Join us for an insightful session that explores the strategic considerations and benefits of scaling through a portfolio of firms versus scaling a single firm. This session will provide a comprehensive analysis of both approaches, helping you determine the best path to sustainable growth and market dominance. We will delve into strategies for managing risk, allocating resources, and driving innovation across multiple firms compared to focusing on a single entity. The session will provide insights into how diversification through a portfolio can mitigate market fluctuations and foster resilience. You will also gain practical tips on evaluating your current business model to decide which scaling strategy aligns best with your long-term goals.
TRANSCRIPT
Greg Alexander: Hey, everybody. This is Greg Alexander, the Founder of Collective 54. And you’re listening to the Pro Serve Podcast, this is a podcast dedicated to founders of boutique professional services firms. So if you’re a consulting shop or a marketing agency or an IT service provider, etc, somebody who markets and sells and delivers expertise for a living. This is for you. We aim to help you make more money, make scaling easier and making getting to an exit achievable. And on this show we’re going to talk about scaling a professional services firm through a portfolio of firms versus scaling a single firm. So, for example, let’s say you got a 5 million dollar firm, and you want to get to a 50 million dollar firm just to keep the math easy. You could do that with one firm, and there’s ways to do that. A playbook to run. Well, you could do that by launching several firms, and maybe one day you have 10 firms, each firm doing 5 million. You get to the same 50 million dollar number. But you do it through a portfolio. So that’s what we’re gonna kick around today. This is something that requires great expertise and skill. It’s something that’s not done as often as scaling one firm. But that’s not because it’s not doable. That’s just because sometimes maybe we’re not creative to think about this. And I hope to shed light on this. We have a great role model with us. His name is Peter Kang, and Peter is the chairman and CEO of Barrel Holdings, and he is somebody that is in the middle of doing this very thing. I’ve been following Peter for an awful long time. I’ve learned a ton from him and his business partner. Say, Wu. And we’re very lucky to have them involved with Collective 54. So with that, Peter, please describe yourself or introduce yourself and your firm to the community.
Peter Kang: Yeah. Thanks for having me. Greg. So yeah. Barrel Holdings. I mean, maybe I can start by kind of giving the story of how it came to be, because I think that will.
Greg Alexander: Right.
Peter Kang: So yeah, I started a an agency, a digital agency back in 2006 called Barrel. So. And this is a little bit confusing because it’s Barrel Holdings. But then Barrel was the initial agency that we started out with. And you know it was mainly focused on design website development. And so you know, there’s a agency that we slowly grew over, you know, a course of 15 or so years. And you know the the thing that we started doing was, you know, specializing the agency into an area where, you know, we thought we could differentiate from our competitors. And you know, that became building e-commerce websites specifically on the Shopify platform. So as we were evolving into a Shopify agency at Barrel, one thing we found was you know, we had accumulated all these clients that didn’t fit that, you know focus. And so we had a portfolio of clients that, you know, in some ways. We needed to kind of, you know, transition out of the agency in order to allow our team to focus specifically on the Ecom work. So this is where you know we we did the math, and we were like, Hey, you know, should we just cut all these clients tell them to go find another provider, but when we added it up it wasn’t an insignificant number, you know. It was it was over half a million. But it was like. You know, definitely a lot of clients that that we had accumulated. And these are very sticky clients, too, that we’re paying, you know, annual contracts. And we’re with us, for, you know, over 5 years. So yeah, we we thought maybe we should, you know, perhaps spin it out as a separate company, and it’s something that we had never done, because we had only had Barrel for the 1st 15 years of our career. So you know, luckily we had an employee, a project manager who raised his hand and was like, Hey, I’d love to run this if you know, we can kind of figure a way to, you know, own this together. And so this was the birth of our 1st business outside of Barrel, which is called Vaulted Oak. So it became a web support and Maintenance Agency. We took all the accounts that were way too small for Barrel to service, or you know, we’re working technologies. That Barrel, no longer touched. Put it into this basket. Came into his own agency. Our, the project manager Jason. He became the CEO of that company. And you know, we we said, Hey, do what you need to do to grow this. And with that autonomy he was off to the races, and within a you know, couple of years he 3 X revenue, and you know he was. He’s been able to, you know, continue to grow it, and it it did a number on both Barrel, too, because, you know, one thing that was always a complaint and a challenge was, you know, servicing all these small accounts while we’re trying to service our larger accounts, and you know the team would forever be resource. Constrained. They’d be mixing some of these high quality. You know the the more innovative work with some of these, like lower kind of you know, maintenance based work. So this allowed Jason to build a team that was, you know, super focused offshore, you know, able to service this type of work. So from that experience. We’re like, Wow, there’s value to be unlocked by, you know, being strategic with some of the structuring. So yeah, we kept that in mind. So we had Volta going, and you know a lot at around the same time. We had been getting a lot of inbound leads for a platform called Web Flow. And this was totally happenstance, because one of a couple of our designers were, you know, early adopters of this platform. And we’re building websites, you know, just because this was a tool geared towards designers to build websites more easily. But you know, Web Flow saw that. And they were sending us leads. They were like, Oh, cool! And you just see, like Beryl could build sites on Web Flow for our clients. And so we, you know. I thought about it a little bit. I was like, Oh, cool. These opportunities are nice, but it doesn’t match with the Ecom focus that we have. So maybe Web Flow is a separate business opportunity that we can spin out as another entity. And so this time we actively sought out a CEO. We brought in a gentleman named Jacob, and we tasked him with, Hey, grow this Web Flow business. We’ll seed it with some deal flow coming from Beryl but you know it’s on you to try to build up that book. And so yeah, take it from 0. And this year we’ll probably cross 2 million. This is in under 3 years. So you know they’re again like, just kind of unlocking value by staying focused and allowing us to build a separately positioned agency business. And so with that, we have 3 agencies. I was still in Beryl trying to run Beryl day to day. But then, now we’re like, Okay, there’s these other businesses, and you know, we’re having these quarterly meetings and weekly meetings to support these other businesses. And so that’s when Seawok and I thought about what we want to do the next 10-15 years of our careers. And we said, Hey, this is the exciting stuff we really like taking the lessons from the last 15 plus years and distilling it and trying to apply it to getting new businesses set up and so we made the move to get out of Beryl day to day. You know we had a leadership team at that point, and it was about filling the gaps of like, okay, if Seawok and I were not in the business day to day, you know. Where do some people have to step up? Where do we have to plug the gaps? And you know that was like a year and a half process. But earlier this year we finally made the move. One of our partners in the business at Beryl, Lucas Ballasi. He stepped into the CEO role, and I was able to focus my attention full time on the Beryl Holdings entity, and Seawok as well.
Greg Alexander: Unbelievable story. Congratulations on pulling all this off. There were several things that you did there that are remarkable. Number one. It sounds like you’re a talent factory. So you have fantastic employees. They stay with you for a long time. They grow their career and as a result of that. They’re given these opportunities to lead entire firms as opposed to just a function. I mean that that’s really amazing. And that’s probably the thing that allowed you to do what you have done. In addition to the fact that you’re attracting all these leads, it’s new business people coming to you which you then can, to use your words, seed. You know these newly appointed CEOs, and get them off to a fast start. So just a great story. I have some follow-up questions, if I may, and these are for you and for somebody that might want to do this, because I have a version of this myself. It’s called Capital 54. It’s a way that I invest in boutique pro. Serve firms. When I say capital, I mean financial capital and human capital as well as time, my time, their time, etc. to kind of maximize returns across the portfolio. whereas in my previous life, when I just had one firm, I didn’t really have to struggle with that. You know, I was my capital allocation decision framework was really project based. It’s very different when you’re doing it firm based as opposed to project based. I would argue, much more difficult. So how have you figured that out, or is that a work in progress? What advice do you have for us on that.
Peter Kang: Yeah, no, it’s definitely a work in progress. However, you know there, there’s definitely been some learnings, you know, especially as I’ve been able to dive into this full time and not split my time as being a CEO, one of the agencies so you know, definitely. You know what we look at. Well, 1st of all, like, you know, we’re careful to, you know. Just make sure that you know each of the businesses are, you know, cash flowing to a certain degree. And you know the holding company can then, you know, have an opportunity to kind of build up some dry powder, because the way we think about it is okay. you know, you can allocate capital in a bunch of ways right? You know you can divide yourselves, you know you can reinvest, and within the business, or you could do you know what we think is a good way to get return is M. And A. So, you know, we think, oh, you know, especially in a growth side, you know a company like Beryl. You know, in the Shopify ecom space there’s been a lot of consolidation happening. So you know, one way to allocate capital could be, hey? Maybe we can have a tuck in acquisition to help, you know. Kind of supplement, expand capabilities, or just, you know, grow deep in the portfolio in a certain vertical. So you know, we think about allocation in that perspective. And then also, you know, if a talent need or talent opportunity arises where it’s like, Hey, there is this really a superstar salesperson that is looking to leave this other agency, and it’s an opportunity for us to invest in that. Then, we can have that dry powder to support the agency. So it’s very much a lot of this, a big fan of Warren Buffett and the Berkshire model, and I do love how he. They’ve been very disciplined about sucking capital out of these profit cash point businesses. And then, just having that optionality to make a move when necessary. And actually, as a real clear example, we did our first acquisition. These initial agencies were all home grown. But we had this opportunity with a design agency earlier this year where we were able to. The agency founder was really motivated to sell, wanted to gather the business, and wanted to do a deal really fast, and we had the capital on hand to do this deal quickly, and we’re able to make that happen. And so that’s an allocation decision that we made that we thought would be beneficial to the portfolio.
Greg Alexander: So, he talked about the Warren Buffett model. I’m also a huge fan, and he embraces radical decentralization. That is his term, not mine. And he backs brilliant operators to run these businesses, and his value add to the equation is not operating the business, but is the allocation of capital one of the tricky things when you’re doing a pro serve version of that is, there’s really no assets. These are asset light businesses. and therefore there’s a lot of risk. when Warren Buffett buys an oil pipeline as an example, I mean it. It’s risky because of the size of the check. But there are real assets there that secure the investment. How are you managing risk across the portfolio?
Peter Kang: Yeah, we think about this a lot and because the people are everything. We’re always conscious of building a pipeline of talent, leadership talent, whether that’s within the firms. Or, just having these conversations with people that we think are high potential, maybe interested in leading one of the preserve companies, or just coming on to support in different ways. And so a lot of my time is spent continuing to scout talent, having conversations, whether it could be somebody who’s already running an agency business of their own or somebody who might be high up at another agency. Just continue to have those conversations, because you never know when something might happen. Or someone might decide to move on from one of our agencies, and that kind of risk, that’s probably the greatest risk to our business. And so, that’s how we mitigate.
Greg Alexander: Okay? And then I guess my last question. Since we’re coming up on the 15 min mark here, and I’ll save the rest of my questions, for when we have the member QA.
you went from being a founder, CEO running barrel to now replacing yourself with a capable CEO, and you’re now sitting at the holding company and adding value by allocating capital. How have you been able to not meddle and truly want the CEOs of these firms run their business, and you stay out of the day to day.
Peter Kang: Yeah, it takes discipline. It’s funny, I think, the first, maybe few weeks of stepping on a barrel which was 18 years. I was tough, and I think it just really boiled down to putting guardrails of like, okay, these are the check in points. And sometimes the less you know, the less you end up caring in some way. So it became like the information coming in the stuff in my inbox had to clean a lot of that out in order to set those boundaries, and I think it’s always been good, because the other agencies I’ve been a lot less hands on. So very hands off with the others. And so it was a good comparative. I’m like, okay, I need to get to that with Beryl. And so I think we’ve been pretty good about setting up these systems.
Greg Alexander: Okay, very good. All right. Well, let me leave the audience with a few calls to action. So first off, if you are a marketing agency, and you think you might want to become part of barrel holdings. Portfolio sounds like Peter is looking for deals, the right kind of deals. But if you’re listening to this, and that’s something that you think you might want to explore, I would encourage you to reach out to Peter, and you can find him on the Collect 54 Member Portal prior to that, or I should say, in addition to that, or maybe a precursor to that attend the Friday, QA. Session, and you’ll have an opportunity to answer. Ask Peter questions directly, and I think we’ll flush up more. I’ve got like 10 more questions. We just don’t have the time to do it. If you’re a non-member and you’re listening to this because we do publish these podcasts in the public domain, and you want to become a member, go to collective54.com and fill out an application. We’ll get in contact with you. And then, Peter, I want to give everybody a chance to follow you or subscribe to your content. I never miss reading your stuff. I love it. I’ve been learning a lot from you. I’m so grateful to have the opportunity to do that. You’re so very vulnerable and transparent, and one of the few people that I think keep it real online. So it’s fantastic. How can people subscribe to your content?
Peter Kang: Yeah, the best way is my website, peterkang.com, and you know there’s a newsletter you can sign up for. I share a lot of the LinkedIn posts I post as well. So yeah, that’s the best way.
Greg Alexander: Okay. Fantastic. Well, listen, Peter, on behalf of everybody in Collective 54, thank you for doing what you do, and thanks for being here today.
Peter Kang: Appreciate it. Thank you.
Greg Alexander: Okay, thanks, everybody. Talk to you soon.
Note: This transcript was generated by Gong.