profitable at some point in time.


[00:29:43] Sean: It's really interesting. Isn't it? You know, when you think about the consequences and the costs, so one is the pressure, and you know, many Founders get into business for themselves because they don't want everybody else's pressure on their shoulders. They want to do it the way they want to do it. And so now you have a situation where the moment you've provided equity to somebody else, I guess, you know, it probably may be a little bit different with debt, if you're really just, if it's kind of a working capital scenario, but the moment you've got an equity investor and you've got somebody you're playing with somebody else's money. To your point, the pressure increases. But I think the thing that's often missed is like the nuance is what does it do to your decision making? Because you might think the business now needs to turn left and go that way. And actually, all of a sudden, you've got somebody else who's going, hang on a second. I don't think that's the direction, I think you should be going right. And you're going, yeah, but I need to go left. They're like, mmm, yeah, not convinced that. Now you're in this battle of like the influence on your ability to make good strategic decisions, you've got to now feed the beast. And so, it can become really problematic, kind of like having, you know, I hear the story that there's a constant theme of Founders who build a business to a certain size with a certain sort of fixed cost base. And as a result of having to feed the beast and make sure that everybody's working and there's enough leads and there's enough whatever, they can often sometimes stray quite a long way from owning a particular space or a particular customer or a particular segment or a sector that they understand because they just need to find more customers to sort of fill the thing. And so, it's gone from a business that succeeded because it was actually specialist in nailing something specific and all of a sudden it has to start to get generic because it's just trying to keep the wheels turning and keep everybody happy. But then all of a sudden there's always a reckoning. Like there's always a reckoning where they have to come back and go; Hang on a second, are we in the right business? No, we're actually nothing to no one, we're too generic, we don't understand anything anymore. We're just like, we're not specialists in any space. And usually when they come back and they focus on A customer type or A problem or A segment, the business then gets its next kind of lift of growth. And I've heard that story so many times in doing this podcast, it's been staggering, both from Founders and CEOs. 


[00:31:54] Thomas: Yeah, and just add onto that. I mean, you know, like a lot of people kind of say, well, I want to grow my company in IPO. Like that's something to kind of aspire to, and I was guilty of that, by the way. And Russell has done that before, he's done a reverse takeover and reverse listing with service stream and you know, one of the things that he said to me, he said that if you could do it again, he wouldn’t go public because you go from being this person front and set of running your business to now doing shareholder management. And you've got some analyst and let's say, for instance, you're turning over 60 million a year and you're profitable. Let's say, you're turning over, you're making 10 million net. That's a great little business. But you now make that public and next year you do 10 million and it's the same number. And analyst goes; Oh, that's horrible. The business is not doing well because it hasn't grown. Well, no, that's a good business still. But I think that, you know, when you go public, there is this expectation of quarter-on-quarter growth. And, you know, you saw it. You're a CEO of a publicly listed company yourself. It's difficult. And shareholder management is very difficult. And so, if you want to be a business person, you need to be looking at what control do I lose by raising money? What control do I lose by doing an IPO? And why am I really doing this? I'm doing this to make money then I want, and I trust my ability to make decisions because I'm not a passenger. Then why am I doing something like that where I now have to get approval from some director who's sitting on a board who maybe doesn't understand my vision that I have for the company and he just wants to protect the company and the investment for who he works for. And so, then you have this conflict of interest, and it can kill you. 


[00:33:40] Sean: Yeah, for clarity for the audience that, you know, Tom's comment there about me running a public company was, I was the CEO of a subsidiary of, at two different times of two different public companies, CEO of their sort of one of the key subsidiaries and therefore exposed a lot to the requirements of what the group CEO or the public company CEO has to deal with, what kind of information they need, how frequently they need it, what kind of disclosures are required. And to your point, the pressures that come with that, and some business models to be frank are also just terrible business models to have a public structure, because to your point, if they are not built to just continue that quarter-on-quarter growth in a really nice stable, predictable fashion, if they're lumpy in any way or that, the market absolutely hates that, absolutely hates it. And therefore, all of a sudden, your stakeholder management as a CEO now just went from 30% of your time to 70% of your time. So, who's running the business, to your point. So, if your leadership team is not absolutely A-grade and able to execute on that without you, you've got a real problem, because you've got no choice, but to manage those expectations and it becomes a big part of the job, and not everybody loves that. Some people love it and not everyone else. So, Tom, what do you think, and we've talked about a couple as we've been going, but when you think the typical, from your perspective, the constraints, the limits, the things that often Founders are getting wrong in their sort of, I guess, their psychology or their mindset, which if they were to shift, could unlock the potential for growth for them. What are some of the things that jump out to you?


[00:35:06] Thomas: It's a really good question. So, I'll just think a little bit while I answer it, but it's really, they need to get the fundamentals of business right, as probably like the first thing. The second thing is really understand kind of why they're doing what they're doing and are they prepared to be doing and working as hard as they need to do. Because if you're an employee it's easy, money magically appears in your bank account every 15 and 30, and, you know, everything's looked after, you’re super and all that sort of stuff. Life is easy, right? It's very predictable. When you go into business, it is very unknown. It is very competitive. It's extremely difficult. And I think a lot of people underestimate the sacrifice that's actually required in order to get that business through these various different stages of 0 to 500,000, and then the change that's required to go from 500 to a million. And then from 1 to 5,000,00, and 5 to 10, and then 10 onwards, each one of those hurdles, like in the book that you recommended to me - Scaling Up, each one of those hurdles have different challenges and the business needs to change to jump through those hurdles and that's extremely difficult and the allure of I'm going to start a business because I've got an idea. I'm going to raise money and I'm going to be the next Mark Zuckerberg, kind of needs to be weighted against the reality of the job and the task ahead of you. And I think unless you are absolutely committed to giving everything, then I think you should probably consider not doing it because there's nothing worse… I mean, everyone wants to be a Founder and it's like the cold buzz thing, but there is a lot that you need to sacrifice and, you know, I've lost friendships. I have lost contact with people that I love, and I'm not saying that that's the only path forward, but for me, I had to really focus because I didn't have a plan B you know, I didn't have anything. If I lost everything, then I lost everything. And so, you know, the weight of that kind of bears on you. And so, I think you really need to be realistic that your business will not be a multi-million-dollar business in six months, even if your Excel spreadsheet says it. The only thing accurate about a spreadsheet is that at a forecast of every company, is that they're a 100% wrong all the time. So, you know, you just put in enough numbers and you go, wow. Wow. I'm going to be a billionaire, this is a pretty good business. So, I think, you need to be willing to kind of do whatever it takes to make that succeed.


[00:37:52] Sean: That's really funny time. I was just reflecting, as you said that on the number of budgeting processes I've taken, you know, I would've had, I don't know, say four or five or six subsidiaries under my holding company that I was running in last gig. And so, we do budget timeline would take from like March to June, right? The amount of spreadsheeting going on in five or six subside and the consolidations and the testing and all the rest. And we would always have the conversation. You'd get to July one. You'd go, okay guys, this is great, this is wonderful. The only thing we can guarantee is that every single one of us is wrong and whatever we've just put in these spreadsheets, it's taken four months is not going to happen. It's going to be something, it's going to be different. So, that's what we have to be prepared for. Not what we stuck in the spreadsheet. Yeah, 100%. And you know, one of the analogy I heard recently racking my brain for who it was from, but it was a great metaphor for what you just talked about in terms of the world of business and what it sort of requires was, somebody had grown up and their dad had said to them… well, oh, actually I know who it was. I think it was Ben Thompson, the Founder of Employment Hero. Australia's most recent unicorn, he's on a few weeks ago. And Ben said… yeah, it was a great day. He's a fabulous guy. But I think it was his dad had said; Well, if right now… because he was an HR consultant or he was basically an employee who was getting his weekly pay-check and he wanted to be a Founder and all the rest and his dad said. “There's a very big difference between being in the zoo and being in the jungle.” And he said, "…And right now you're in the zoo. The keepers come around every day at 12 o'clock and they stick food in that bowl and you get patted. And when you need to go to the vet, someone organizes the vet for you.” He goes. “…The moment you step outside those gates, you are in the jungle and you're still the same animal, but now everybody's out to eat you, you know, food cannot be sort of trusted to be there whenever it is that you feel like it. No one is coming to look after you once you're out in the jungle.” And so, that's what you got to be, I thought was a really a good metaphor.


[00:39:47] Thomas: Actually, that's great. 


[00:39:48] Sean: Tom, I am really interested to hear your perspective on the challenges that you've faced which I'm sure have been many. So, I don't know how quite to get to the number of it, but you've been a Aussie guy building businesses in a country, which you didn't grow up in. And a lot of people have ambitions to take their businesses overseas. And of course, you know, most of them, hopefully if they've been listening to this podcast for a while know that you don't just take any model and pick it up and stick it in a new country and everything works the same way, that never ever happens. But what are some of the things that you've had to really shift in your mindset or change in the way that you thought about things, to be able to succeed in an environment where it was actually probably very variable and uncertain for you, because you just didn't know all the rules, you didn't know how to play the game at the start. And to your point, you were like a hundred percent in, so you had to figure it out. But what did you learn through the process that helped you succeed in really building a business or businesses in a new market?


[00:40:42] Thomas: Well, I'm still trying to succeed. I don't think I've probably actually succeeded, but it's very different. It’s so, so different because you have cultural aspects, you have governmental aspects, you have challenges with law and just a whole lot of different things that you need to consider. But I think the challenges, like the biggest challenge I probably found when I came from Australia to the Philippines was just that in Australia it is a pretty well-oiled machine, salaries are really high. And so, companies tend to be pretty effective and they have a whole lot of technology that helps to make them effective because salaries are just so expensive, you can't have people doing everything for you all the time. But in the Philippines and in other developing countries that may not be the case. Where, you know, it's easier to throw people at a problem than to solve it from a technological point of view. And so, you know, when you come to developing countries, you're often kind of frustrated with the shortcomings of what you see in Australia. But I think that it creates the opportunity, right? So, you know, while you can't be grateful for the opportunities that you see in the country and then say, oh, but you know, it's not like Australia. Well, it's not Australia, firstly. And so you need to kind of be real in the different countries in which you want to operate. But I think that, you know, I can think bringing your country to another country is probably different to what I'm talking about, but what I'm talking about is starting a company in another region can really, I mean being it from coming from Australia and the Australian context and coming to that country, can really create a lot of opportunities for you. And the Philippines gets a lot of bad press in the news because the news doesn't like to talk about good stuff. Obviously bad news sells better than good news. And so, the Philippines by and large, when I see it in Australia, you know, it's normally the bad news, but there is so much that is amazing in the Philippines and it is an incredible country to create a business, to start a business, to run your business. And so I think, if you're going to start a company here, you're probably at an advantage if you're coming from another region. And then you then have to be kind of a cognisant of the different cultures and all those sorts of things. Like I don't run our business and manage our staff because I'm very frank, you could probably say I'm very abrasive and so those things don't go so well in the Philippines. And so, I have my business partner and co-Founder, Steve, and he is very strong where I'm not so strong. And so, he is the finesse to me being the sledgehammer. And so, you know, that's how we've navigated it. And so I think you just have to be aware kind of being in different countries, it's just very, very different. And I don't know if I really have an answer, that's probably a silver bullet. It just really depends on the country in which you're operating the business that you're operating and your own shortcomings as a person, as well.


[00:44:06] Sean: Yeah, it's really interesting. I was just, you know, thinking out loud, obviously that I came into the Philippines and we established a joint venture there. And so, one of the things that was really key to us was having a partner that we could trust, you know, and we found that partner through a network so that became very valuable cause we already had trust within the referral, if that makes sense. But really that partner… 


[00:44:28] Thomas: … one of the best companies to partner with in the Philippines. 


[00:44:31] Sean: They are a wonderful, a wonderful business. But one of the things that really helped and gave us a lot of comfort, like, I do see people try to who believe that they will just be able to navigate or take the existing, you know, take the existing model and enter the new market. And all of a sudden, you just, it's just so much nuance. You can't possibly understand about what people value, what they don't value, how they're going to make decisions, what kind of information they will give you. I remember we were looking at a business to buy in Thailand and one of the leaders sat me down and said; oh, I know you, like I can tell from your guys' style that you're kind of expecting you're going to get this relationship with the team, but they're not going to tell you any of those problems, because they're really going to be very differential in relation to their perspective of authority and how that works. So, you're going to need a tie leader that you trust who is going to have to be that go between, who has operated enough in Western companies. They know what you want. They can give that to you, but you're not going to get it from that team. And it was just, you know, small things like that that were just real can be so easily overlooked without local knowledge, local partner, local source of knowledge that you can trust and who can help you sort of enable and get things out to the way to succeed.


[00:45:43] Thomas: Sorry, but just to add to it. You know, I mean, if it was that easy, we wouldn't be in business with ProSource. So, you know, we are in business because we really understand intimately our own environment. We understand our people and we've been pretty successful I would say in what we do and there's seven years of learning. And so, you know, those sorts of things make it easier if you want to enter a new market, because you can partner with people who have already done all the heavy lifting and you don't need to reinvent the wheel.


[00:46:18] Sean: Yeah. I love that. So, Tom, we don't have a lot of time left, but I'd love to, and I know we've covered a lot of ground, but if you had a room full of Founders in front of you and you know, you've kind of got this, you've got a whole bunch of kind of bright eyed, bushy tail, people are really excited. These people have businesses. If you think about our audience, most of them will have businesses in the two to $20 million range, nearly the vast majority of them would be profitable and probably not sort of cashflow negative, take businesses hoping for a bigger beginner. They're typically far more traditional service sector businesses that are healthy and they've got a decent bottom line, but they're still trying to figure out how to scale. What advice would you give to them if you were to think about, you know, these are my kind of “Above All. Else's” like, these are things I think you really need to pay attention to if you're going to scale as a Founder, what would be those three things for you?


[00:47:08] Thomas: I was think it's ROI over emotion, and it's, you've got to. Okay. I mean, we all get very emotional about our businesses. They're our babies and we love them. But if you're lucky enough to be in the business where you've got profitable business from, let's say 2 to 20 million, you've got a great business. And I think you need to be looking kind of do I go vertical with that business? Like, you know, with ProSource we go from ProSource to then having our own building, do you start going vertical and saying; okay, there's areas where we can go up and kind of eek more net margin, you know, do we then take that net income and do we go into something else? And you know, a great example is kind of Frank Lowy with Westfield and then into the actual asset side of things with Centre Group. And if you look at a, like, even a lot of the successful business, people in the Philippines, they generally have cash flow business, and then they have equity plays. And that's not for every. But if you're sitting on a business that is cash positive and it's got a great cash flow, unpredictable cash flow, and you're already working on growing that business and you've got a path forward to grow that business you're growing horizontally, or you're potentially looking at what do I do with that net income, because obviously putting it into your own pocket is going to cost you a lot from a tax point of view. It's not effective. And so, it's better for you to do something else with it. So, I would be starting to research, what makes certain businesses great businesses, and you probably want to be looking at expanding your annuity type business. So, you have a few different cash flow of businesses and then start thinking, okay, so how much revenue do we need to get to before we maybe buy a office building? Or are we going to kind of put that into something else, whatever that looks like. I'm certainly no guru. I just have my own way that we do it. But if you have that profitable business, I think it would be smart to be looking that you're either kind of start going more vertical or you look at kind of taking that money and investing it to other things rather than maybe just kind of gambling on little businesses. Because if you're investing in somebody's company, in your neighbour's company, you know, you become a passive investor. And I think that if you own that business, you've probably been successful because you've been an active owner of that business and not a passive owner. And I think when you go from, if you give your money to somebody else's, my dad always said; It's really hard to make a dollar. It's extremely easy to spend $2. And there's always somebody who wants $3 from you. And if you do the math, you know, you're always going to be losing money if you're not smart with your own money. So, I think business owners who are sitting on profitable businesses today are profitable because of what they've done. They're very good at being active owners in the business. And so, I don't think that they should look at changing that business model and being a passive investor. And so personally, I would steer away giving money to somebody else because they'll just spend it and I don’t know what they're going to do, but I actually back myself over somebody else. And so I would be looking at what else I can be doing personally that either benefits the existing business that I have, or maybe it's something different that is that equity play that I can work on in the background that maybe costs a little bit more money, but it gives me a better outcome at the end. 


[00:50:28] Sean: And to your point around, because you've only got so much time. And so, you know, you made the comment about Steve also running the business and running ProSource in the Philippines. And so, it's like; well, you may want to be the owner and be an active owner, but that doesn't mean that you have to run the business operationally every day. You can still take that knowledge and that skill and apply it to a business that you've got a higher degree of active involvement in, but it means you need to built a team in the existing business and to free you up so you can focus on bringing as much value as possible in the space that you can be effective.


[00:51:01] Thomas: Less firefighting, more value creation.


[00:51:05] Sean: Yeah. Love it, Tom. I've really enjoyed the conversation today. Thank you for being so generous with us, and your time and sharing your wisdom and your experience. How do people get in touch or follow along with what the companies are doing when best place to find you, etc.?


[00:51:21] Thomas: Yeah, so you can, obviously go to our website, ProSource.io. We have LinkedIn page. So you can go in there. You know, I think if anyone is looking to grow their business and they're looking to build a team of highly technical engineers, we'd certainly love to have a conversation. And I think anyone who's, a friend of yours, is a friend of mine. So, I'm happy to talk to anybody as well. Even if they're looking to set up their own company in the Philippines and kind of what to be mindful. Always happy to help. So, best point is to probably go to the website and we look forward to talking to anyone. And if not, hopefully this also helps.


[00:52:06] Sean: Absolutely. Well, Tom. Folks, I really hope you've enjoyed the show today. Huge thanks from me to you and from all of us, Thomas Woudwyk. And folks, before you go, if you got value out of today, the most important thing that you could do to support us is actually just to tell somebody else, you know. No doubt, there's been something that Tom said today that has stimulated a challenging thought or, you know, a deep question that you're probably going to go away and percolate on in relation to your own business model or how you're treating your business as part of a portfolio or how you're thinking about kind of cash flow versus, you know, do I doubled down sort of too much all in one thing. I guarantee that somebody else in your peer network is probably could really value from that kind of thinking too. So, if you could just let somebody else know about it, we'd be super grateful. You can find us on LinkedIn, feel free to tag Tom or myself, or leave us a review. You have been listening to the ScarleUps Podcast. I'm Sean Steele. And I look forward to speaking to you again next week. Thanks again so much, Tom.


[00:53:03] Thomas: Thank you. Take care.

About Sean Steele

Sean has led several education businesses through various growth stages including 0-3m, 1-6m, 3-50m and 80m-120m.  He's evaluated over 200 M&A deals and integrated or started 7 brands within larger structures since 2012. Sean's experience in building the foundations of organisations to enable scale uniquely positions him to host the ScaleUps podcast.

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