Brad Jacobs: How To Build a Billion Dollar Company
Brad Jacobs, Chairman and CEO of QXO and founder of eight multibillion-dollar companies, shares his playbook for scaling businesses from zero to billions. He discusses spotting major trends, mastering M&A, cultivating culture, and applying mathematical and musical thinking to achieve outsized shareholder value.
Deep Dive Analysis
18 Topic Outline
Ray Kurzweil's Singularity and AI's Future Impact
Developing Rational Thinking and Managing Biases
How to Spot and Capitalize on Major Trends
Research, Questioning, and Non-Judgmental Listening
Music, Math, and Simprovisation in Business Strategy
Strategic Use of Leverage and Debt Management
The Importance of Taking Contrarian Bets
Parental Influence on Building Confidence
Providing Constructive and Positive Employee Feedback
Brad Jacobs' Perspective on Money and Motivation
M&A as a Core Strategy for Value Creation
Key Questions for Acquisition Diligence
Running Transparent and Engaged Board Meetings
Capital Allocation, Compensation, and FP&A's Role
Identifying Underappreciated Capital Allocators
Balancing Quality and Speed in Business Operations
Biggest Lessons Learned: People and Technology
Brad Jacobs' Definition of Success
10 Key Concepts
Singularity (Kurzweil's Prediction)
A predicted future point where technology becomes more intelligent and capable than humans, leading to a merger with technology and the emergence of a new species beyond Homo sapiens.
Cognitive Therapy (REBT/CBT)
A therapeutic approach focused on analyzing one's thoughts, biases, and cognitive distortions to think more rationally, constructively, and accurately, which Brad Jacobs applies to business to stay calm and collected.
Non-judgmental Concentration
The practice of giving someone 100% of your attention without judgment, actively listening to understand their thoughts and feelings, thereby creating a safe space for vulnerability in personal and professional relationships.
Alpha (in Business)
Returns that exceed the overall market uplift (beta), indicating superior performance generated by a company's specific strategies and execution, rather than just general market trends.
Mathematical Simplicity in Business
The approach of reducing complex business situations, such as convoluted organizational charts, to simple, elegant, and geometrical forms to identify inefficiencies and opportunities for improvement.
Musical Improvisation in Business
The ability to be spontaneous, flexible, and adapt to changing market conditions or unexpected opportunities, rather than rigidly adhering to a fixed business plan, allowing for capitalization on new developments.
Validate, Then Dispute / Join, Then Lead
A communication technique, learned from therapy, where you first show understanding and agreement with someone's perspective (validate/join) before offering a different viewpoint or constructive criticism (dispute/lead).
Love Vibe (in Business)
A positive organizational culture where employees feel good about themselves, the company, and their colleagues, which is fostered through intentional effort, appreciation, and well-designed interactions rather than occurring naturally.
Disagio (in M&A)
The spread or difference between the cost of raising capital and the lower multiples at which a company can acquire other businesses, creating immediate value for shareholders from the first day of the acquisition.
Standardization (in M&A Integration)
The practice of unifying systems (like ERP, HRIS, CRM, internal social media) and processes across acquired companies to create a single, cohesive culture, improve efficiency, and enable benchmarking across different locations and regions.
12 Questions Answered
Brad Jacobs suggests paying attention to one's own thinking, studying cognitive therapy techniques (like REBT/CBT), and reflecting on automatic thoughts, biases, and cognitive distortions to apply tools for more constructive and accurate thinking.
He intentionally spends a lot of time thinking about the wider context of situations, their origins, present conditions, and potential future paths, and is shamelessly curious, asking many questions and learning from others.
Giving someone 100% of your attention, listening non-judgmentally, and creating a safe environment where they feel at ease to open up and be vulnerable.
A musician's ability to improvise and be spontaneous, adapting to new 'notes' or unexpected changes, is crucial in business to capitalize on unforeseen opportunities rather than rigidly sticking to a plan.
Brad Jacobs advocates a 'Zen Buddhist approach' – not too much, not too little. A healthy target is typically one to two times EBITDA, allowing for some leverage to improve returns but avoiding excessive risk, especially given geopolitical volatility.
To achieve outsized returns that exceed average market performance, one must think differently and take positions that are out of fashion or where the market is not seeing the true value, often requiring patience.
Start with genuine positive feedback and appreciation, specifically acknowledging accomplishments, before moving into constructive criticism or areas for improvement, following the 'validate, then dispute' or 'join, then lead' principle.
His primary motivation is the need to be appreciated and to please his co-investors, friends, and family by generating superlative shareholder returns, which he views as his report card and a source of personal satisfaction.
Brad Jacobs believes sensible M&A (Mergers & Acquisitions) is the most likely way to create massive shareholder value on a risk-adjusted basis, especially when combined with strong organic growth.
Board meetings should be completely transparent, with directors having full access to company information and employees. They should not be scripted or rehearsed, but rather focus on real conversations where directors ask unscripted questions to various levels of management.
FP&A plays a critical, omnipresent role in turning ideas into numbers, forecasting, budgeting, attaching probabilities to endeavors, identifying sandbagging or overconfidence, and ensuring capital and time are allocated to projects with the highest impact on shareholder value.
He seeks raw capitalists who want to make money for themselves and their families, as their interests can be aligned with shareholders through well-designed compensation plans that reward them for contributing to the company's big goals and outsized shareholder returns.
62 Actionable Insights
1. Prioritize Major Trends
Intentionally dedicate time to identifying and understanding major trends, as getting the main trend right is paramount for significant financial success in business. Failing to align with major trends means working against the current.
2. Cultivate Profound Curiosity
Maintain a profound curiosity and a student mindset throughout life, shamelessly asking for opinions and picking people’s brains, rather than assuming you know everything. This approach fosters continuous learning and helps identify trends that others might miss.
3. Cultivate Rational Thinking
Invest time in understanding your own thought processes, including automatic thoughts, biases, and cognitive distortions, through self-reflection and potentially therapy (e.g., CBT, DBT, positive psychology). This helps you think more rationally, constructively, and accurately, which is crucial for business and life.
4. Embrace Business Flexibility
Avoid rigid business plans and thinking, as markets, economies, and life constantly change. Instead, remain flexible and adaptable to capitalize on new opportunities that arise, even if they deviate from initial plans.
5. Simplify Complex Problems
Apply analytical thought and mathematical principles to business by carefully analyzing numbers, making order out of disorder, and reducing complex situations to their simplest, most elegant forms. This clarity helps identify patterns and relationships for better decision-making.
6. Embrace Contrarian Thinking
To achieve outsized financial returns, be contrarian and think differently from the mainstream. Conforming to popular opinion will only yield average results.
7. Bet on High-Conviction Ideas
When you have high conviction and a deep understanding of complex, but organized, opportunities (even if they appear risky to others), be courageous and bet significantly on yourself and your ideas. This can lead to outsized returns.
8. Prioritize People and Technology
When seeking to make a significant impact or solve problems, prioritize solutions related to people and technology, as these are consistently the two biggest ’needle movers’ and categories that drive substantial change.
9. Define Professional Success by Shareholder Returns
Professionally, define success unequivocally by generating superlative shareholder returns, measured by share price performance against benchmarks in both relative and absolute terms. All other stakeholder considerations contribute to this ultimate report card.
10. Prioritize Tremendous Business Growth
Focus on achieving tremendous business growth, both organically (by taking market share from less well-managed competitors) and through strategic mergers and acquisitions, as this is the primary method for creating massive shareholder value.
11. Strategically Select Industries for M&A
Before engaging in M&A, thoroughly research and select an industry by evaluating its size, fragmentation, M&A potential, economies of scale, competitive advantages of being larger, technological readiness, and cultural fit for your business approach.
12. Acquire for Strategic Fit
Be highly selective in acquisitions, ensuring each target company has a compelling strategic reason for purchase, benefits customers, improves the overall business, integrates well with existing assets, and aligns with your long-term vision.
13. Leverage Capital & Business Improvement
Understand that the two primary levers for creating shareholder value through M&A are the spread between your cost of capital and the acquisition multiples you pay, and your ability to significantly improve the acquired businesses.
14. Prioritize Post-Acquisition Integration
Recognize that successful M&A hinges on rigorous post-acquisition integration, not just the purchase itself. After selecting the right industry and companies at the right price, dedicate significant effort to combining them effectively.
15. Standardize Acquired Businesses
Implement a strong appetite for standardization across acquired businesses, including ERP, HRIS, CRM, and internal social media systems. This creates a unified company culture, enables benchmarking, transparency, and efficient identification of synergies, avoiding fragmented ‘mishmash’ operations.
16. Integrate Immediately & Communicate
Begin the integration process the moment an agreement to acquire a company is made, and on closing day, immediately standardize everything possible while communicating extensively. This proactive approach ensures a smooth and effective transition.
17. Manage M&A Talent Thoughtfully
In M&A, prioritize forming strong relationships with people from the outset to retain great talent. Simultaneously, identify weaker performers and exit them gracefully and generously to optimize the team.
18. Conduct Insightful M&A Diligence
For M&A diligence, conduct one-on-one interviews with top personnel, asking critical questions like, ‘If this were your money, would you buy this company, and what would you change/not change?’ This uncovers opportunities, blind spots, and strengths.
19. Empower FP&A for Reality Checks
Empower Financial Planning & Analysis (FP&A) to translate ideas into numbers, forecasts, and probabilities, attaching realistic chances of success to projects. Implement constant, iterative daily budgeting to track progress against plans and ensure accountability.
20. Use FP&A to Calibrate Forecasts
Utilize FP&A to identify and adjust for ‘sandbagging’ (understating potential) or overconfidence in managers’ forecasts, using historical performance to predict future likelihoods. This ensures more accurate and realistic planning.
21. Optimize Capital & Time Allocation
Senior executives must focus on two key responsibilities: allocating finite capital to its highest and best uses, and managing organizational time to ensure everyone focuses on high-impact activities that create massive shareholder value, guided by FP&A.
22. Ground Inspiration in ROI
Even for highly inspiring and creative projects, always analyze the numbers to ensure they offer a good return on time and capital. Avoid over-investing in projects that, despite their appeal, lack strong financial justification.
23. Continuously Track & Adjust Performance
Rely daily on FP&A to continuously track internal project performance and external commitments to investors. Proactively adjust strategies and communicate with stakeholders if performance significantly deviates from forecasts, whether above or below.
24. Maintain Relentless Focus on Results
Regardless of capital-raising needs, maintain a relentless and rigorous focus on delivering promised financial and operating results, customer satisfaction, and employee satisfaction. This is a core duty of management, driven by conscious intention and a sense of honor.
25. Recruit Money-Motivated Capitalists
Actively recruit individuals who are ‘raw capitalists’ and highly motivated by money for themselves and their families. Structure the company so their drive to earn more directly contributes to making money for shareholders, creating a win-win.
26. Align Compensation with Shareholder Return
Design executive compensation plans with a significant equity component tied directly to Total Shareholder Return (TSR) relative to benchmarks like the S&P 500. Implement vesting schedules that heavily reward outperformance (e.g., top percentiles) and potentially withhold vesting for average or below-average returns, ensuring complete alignment with shareholder interests.
27. Reward Collaborative Contributions
Implement compensation plans that financially reward employees, including frontline and mid-level management, for actively helping colleagues achieve their goals, fostering a collaborative ‘super organism’ culture.
28. Ensure Win-Win Alignment
Strive for complete alignment where both shareholders and employees win or lose together, ensuring neither group profits at the expense of the other. This fosters fairness and shared success.
29. Optimize for Speed and Quality
Achieve the ‘golden mean’ by moving fast intelligently, without sacrificing quality; ideally, improving quality while increasing speed. This requires careful planning, engineering, and a deep understanding of inefficiencies to be removed.
30. Maintain Calm Under Pressure
In business, remain calm, cool, and collected when facing unplanned circumstances. The goal is to capitalize on these changes rather than being overwhelmed, using them to create value.
31. Be Hands-On in Research
While leveraging research teams, also personally ‘roll up your sleeves’ and delve into the details of what you’re studying, such as how successful companies achieved growth. This hands-on approach provides deeper understanding and allows for more effective brain-picking.
32. Create Safe Spaces for Vulnerability
Before asking probing questions, establish a safe and non-judgmental environment where individuals feel comfortable being vulnerable, sharing their true feelings, and taking off their ‘mask.’ This fosters genuine communication and openness.
33. Give 100% Attention
In any relationship, personal or professional, give the other person 100% of your undivided attention, actively listening and focusing solely on them. This powerful technique makes the speaker feel valued and encourages openness.
34. Practice Non-Judgmental Listening
Listen non-judgmentally, first seeking to understand and validate the other person’s perspective (‘joining’) before attempting to lead, dispute, or suggest alternative ways of thinking. This ensures the message is received and fosters trust.
35. Engage Non-Judgmental Concentration
Apply ’non-judgmental concentration’ by fully dedicating your consciousness to another person, not only understanding their thoughts but also empathizing with their underlying emotions. This deep engagement is valuable in various interactions.
36. Seek True Understanding
Approach conversations with the goal of truly understanding another person’s perspective, seeing the world through their eyes without needing to agree or disagree. This deep empathy helps prevent miscommunication.
37. Run Electric Meetings
To run ’electric meetings’ where everyone leaves exhilarated and with actionable tasks, ensure all participants turn off devices and practice non-judgmental concentration on the single speaker, avoiding side conversations or talking over others.
38. Lead with Positive Affirmation
As a leader, intentionally train yourself to see the good in people and express genuine appreciation and positive feedback first. Deliver constructive criticism or areas for improvement only after validating their strengths and contributions.
39. Give Specific Positive Feedback
In performance reviews, always begin with sincere, specific, and concrete positive feedback, highlighting what you genuinely appreciate and admire about the person’s contributions, before addressing areas for improvement.
40. Balance Feedback (3 Good, 3 Bad)
When conducting performance appraisals, aim for a balanced approach by having individuals identify three accomplishments they are proud of and three areas where they could have done better or plan to improve.
41. End Meetings Positively
Structure meetings like an ‘Oreo cookie,’ starting with positive aspects, addressing negative or challenging topics in the middle, and always ending on a positive note. The meeting’s conclusion significantly impacts how participants feel afterward.
42. Acknowledge Peer Contributions
At the end of a challenging meeting, ask each participant to identify whose ‘star went up’ and why, recognizing specific contributions, elegant expressions, innovative thinking, or kind-hearted conflict resolution. This fosters positive regard and appreciation among team members.
43. Practice Silent Team Appreciation
At the end of long, intense meetings, have the team stand in a circle in silence for five minutes, looking at each person. Internally, think of reasons for respect, admiration, and gratitude, and genuinely wish each colleague great success. This practice fosters positive feelings and strengthens team bonds.
44. Cultivate a ‘Love Vibe’ Culture
Intentionally cultivate a positive ’love vibe’ within the company, ensuring people feel good about themselves, their colleagues, the company, customers, and vendors. This requires conscious effort, intentionality, and skill to foster a harmonious and productive environment.
45. Supplement with Non-Financial Recognition
Supplement financial incentives with non-financial recognition programs, such as awards, trips, and ’employee of the month,’ to make people feel good and appreciated for going above and beyond.
46. Value Trusted Team Relationships
Prioritize working with a trusted team with whom you’ve shared successes and challenges, as deep familiarity, mutual respect, and shared history enable seamless collaboration and a strong collective bond.
47. Seek Transformational Industry Opportunities
Target industries where you can introduce transformative elements, such as advanced technology, to significantly improve industry quality and gain a competitive advantage. Inspire others by sharing a clear vision for technological investment.
48. Maximize Personal Relationship Quality
Personally, define success by maximizing the quality of relationships with family and friends. In limited time, intentionally create enriching experiences filled with love, positive vibes, and symbiotic support, where you help others and they help you.
49. Personalize Mental Wellness Practices
Explore and integrate various mental wellness practices like meditation, self-hypnosis, mindfulness, positive psychology, and cognitive therapy. Customize these schools of thought to fit your own personality and background for optimal personal development.
50. Embrace Present Reality
Embrace and go with the reality of the present moment, whatever it may be, rather than resisting it. This mindset, likened to a musician embracing all sounds, helps you stay in tune with your current situation.
51. Cultivate Business Improvisation
Develop the ability to be spontaneous and improvise in business, adapting to unexpected changes and ‘going with the flow’ rather than rigidly adhering to a plan. This flexibility allows you to capitalize on new opportunities.
52. Identify ‘Messed Up’ Opportunities
Look for situations, like a ‘messed up’ organizational chart, that are inefficient or disorganized but are also ’easy to un-mess up.’ These represent significant opportunities to create value and profit.
53. Simplify to Expose Flaws
Actively simplify complex systems, like organizational charts, because bad ideas and inefficiencies can hide in complexity. Simplicity, with clear KPIs and metrics, makes it difficult for flaws to remain hidden.
54. Balance Debt Prudently
Adopt a ‘Zen Buddhist’ approach to debt, using a moderate amount of leverage (e.g., 1-2 turns of EBITDA) to optimize returns without excessive risk. Avoid too much debt, especially in volatile times, to maintain flexibility and prevent bankruptcy.
55. Manage Leverage Actively
Actively manage leverage by either improving profits (increasing EBITDA) or paying down gross debt. This proactive approach helps maintain financial health and control risk.
56. Find Motivation in Appreciation
Leverage your personal need for appreciation as a powerful motivator to serve others, such as investors, friends, and family. Aim to please them by delivering strong results, which in turn brings personal satisfaction and purpose.
57. Engage Employees for Improvement
Actively engage employees through surveys, town halls, and interviews, asking questions about how to win, what’s going wrong, what can be improved, and what’s working well. This yields a high return on time and capital by involving those closest to the work.
58. Foster Deep Board Engagement
Encourage deep board engagement by allowing directors unrestricted access to any employee and all company data, including customer and employee surveys, good and bad. Invite them to operating reviews to ensure they are highly informed and can contribute effectively.
59. Run Unscripted, Candid Board Meetings
Avoid scripted, rehearsed board meetings that waste time; instead, ensure directors read materials beforehand and are deeply involved between meetings. During meetings, bring in diverse managers and employees for unscripted, spontaneous, and honest Q&A sessions with directors.
60. Collaborate on Board Agendas
Instead of micromanaging board agendas, collaborate with lead directors and the CEO to identify key personnel to present. Distribute the proposed agenda to the entire board for input, allowing directors to shape the discussion and ask questions they deem most relevant.
61. Avoid ‘Committee’ Nomenclature
Avoid using the term ‘committee’ due to its negative connotations of bureaucracy and slowness. Opt for alternative nomenclature to foster a more dynamic and efficient perception of group decision-making.
62. Form Cross-Disciplinary Decision Teams
For big, impactful decisions requiring multiple disciplines, assemble a group of relevant C-level executives (e.g., COO, CFO, CHRO) to ensure all perspectives are considered. Avoid wasting their time on minor decisions.
10 Key Quotes
You can mess up a lot of things, but if you get the main trend, right, you're going to make a lot of money.
Ludwig Jesselson (quoted by Brad Jacobs)
The most, maybe the most, maybe the single most powerful thing you can do in a relationship, whether it's personal, whether it's professional, is to give someone your 100%.
Brad Jacobs
If you can find something that's messed up and easy to un-mess up, booyah, there's your money. There's your opportunity to make a lot of money.
Brad Jacobs
Companies don't go bankrupt unless they have too much debt. You go bankrupt from not being able to repay your debt.
Brad Jacobs
I'm really happy each of you turned out so well.
Brad Jacobs' Mother
I like to make it like an Oreo cookie. I like to make the good stuff, the negative stuff, but then end on the good stuff.
Brad Jacobs
My goal is to make money for shareholders, period.
Brad Jacobs
I don't know of another way on a risk adjusted basis on a certainty level that is more likely to create massive shareholder value than doing sensible M&A.
Brad Jacobs
There's only two things a manager manages, return on capital and return on time.
Brad Jacobs
Neither one should make a lot of money at the expense of the other. That's not fair. That's just not right.
Brad Jacobs
5 Protocols
Running an Electric Meeting
Brad Jacobs- Everyone in the meeting shuts off all their devices.
- Concentrate non-judgmentally on the one person who's speaking at a time.
- Avoid side conversations or talking over each other.
- Ensure everyone in the room gives their full attention to the speaker.
Performance Appraisal Feedback (Oreo Cookie Method)
Brad Jacobs- Start with genuine positive feedback, congratulating and appreciating specific accomplishments.
- Provide constructive feedback on areas for improvement or things that could have been done better.
- End on positive reinforcement, such as exercises that highlight others' contributions or well-wishing.
Meeting Closing Exercise: 'Whose Star Went Up?'
Brad Jacobs- After tough business discussions, take a breath and set aside the difficult topics.
- Go around the room, asking each person to identify someone whose 'star went up' during the meeting.
- Explain why that person's star went up, citing their thinking process, elegance in expression, or innovative approach.
Meeting Closing Exercise: Silent Circle of Gratitude
Brad Jacobs- At the end of long, intense meetings, have everyone stand in a circle.
- Spend five full minutes in silence.
- During this time, each person should look at every other person.
- Think to themselves: 'I really respect/admire/am grateful for this person because...'
- Also think: 'I really wish this person a lot of success and a fantastic future at this company.'
M&A Integration Process
Brad Jacobs- Select an industry that is big enough, fragmented enough, and where being bigger provides a competitive advantage or economies of scale.
- Identify opportunities to apply technology where the industry is lagging.
- Ensure the company's management style and culture will work effectively in the chosen industry.
- Select specific companies to buy based on compelling strategic reasons and fit with existing operations.
- Maintain discipline on the acquisition price, aiming for a lower multiple than the capital raised.
- Begin the integration process the moment an agreement to buy is made.
- Standardize key systems (ERP, HRIS, CRM, internal social media) across all acquired entities.
- Communicate extensively and transparently with employees of the acquired company.
- Form strong relationships to retain great talent from the acquired company.
- Identify weak performers and gracefully and generously exit them.