Eric Beckwitt 0:00

We immediately found it's not about technology. In the final analysis, you really need to understand that the technology, when it works well, is like taking for granted like air. It's really understanding the pain points of the customers. So the whole business started to evolve as we started to understand really what customers need.

Angela Robertson 0:17

Our guest for this episode is uh an incredible story, really. Eric Beck with uh with FreyTara has just had an incredible growth journey, not just um in this last year, but consistently through the last three years. And given that this world and the economic climate that we're in, everyone seems to be struggling. I know that all of our listeners and the folks in the room with us here are just dying to know how you've pulled this off. So, Eric, why don't you tell everyone a little bit about Frey Terra and your journey as its CEO?

Eric Beckwitt 0:54

So FreyTara is a BC corporation. Uh, it was created by my wife and co-founder in NI in 2014 to address a problem in logistics. Uh, was specifically is there's no central market and central system that aggregates rates from all of the transportation companies into a platform that allows companies to easily book and ship freight at fixed cost anywhere it needs to go. So we actually did an original architecture on this and uh rolled out this system um in 2014. And uh to aggregate across all those different companies, there's about uh 1.2 million transportation companies in North America, eight or 10 million core users that ship industrial freight. This is the industrial architecture of the North American economy. It's like uh $200 billion a year in freight that's moved through these systems. And uh that system actually started to work well. Uh, we're also focused on emissions reduction, but we immediately found that that the it's not about technology. In the final analysis, you really need to understand that the technology, when it works well, is like taking for granted it's like air. It's really understanding the pain points of the customers. So the whole business started to evolve as we started to understand really what customers need. And our typical customer is an importer or a distributor or a manufacturer in Canada or in the United States, they're a relatively small company. Um, and they need, depending on the cost of the freight, they're in business or they're not in business. If the, if the freight, if the they in a typical transaction moving through our platform is $560, if that freight does not arrive on time, if the if the transportation company suddenly charges that company $2,000 or $5,000 for it, all the value in that entire shipment is gone. They're operating at a loss. So it's really important to them. And they the margins in this business are very, very slim for typical companies. A transportation company that actually owns equipment, we're not one, we're a platform, will is lucky to make a 3% net margin. Um, and so they have to be constantly charging, making all of charging extra for all these things that go wrong. It's a very fragmented and difficult space. And so the the real critical breakthrough for us, we've generally have grown, we've grown every single year as a platform. We've grown every single year. Uh recently, the the the five-year CAGR is 23.4%. Um, the last year was a slower year. So it was actually a much harder year. It was only 15% growth, but generally it's been much higher. Good years. We grow 50% year over year. But the uh the space that we're in, we've been in this epic recession. Uh not only the Canadian economy is in trouble, but the the freight sector, transportation sector, has been 14 consecutive quarters of back-to-back declining transaction volume, tens of thousands of companies going bankrupt each year, companies that survived the Great Depression, hundreds-year-old companies just folding, technology companies folding. They were our biggest competitor. There were two big competitors that raised, you know, one raised $1.2 billion, one raised $2.3 billion. That $1.3 billion company is gone. It's been bankrupt. And that was backed by Bezos, backed by Microsoft. They're dead. So in this space, um, it's been a terrible space.

Angela Robertson 4:06

What's contributing to this?

Eric Beckwitt 4:08

Um, declining in manufacturing in North America, I think in the final analysis, it's been the steady exodus of manufacturing from Canada and from the United States to a certain extent, deregulation in the space, which has caused far too much capacity. And the lack of the technology companies in the space have not figured out how to make money. Uh, most of the technology companies in the space will go to Silicon Valley, raise $50 or $100 million, stumble for a few years, burn all that money, and die. We've seen company after company do that. That's not us. So we've raised about $8 million primarily from Canadian angel investors. We have angel investors in Silicon Valley. We have a few small family offices in, single largest check size like $1.5 million. And we're extremely frugal and careful. And we are opering, offering, operating a profitable company with the rarest of the rare. And it's generally profit doubles every year. That's unheard of. And so the I don't know if you have how many of you have been approached by private equity funds or VCs that say, we will invest $100 million in you in three months if you're willing to comp with a plan to burn that money within 12 months. Or 50 million. And you're like, that'd be the stupidest thing you ever could do. All of the discipline is gone. Everything is gone. Out the window, all of the good work were gone, and now we're figuring out, scrambling how to budget to spend this crazy amount of money on the assumption you're gonna be there next year to invest the next 50 million, with 50% probability you're gonna change and you're not, and we're dead. So 75% probability have you guys seen the statistics. If one of those VCs invests in it, you're dead. You're gone. Because your culture has changed and you're adapted now to living on OPM and you're gone. Okay. So that's why it's so important if you're a VC to say, I'm gonna invest in you, but I'm gonna dribble that money into you over these years based on this performance. I don't want you to change your culture at all. What do you need? Let's be really strategic. But they just want you to scale fast and and that that's that model. And they'll come in and tell you that, right?

Angela Robertson 6:01

So, how do you maintain a level head and this kind of less sexy approach to building business, which arguably we all know is the way to build a successful business, right? We all want to stay profitable. How, but what is your secret?

Eric Beckwitt 6:19

Um, well, we've made a lot of mistakes. I think that the we we were not profitable. We were scaling. If I had a could put up a presentation, we were scaling like a typical company that is that revenue was scaling very nicely and expenses were scaling almost in lockstep.

Angela Robertson 6:31

Yeah. Okay.

Eric Beckwitt 6:32

Through 2022. And we actually took advice. We were invited down to a PE firm. Uh they spun out a Golden Socks. They took us to a conference in Florida and they said we really want to invest in you when you're a little bit bigger with a fit with corporate with managers from other companies and from the industry. We're personally taking direct control of the company. Everyone's going to report directly to us. We're not going to have any of that. We reduced the expenses one and a half million dollars immediately. We introduced a brand promise. The guy told us, if you do that, you're bankrupt. We said, we guarantee that provided you're honest with us about the contents of that freight, the size, the weight, dimensions, it's going to cost exactly what we said it's going to cost. There's going to be no nonsense here. So we implemented that first quarter implication of that scared the hell out of everybody, right? Classic. If the brand promise doesn't scare the hell out of everybody on your team and everyone else, it ain't a good brand promise. So we delivered on that. And what that forced us to do was to use the data that we had in-house and develop a special team to make certain this thing is going to be delivered at cost. And if it's there's an honest mistake, of course the company customer pays for it. If the carrier actually is detained or something, the customer pays for it. But it's all that other stuff that was happening that we cut out. And that stuff amounts to hundreds of thousands of dollars in extra charges each year for those companies that we eliminated. And so our revenue took off. We became profitable that first quarter. We're profitable that first year, and it's been growing ever since. So that was a critical turning point. Those two things direct control of the business and uh and a really excellent um guarantee, the rate defense.

Angela Robertson 8:05

I want to talk to you a little bit more about taking direct control of the business. How many direct reports did that mean that you had, your wife had, your co-founder had once you took control of the business?

Eric Beckwitt 8:16

Uh, not that many. So the we have a leadership team on this is and this is as per talk about throwing out the playbooks. No, actually using the Metronomics playbook, okay? That book that's in that in that your binder today that everyone goes given at this conference. Everyone's read it, I'm sure. We have a leadership team that runs the company. I don't run the company. So we have seven people on that leadership team. My co-founder runs marketing. We now have a legal team, but the critical teams, there's an operations team, marketing, customer support, logistics sales. We really don't have salespeople at all. This is an inbound marketing, self-serve automated platform. So the salespeople are really there just to reduce friction and to maintain relationships. So we have classic 80-20 distribution. We have there's no one account that's more than 4% of our revenue, but it's glass typically about 300 accounts that are 80% of the revenue every year. And we want to know those people, especially in the top part of them. We want to know them on a first name basis, know who they are, and so they can actually get back to us. I say call me if necessary, very rarely they do, but I want to know if something is wrong so I can fix it for you.

Angela Robertson 9:18

I'm sorry, did I just miss? You all of your sales are inbound?

Eric Beckwitt 9:22

Yeah, it's inbound. So the the uh the way the system works, yeah, we don't have a salespeople, we don't call companies, is a very well-designed system of inbound marketing. Um, we know the cost of a customer, we know the lifetime value of the customer. As we speak right now, the lifetime value of the customer is around $51,000. Gross profits like $11,000 per customer. We know how long they last, we know what they cost. Maybe it pays off. Last year it was paying off in 90 days. Now it may have slipped to four and a half months for the cost of complete cost of customer acquisition. It's like 51 times return on advertising spend over time. So we we know that all. So no, it's the exact opposite of having a room full of people calling. You know, there's massive demand and just people pouring in. A typical day right now will we'll have between 15 and 20 new accounts. We'll discuss and sign up.

Angela Robertson 10:09

Wow. And so you said that that was a massive turning point for you in 2022. And yet it sounds like economically the downturn has just continued since then. And so, but you are continuing to grow. Is it still because of those two levers that you pulled then, the guarantee and taking direct control?

Eric Beckwitt 10:28

Um the most recent. So we are seeing the we are seeing an uptick right now. For the first time, there's sign that transaction volume is starting to increase. To give you guys a sense, if you can imagine transaction volume being back at 1990 levels, that's what the Cas Index, Federal Reserve Index indicates. But whenever you have a contraction like this for multiple years, a lot of companies are dead. So anyone who's left in the room standing at the end benefits from it. So there's definitely the beginning to be the first sign of green shoots for that. Um, but the overall we're seeing is there's a the accelerating transition to digital platforms, um, where our the the rate of signups for customers is up 50% year over year right now. The number of people using the platform has increased dramatically, the ticket size has increased, the margins are increasing. So I think that there's a whole, but there are there are a bunch of things that are simultaneously affecting us. That's like a perfect storm on the upside. So right now, suddenly revenue is growing at over the last 30 days, suddenly revenue is growing at at 50% year over year again, and we're at a $40 million run rate. It's been sustained week after week. It's been a gradual process over the course of the quarter. It looks like the quarter will close the quarter up 300%. Um we're not the numbers are not done yet, but it looks like we'll be about 300% increase in EBITDA um year over year for the quarter. So we're starting to grow again much more rapidly. But as I tell people, when things do well, you just look at you, it's easier when navigating through difficulty. You know you're in the difficulty. When things are going well, you're thinking what's gonna happen next. Here always that's the only intelligent way to approach this. You never rest.

Angela Robertson 11:51

You strike me as an exceptionally analytical person, Eric. You seem to know the numbers and have them dialed on everything. What gives you so much confidence in knowing exactly how your business is gonna grow and scale and adapt to meet those needs?

Eric Beckwitt 12:05

Oh, I I don't want to think that we have comp about the future. I think that the, I think you don't know about the future. I think what you can have is you can have, you can keep really good, you can have a really good analytical basis for running the business. Basically, we're we are like a big data system in the sense that we have unique data on now hundreds of thousands of locations in North America. We actually understand the complexities. We've been there multiple times. That's one of the reasons we can predict cost. Critical thing is that data, you do not let any of those AI systems have your data. You run your own data, you can build it, import the model, but you keep it in-house. So, yeah, data is extremely important, uh, but you don't know the future and you don't get arrogant about it either.

Angela Robertson 12:45

And if everyone in your company, uh your entire team is now signed up for this system that you've put in place with such rigor, but how did you bring the rest of the team along so that they were as open and ready to have their metrics up there on a scoreboard for everyone to see?

Eric Beckwitt 13:05

Well, first of all, we've learned the hard way that the best people to run the company are people that you actually we like to hire people to write, bright young people right out of university. We like to grow them for many years inside the company and promote them. So the the people that are actually running the company are all in their early 30s, almost exclusively in their early 30s right now, and have been with us six, eight years. And they're like family. And ideally, we've actually really taken good care of them and they're really, really heavily. There's all these reasons why they want to stay with us because no one else will do what we've done with them. Okay. We allow them to live anywhere we want in the world. We help them immigrate there, we take really good care of them. So, but you the ideal situation in leadership is that you are not just a coach to them, but you actually create an information environment where the decision process comes from them. They, when we do those quarterly planning meetings, I don't come in and tell them like Moses, this is what we're gonna do. We have a survey, including the whole company recently, and we say, here's all these good ideas we got from people. And yes, of course, they overlap with my own ideas frequently, but it's their ideas. This is critical. It's not mine, it's theirs. And so when it's your idea and you're implementing your own idea in a company, it's entirely different than having someone tell you, uh, okay, Angela, you have to do this. And like, no, okay, I will reluctantly, because you're, you know, telling me I have to do it, but I don't want to. So that's critically important that people understand, like, in the air around them is the information that would indicate what the direction it needs to go, and they see it. Much like the goose beer taught by David Gotha yesterday. Like, what do you guys see in these charts? Do you see anything? Anything obvious in these charts? Yeah.

Angela Robertson 14:38

And so what advice would you have? Maybe, you know, you've it seems like you've been able to continue to build growth over time, and you are so confident in the system that you've put in place. But I don't know that all of our listeners or everyone in the room is feeling that same sense of confidence about where things are going, especially in the future. So, what what advice would you give to people who are trying to grow their companies and and do it in a sustainable way?

Eric Beckwitt 15:08

Well, the the you probably most of you in the room are probably avid readers of books. And I want to write a book called A Thousand Books. I think that the that the that just summarizing like a thousand critical books that people don't usually know about, but increasingly people don't read at all. Um one of those books was a book about growing through uh through uh technology change, technological changes. And I should all have to, if anyone wants it, I'll find it for you. Again, but the idea is that there's a certain stability that's necessary in a period of rapid, rapid change. Those companies that just pursue the latest fads every time tend to die. So having this stability, having this knowledge of this is the technology I need, this is what I'm going to incorporate, but not the rest of that stuff is really, really important. And it's not to say that the wills that we will be fine in 10 years. We have to adapt. I totally changed my mind over three years on AI, for example. I'm much more enthusiastic than I was three years ago. Uh, but the the point is that you gradually implement things and you don't just follow the fads and go along with all the other people off a cliff. You want us to really think. And it and the think contrarian thinking is very hard and very important. So you want to keep keep thinking, not lose your head and not move along and think this is what we want to do. And when it's working, when something is working really well, we had people two and a half years ago that when when ChatGPT rolled out said, that's it, it's all over. Someone's gonna build with a genetic edge is gonna build a platform. The fundamental problem with this is it's not about coding. This is about relationships. We have relationships with hundreds of companies. We have their secret sauce, we have their pricing. They don't want to give it to an AI agent. They don't want the last thing they want to do is to do that. So there's a you people always forget that actually in behind every technology company, depending upon the space that you're in, there's a lot of proprietary information and there's relationships and trust. It's taken us years to actually build up the trust with some of the large with the transportation providers to actually even give us access to rates. And the other thing is that we operate with a lot of small accounts. So we don't currently, we actually currently are negotiating a landbreaking um contract that's it's actually three and a half years in process. It's done except with the final dotting the I's and crossing the T's. That's with one of the largest public companies in Canada. So when that actually lands and goes public, that's going to change everything. But we don't even have that in our projections. As far as we're concerned, that's fantasy land until it's actually signed, because it is. It's just nonsense, even though if it's 99% probability, it's nonsense until it's in. And then we had to deal with that and the growth implications of it.

Angela Robertson 17:38

Wow. Eric, well, you're a very deserving award winner of the Innovate BC Growth Award. And we're very lucky to have you and the Frey Terra team as part of the Ace Tech community. Thanks for joining us. Thank you.

Eric Beckwitt 17:49

Thank you all.