Broadly speaking, we focus on a particular stage in the life of a small business. That stage is not the start-up stage. On the contrary, we invest in proven companies. (Our youngest investment was a 15-year-old company; our oldest over 100.) Typically, these companies are competitively advantaged but need some help getting to that next level of profitability and growth.
We regard ourselves as experts in this stage of a small business' life: experts who can help a company move to that higher level of profitability and growth.
We can help these companies in seven ways.
We provide capital that enables a company to achieve an objective--e.g. internal growth, external growth, shareholder liquidity, deleveraging, risk reduction, etc.--that will enhance the company's value. That said, we are at our best when we are adding more than "just" capital.
Our experience is that small-business CEOs can richly benefit from an outside, independent perspective-ideally from someone with deep business and entrepreneurial experience. We have served as C-level executives of rapidly growing businesses. As a result, we have personally experienced the challenges of a small-business CEO/entrepreneur. We therefore provide pretty good and candid "Dutch Uncle advice".
However, we arguably are at our best when a company asks us to become a more engaged partner/shareholder. In these circumstances, we provide five things in addition to capital and advice...
Most small businesses have a gap or two in their management team. We therefore support and supplement management by helping the team fill its gaps.
Systems & Processes-+
Most successful small businesses are long on entrepreneurial zeal and competitive drive; however, they are short on the systems and processes that enable a company to continue to grow in a more enduring fashion. No small business can become a great business without these systems and processes.
We have been very successful at finding one or two unrecognized or at least unrealized opportunities, which -- if realized -- would enable a company to take a material leap in value. Of course, the source of this value varies from company to company. However, our experience is that many small businesses have these unrealized opportunities and, with our support, can realize these unrealized opportunities.
We find that many small businesses can benefit from intelligent acquisitions; however, most small businesses lack either the acquisition know-how or the time to make those acquisitions. We can provide the know-how and a material portion of the additional time.
Smaller, less professional middle market businesses are perceived to be riskier, less professional and more fragile than larger companies. As a result, small businesses not only have lower earnings than their larger peers; they also sell for materially lower earnings multiples. Over a period of time, a strong equity partner can help a company not only grow its earnings but also professionalize and mitigate its small-company risks and thereby position it to earn a materially higher multiple and exit value.