Tiny Office Hours - Episode #1: Ask Us Anything

Hosts: Andrew Wilkinson & Chris Sparling (Tiny)
Date: January 3, 2021

Overview

In their inaugural "Ask Me Anything" (AMA) for charity, Andrew Wilkinson and Chris Sparling from Tiny open the floor to the community to ask pressing business and investing questions. In this interactive, candid session, they address a spectrum of topics: company building, hiring CEOs, incentive structures, acquisitions, scaling businesses, avoiding common pitfalls, and personal philosophies on business and life. The tone remains direct, practical, and unfiltered, making it especially insightful for founders, operators, and would-be business buyers.

Key Discussion Points & Insights

1. Starting & Scaling Agencies: Buy vs. Build, Hiring CEOs, and Acquisition Targets

[00:11–03:07]

• Buy vs. Build: If you can afford it, buy a small but talented existing agency. This provides a team, processes, and instant leads; otherwise, start from scratch with clear growth opportunities.
  • "We always take the approach that you want to find somebody who's done it before. So I would look at, could you acquire a small agency that's already working?... That's always the easiest thing to do." (Andrew, 00:59)
• Hiring CEOs: Poaching from a top Shopify Plus partner is ideal; but keep in mind that you’ll need sufficient brand appeal to attract strong candidates.
  • "Just poach someone from a top Shopify plus partner." (Andrew, 01:53)
• Attractiveness for Acquisition: Build a track record, demonstrate profitable growth, and ensure the founder is not indispensable.
  • "The number one thing is that you're not part of it, that you're not the key and that you're not sprinkling the magic on top, that you're at a distance." (Andrew, 02:21)
  • "Build that business so that you're holding it for 10 years and with no mind of selling whatsoever and it'll be a great business that someone will actually want to purchase." (Chris, 02:58)

2. CEO Incentive Structures & Compensation Mistakes

[03:13–08:51]

• Incentives: Best alignment is when a CEO invests personal capital (80/20 model), but most prefer high salaries and low risk.
  • "The dream is always that you get someone to come in and cut a check. It's just hard to get people to do that." (Andrew, 06:10)
• Compensation Practices:
  • Most Tiny businesses use 100% cash-based compensation tied to growth above predefined hurdles.
  • Equity is rare—hard to structure for private companies.
  • "We've had really good success with a structure where we say, look, this business is already growing at 15% a year... if you grow it above 15%,... we'll give you 10% of it..." (Andrew, 06:20)
• Common Mistakes:
  • Setting compensation targets based on prior annual growth punishes outlier performance and encourages sandbagging.
  • Avoid budget-based bonuses; employees will game the targets.
  • "They were incentivized to set the target as low as possible to maximize bonus. But yeah, never do budget based. It's just brutal." (Andrew, 08:04)

3. Product-Market Fit for Shopify Apps

[08:56–10:58]

• Approach:
  • Go for either lots of small customers or a handful of large ones; targeting the latter can yield higher margins.
  • Use public databases to find large Shopify merchants and reach out directly.
  • Lean on existing networks like reseller/agency channels.
  • Offer agencies a kickback to install or recommend your product.
  • "I actually think kickbacks for agencies is such an interesting channel." (Chris, 10:40)

4. Business Partnerships & Co-Founders

[11:02–12:30]

• Healthy Dynamics: Complementary skill sets reduce friction and allow partners to pursue their passions without overlap.
  • "The things I really care about, Chris doesn't give a shit about. And the things Chris really gives a shit about, I don't care about at all ... we don't bug each other. We have very complimentary skill sets." (Andrew, 11:25)
• Having distinct roles curbs "shiny object syndrome" and tempers risky moves.

5. Investing in/Acquiring with Services & Deal Flow

[12:34–16:46]

• Bringing Value Beyond Capital:
  • Tiny prefers standalone businesses over ones reliant on synergy or shared services; services-for-equity doesn’t align incentives and can cause friction.
  • "Every business that we invest in has to stand on its own two feet. We can't depend on synergy." (Andrew, 13:30)
  • "They always treat you not as an actual investor, but almost as an employer or contractor. And you don't really get the same level of updates..." (Chris, 16:06)
• Generating Deal Flow:
  • Early days required cold outreach ("Dennis the Menace approach"); now, audience built over 15 years brings inbound.
  • Leverage agency insights to make acquisition offers on high-potential projects you’re already servicing.

6. Scaling Early-Stage Products/Platforms

[16:54–20:28]

• Mentality: Focus on validating core pain points and securing early customers from your network; avoid over-expanding scope based on early feedback.
  • "We're not blitzscalers. We always think about how do we start this as a small business, then make it a medium business. Then if it deserves it, we'll make it a large business." (Andrew, 17:40)
  • "We made the critical error of listening to our customers too much." (Andrew, 19:38)
  • Stick to your convictions, but don't neglect revenue.

7. Finding Acquisition Targets: Marketplaces vs. Direct

[20:30–24:05]

• Marketplaces: Listing sites are often “last resort” or low quality, but sites like MicroAcquire can be decent. Direct outreach yields higher probability of finding quality deals.
  • "When things go on listing sites that means none of the smartest people want to buy them or they're very low quality.... We like Andrew who runs [MicroAcquire], but I would think you'd have much better results doing the Peter Lynch..." (Andrew, 20:55)
• What Size to Target?
  • Avoid "corner store" businesses (hard to scale, just buying a job).
  • Look for businesses with enough profit for management, scalable growth, and areas matching your unique advantages.

8. Attracting & Managing Great CEOs

[24:10–28:18]

• Sourcing: Treat current CEOs well and build a great business to attract talent.
  • Use recruiters (worth the premium) when busy; direct LinkedIn outreach to seasoned execs in scaled companies is highly effective.
  • "To hire great CEOs, you have to deserve great CEOs, so you have to treat the ones that you have very well." (Andrew, 24:39)
• Mistakes: Hiring dreamers without experience leads to failure at Tiny, as operators must be able to “swim” on their own.
• Creative Comp: Often, total comp for big-company execs is more achievable than you think if you get creative on salary/bonus mix.

9. Qualitative vs. Quantitative in Acquisition Decisions

[27:17–28:53]

• Focus more on defensibility and "moat" (network effects, competitive barriers) versus just the numbers.
  • "We really like to get in the habit of thinking about what the mode is of that business and how it's defensible over just cheapness or unit economics..." (Andrew, 27:36)
  • Simple napkin math beats complex models that only serve to rationalize a risky acquisition.

10. Growing Beyond the “Corner Store” Agency

[28:57–31:41]

• Use agency profits to experiment with new business models; run these as totally independent ventures, not as “side projects” inside your agency.
  • "Try and start other businesses... completely separate from your agency." (Andrew, 28:57)
• Start with simple, resilient businesses (“baby weights”) to build experience.

11. Due Diligence – Process and Philosophy

[31:47–35:56]

• Top Priority: Only buy from good people. Reputation and reference checks are paramount.
  • "You can't do a good deal with a bad person... that's the most important thing." (Andrew, 31:54)
• Financial Checks: Confirm Stripe accounts, P&L vs. bank, cohort analysis if needed.
• Deal Speed: Deals often take 3–6 months naturally, providing plenty of time for assessment.

12. Boards & Reporting Structures

[36:02–37:50]

• Boards unnecessary when you own 100%—just monthly/quarterly email reports.
  • "When you own the whole business yourself ... we just do monthly emails." (Andrew, 37:36)

13. Long-Term Goals & Motivation

[37:55–39:27]

• Comparison to weightlifting: constantly adding “weight” (increasing challenge) keeps them engaged.
• North star is liking people they work with, enjoying the problems, doing positive work, and balancing professional success with personal wellbeing.

14. Debt Usage Philosophy

[39:33–41:24]

• Debt is only used when highly certain of the business; always structured to be paid off within six months.
  • "Debt just magnifies returns but also destroys people's lives." (Andrew, 41:03)
  • Avoid “hubris + debt” at all costs.

15. Expanding the Investment Team

[41:33–43:14]

• Keep the core team lean; spin out platforms with their own teams (e.g., WeCommerce for Shopify ventures).
• M&A staff screens deals, only involving the founders when there’s high conviction.

16. Biggest Lessons from Charlie Munger & Bill Ackman

[43:21–44:59, 61:13–62:18]

• Munger: Don’t force synergies—let CEOs make mistakes, as long as they’re not fatal.
  • "You have to leave your CEOs to make mistakes and do things themselves. ... They never pursue any synergies." (Andrew, 44:19)
• Ackman: Hold yourself and others to higher standards; people rise to expectations.
  • "Holding people around you to a higher standard... watching people actually rise to that occasion." (Chris, 44:33)
• Ackman’s long-term thinking: "Think in decades, think super long term." (Andrew, 61:13)

17. Going Public vs. Staying Private

[45:00–47:49]

• Liquidity/capital access are biggest reasons to go public—but it brings more complexity and stakeholders.
  • "At the end of the day, it's a lot of brain damage because you have a lot of stakeholders." (Andrew, 45:42)
  • Private equity: one (loud) investor vs. public: many (quiet) investors.

18. Scaling B2C Services Businesses

[47:53–50:05]

• B2C services tend to not scale well. Greater profit comes from targeting larger B2B clients (e.g., negotiating on behalf of companies).
  • "The amount of money you could make [B2C] would be very small. ... Just reach out to large companies..." (Andrew, 48:53)

19. Best Books & Resources for Operators/Investors

[51:43–54:38]

• For investing/business philosophy:
  • Tao of Charlie Munger
  • The Dhando Investor
  • How To Get Rich by Felix Dennis
  • Charlie Munger speeches on cognitive biases
• For operators:
  • Four Hour Work Week
  • The Hard Thing About Hard Things
  • E Myth
  • The Goal
  • Shoe Dog
  • How To Win Friends and Influence People

20. Roll-Ups & Portfolio Integration

[54:44–56:19]

• Prefer to keep acquired companies as “siblings,” not merged into one; integrations often destroy value and underestimate complexity.
  • "We kept them separate as their own businesses because we didn't want to destroy the business value." (Andrew, 55:08)
  • "Don't value your synergies." (Chris, 56:02)

21. Founder Skillset vs. Delegation

[56:20–58:43]

• You don't need to code to build a software business—know enough to spot BS, but focus on operating and let others do what they excel at.
  • "Real estate developers don't know how to lay bricks. ... Our whole approach to business is if you don't like running, but running is part of the business. Find someone who freaking loves running and then just pay them to do it and incentivize them." (Andrew, 57:34)

22. Public Markets Philosophy

[58:43–60:13]

• Don’t try to time the market. Focus on owning great businesses and growing long-term value, not short-term fluctuations or fads.
  • "The best defense against public market is to own great businesses, to buy them at fair prices, and to not think about it." (Andrew, 59:11)

23. Decision-Making, Scar Tissue & Poker

[60:13–60:45]

• Iterative, hands-on learning trumps theory; building “scar tissue” through real-world decisions is the best practice.
  • "The way we practice is probably just by doing it every day for 15 years and learning through trial and error." (Andrew, 60:36)

Notable Quotes & Memorable Moments

• On Building Enduring Businesses
  • "Build that business so that you're holding it for 10 years and with no mind of selling whatsoever and it'll be a great business that someone will actually want to purchase." (Chris, 02:58)
• On Poaching CEOs
  • "Our ideal would actually be that we go buy, we go buy a business, we buy 80% of it and we have a co-founder CEO who comes in and they buy 20% with their own personal capital and they think like an owner." (Andrew, 05:12)
• On Debt
  • "We think of debt as a knife on the steering wheel. You can be the best driver in the world, but it's pretty easy to gore yourself if you drive over a speed bump." (Andrew, 39:48)
• On Personal Motivation & Balance
  • "We've seen so many people who have made a lot of money, who are miserable, are bad parents, not very happy people. And we're just trying to figure out how do we have professional success without that downside." (Andrew, 39:13)
• On Due Diligence
  • "You can't do a good deal with a bad person... that's the most important thing. Forget all the other diligence." (Andrew, 31:54)
• On Synergy
  • "You have to leave your CEOs to make mistakes and do things themselves. ... They never pursue any synergies." (Andrew, 44:19)
• On Personal Growth
  • "All the mistakes that have happened over the last 15 years have actually informed us. ... You don't want lethal mistakes, but non-lethal mistakes benefit you." (Andrew, 50:41)
• On Decision-Making
  • "Keep building scar tissue, right?" (Chris, 60:44)

Structure of the Episode & Additional Notes

• Format: Fast-paced, Q&A style—few tangents, little filler, anecdotes mixed with actionable advice.
• Focus: Relentlessly practical, minimal theorizing. Concrete examples from the Tiny portfolio (e.g., Dribbble, Flow, Buyer).
• Audience: Entrepreneurs eyeing agency or SaaS acquisition, scaling, or those contemplating CEO positions or M&A.

Final Takeaways

• Focus on long-term, sustainable growth and owner-independent businesses.
• Align incentives wherever possible—ideally, actual skin in the game.
• Buy from good people; patient, disciplined, relationship-driven deal flow trumps flashy tactics.
• Keep it simple: qualitative over quantitative (most of the time).
• Maintain balance between professional ambition and personal fulfilment.
• Learn by doing—and by reading widely from the best business thinkers.

For more resources, book recommendations, or questions, Andrew and Chris encourage reaching out by email.