All posts by TODD

MASTERING MORALE: PERFORMANCE PARALYSIS AND SURVIVING THE SLUMP

Sometimes no matter what you do the team just seems like it cannot execute.

Anyone who has played or watched team sports has seen or experienced this firsthand.

As entrepreneurs, or entrepreneurial employees, we try to stack the deck in our favor by recruiting the most talented group of individuals we can find and but at the end of the day there are times when even the Kobe Bryant’s’ and Peyton Manning’s of the world, who have been given access to extreme resources, simply cannot  sink enough baskets or complete enough passes to make victory happen.

It happens to the best of us; a bad sales quarter followed by a few others; missed production targets; a surprise regulatory hurdle; or the unexpected leave of absence one of your star player’s has to take from out of left field.

Sometimes these performance problems are quick to pass or can be overcome by adjusting either the team roster or the company playbook.

To some extent every business is driven by its labor model. The complexities of employee scheduling, payroll management, and productivity all pale in comparison to the single most important task a manager or business owner must achieve; the maintenance and growth of employee morale.

Although scheduling, productivity, and on time payroll  at first glance may appear business-centric, the reality is that these functions are as complimentary as cookies and milk to the proper maintenance of employee morale and business growth.

Scheduling is essential to ensuring your team feels well-managed, i.e., competently managed. We have all had to adjust to last minute scheduling changes, but the need to accommodate this regularly is a sign of poor organizational management. Organizational issues can frustrate the team in a variety of ways, all of which ultimately reduces team performance.

Issues with payroll are anathema to team morale; there is nothing that worries the team more than not getting paid on time or not feeling adequately compensated for the results achieved.

The above issues will actually stop the team from executing; I call it “Performance Paralysis.”

I have a great deal of personal experience here; I have made the mistake of starting, and deciding to continue what in hindsight, were underfunded concerns. Lack of sufficient operating capital led to operational issues. The operational issues led to intermittent, and ultimately insurmountable, employee crises.

Even in extremely well-funded concerns, misapplication of resources is a common problem that often creates the very same issues as those found in companies that have insufficient capital.

The odds were against me and my ship did sink.

I learned a lot during my swim to shore.

Two of those lessons I would like to share:

  1. Whether your business model is customer focused or operations centric, employee morale is the most critical aspect of sustainable and effective execution;
  2. As counter-intuitive as it may initially seem a structured model for organizational discipline, from the basics of the dress code to the communication of organizational goals and execution approach, is the ONLY way to achieve high morale.

At the end of the day managing and navigating a structured environment is easier than trying to perform in chaos. How to build a structure that can also react with sufficient agility to thrive in markets that experience rapid change is a topic for another time.

Until then, go forth and SUCCEED!

Make it a better place,

Todd

THE DEADLY THREE!

THREE ASSASSINS THAT CAN QUICKLY KILL ANY VENTURE!

Ever heard the old adage that, “Business is about relationships.”?

I would bet that most of us have and understand this as a fundamental key to the success of any enterprise.  Many of the opportunities we are able to pursue in business stem from our relationships. Our relationships are key to our ability to raise capital, make that business critical sale, or simply recover after things have not gone according to plan.

This post is about what I have found over the years to be the three deadliest killers of business. They are destroyers of our relationships, whether they be with our friends, customers, or investors. These killers with ninja-like precision divert us from our goals, make us suffer from needless delays and alienate us from success.

Make no mistake, any profit-making venture MUST employ these mercenaries and apply them to the cause. The true danger lies in letting these guys run amok, in either your psychology or in the business, unchecked.

Assassin #1 : Pride

AKA Ego, Vanity, Honor, Hubris, The Brand Promise

THE DANGER OF THE DOUBLE-EDGED SWORD

Pride, in this group of three, is potentially the most dangerous, since it is a double-edged sword and a necessary component of any successful venture. Any negotiator knows how important it is to know the value of the deal and have the ability to project that value confidently.

The danger is when one possesses an inordinate or irrational sense of value.

Although ego is often associated with CEO’s and artists alike, there are times when what would ordinarily be a healthy level of self-confidence turns to fear, e.g., of failure, loss of time, money, and the oft most-dreaded loss of reputation.

Risk goes hand-in-hand with success. Oftentimes the riskiest ventures are the very ones that will yield the greatest gains upon success.  Excessive levels of pride can interfere with our ability to take that necessary, but risky, step, whether it be a conciliatory call  to an upset customer or those disappointed investors after missing last quarters revenue targets. Although failure may have very real consequences, fear of failure should never be the obstacle to pursuing a viable venture.

Pride can keep you from seeing  or asking for what you truly need when it is most important.

It can keep you from letting go of old grudges that keep you from truly achieving success. Finally, pride in its negative aspect can keep us from making the self-assessments and taking the corrective actions that we invariably need to make during the life cycle of our business.

Pride generally goes before the fall, but in my experience it is generally too late by the time you are in free fall to find a parachute and reorient yourself so that things work out in your favor.

Pride can  keep you from seeing why you failed.

I do not like having to acknowledge my personal failures. I imagine no one does. Pride and our personal sense of self-esteem often walk hand-in-hand. Everyone fails, and it is important to be able to  take an honest look at those failures to ensure that the next engagement is not simply a repeat of the same set of mistakes made in the last venture.

Remember, experiencing failure does not make you a failure; letting failure stop you from achieving your goals, if those goals are realistic, is what separates the achievers from the failures.

Excessive pride is a relationship saboteur.

Arguments where our “pride is a stake” quickly devolve into no-win situations, since even if we are technically correct  we tend to leave the “loser” with the feeling that we do not respect them and do not care about preserving their sense of dignity. In the case where the “loser” is your friend, co-founder, customer, or investor the stakes are high and the chances of damaging your relationship over the long term are profound.

In the end this particular assassin can lead us to win the proverbial battle while losing the war in one fell swoop of its “vorpal” blade.

Assassin #2: Greed

AKA Selfishness, Excess, Piggishness

In modern business, greed as a principle is generally thought by the lay person to be a good thing. It is not. Greed is the second deadliest threat to business and it works by rendering an enterprise unsustainable.

For the purposes of this post, greed is wanting more than the market is willing to bear. That is not to say that you cannot offer your products at price points that offer phenomenal margins.

It is often the case that businesses are able to charge what might seem to many ridiculously high prices and do so ad infinitum as long as there is appropriate demand. Profit making in this category should not be considered greed, since generally business in this category is usually backed by a brand or some other competitive advantage like a patent, contracted infrastructure, low cost source of materials or a set of services that may simply be quite difficult for competitors to replicate and serve as a barrier to entry to those who aspire to take a chunk out of your market share.

Greed is a powerful motivator. The quest for “more and more” drives just about every aspect of consumer economics.

GREED IS OFTEN A CATALYST FOR ECONOMIC BALANCE

And just like its associate pride, greed unchecked is a certain destroyer. Often greed acts as a catalyst for balance.

In the case of consumer products and services, greedy companies generally find that they have competitors seeking to grab marketshare. Big companies tend to be slow companies when it comes to reacting to market disruptions and, although it is arguable if this ultimately is to the benefit of consumers, it is generally considered a beneficial outcome to have multiple providers in a free market economy.

A MARKET WITH ZERO ACTIVITY IS A BALANCED MARKET

Greed can also destroy markets and opportunity  by destroying demand (which zeros supply) and, although on its face it may seem counter-intuitive, a market with zero activity IS an inherently balanced market. Put bluntly, excessive greed can destroy your opportunity to enter the market as well as the market itself. For a recent example one need look no farther back than the Emergency Economic Stabilization Act, signed in 2008 authorizing $700 billion dollars in bailouts for a set of companies deemed “Too Big to Fail”; an expensive lesson to say the least.

The nature of the destructive activities tied to greed vary but include excessive valuation of shares (your mother may think that your eco-friendly napkin company is worth $10 a share but trying to retain that value for a Series A round is NOT going to happen), to poor product economics (it costs us .35 USD per recycled paper napkin produced but they are completely carbon neutral), to an overly aggressive consumer pricing model ($1 per napkin to the eco-saavy consumer sold in a box of 10) are all quick roads to oblivion.

Management can also set policies that cripple the company’s ability to make a market as well. It may not be the case that your top sales performers request for 20% commission is an act of greed; it may be well deserved and it is greed (or that prime assassin pride) that has you balking at the idea.

GREED CAN BE CURTAILED

From the perspective of your customer, always do your best to understand what they value in your product or service and then do your best to master its efficient delivery. Of course this is easier said than done, and that’s why you are offering that magical product or service to a customer who is probably quite happy to let you handle all of the tedious delivery details.

If the customer is not happy, then they are still looking for a solution and your relationship is in jeopardy from the next competitor that comes along offering one.

Assassin #3: Misalignment

AKA Dystopia, Complacency, Misunderstanding

If you are sure that you have the right strategy, tech or business model but you cannot seem to close the deal, maybe it is this third, and potentially most insidious of the assassins sabotaging your success.

Strategy is not sufficient for success. Execution is critical. Alignment is often the difference between strategic success and ignominious failure.

MISALIGNMENT IS PASSIVE AGGRESSIVE. 

Just ask Senior Management.

Organizational misalignment operates like cancer and often it is difficult to detect and virtually impossible to cure by the time it has reached the attention of senior management. If you have ever been in a large organization that seems to reorganize once every few years then you have definitely experienced crisis management around organizational misalignment.

Of course often senior management is the cause for the very misalignment it is trying to avoid or resolve because the top down approach is better at allowing management to explain things to shareholders or third-party stakeholders than it is at allowing the easy flow and adoption of solutions provided by the employee-base on the front lines.

In the case of large organizations, senior management is often able to author and adopt a strategy. Communicating this strategy to the employee base is always problematic, but it generally is the case that, given the correct information, the general goals of senior management are communicated in such a way that the lower level employees or members of the team are able to more or less regurgitate the goal set.

The fundamental problem is that communicating a set of goals is not sufficient to have your employees make decisions based solely on the achievement of those goals. The primary reason for this is simple; most employees do not report directly to senior management and are not empowered to do so. They report to the person who is ultimately responsible for giving them raises and making sure that they are able to work in a tolerable, if not enjoyable, environment.

Usually the above is not an inappropriate approach for the employee but it is absolutely the adoption of this “Business as usual because nothing has truly changed for me!” viewpoint that stops organizational change in its tracks.

SMALLER VENTURES DIE BY MISALIGNMENT AS WELL

Misalignment can happen when you least expect it.

When your “friends and family” backer dies and the family decides that this last investment was either not sound, taking too long to develop a return, or because of tax timing it may be better to pull the plug and take the loss to offset gains in other areas.

Or when your partner has made a deal with your competitor to sell their stake in the business you both founded.

Or when that federal subsidy you were banking on lapses due to  lack of congressional alignment.

Just like cancer, misalignment kill indiscriminately and is often aided by factors beyond your control.

DEATH BY A THOUSAND DECISIONS… OR JUST ONE OR TWO BAD ONES

Successful execution requires a variety of things to align; people, process, product or service, delivery and cost. All of these things must be initially aligned and remain in alignment for reproducible success.

Since we as leaders are aware of this from the start, it is our job and unending challenge to ensure the capacity to maintain adequate protections against nefarious enemies to our enterprise.

Speaking strictly from experience, our failure to do so may be the reason that years down the road we are weighed down by the demise of a venture we truly believed in.

One of the attractions of entrepreneurship is that the next big opportunity is always there waiting to be discovered.  One of the best decisions I believe you can make before embarking on that next journey is to prepare yourself for the inevitable onslaught of the three above. Fortune does favor the bold.

Good luck to us all!

Todd

TRUMP: The Last T. Rex?

This week’s top news story was again Donald Trump.  No surprise there. His voice is loud, honest and clear.

THE MAN, THE MYTH, THE ROBBER BARON?

Trump, a billionaire real estate mogul, prolific entertainer, and now politician is a modern day robber baron. I say that with the respect due for those few American barons that have mastered the financial and political system so completely that they are virtually above the law and social precepts. These men include the likes of Rockefeller, Ford, Sloan, Hearst, and Getty.

None of these names associated with his own would offend Mr. Trump, and frankly the majority of American free enterprise is modeled on entrepreneurs both young and old aspiring to become the next name numbered amongst these icons of enterprise.

A fundamental difference between these men and Trump is that the majority preferred to exercise their influence the same way Trump had become accustomed to wielding his own influence; through the funding of campaigns and back room deals. I do not think this prior approach was due to the humility of these men, but simply reflective of two fundamental facts; the first that the position of president would distract these men from building their empires, which in their respective eras were vastly influential. The second is that, although in certain arenas these men were competitors, it was hard to engage in free enterprise under the limitations imposed by public service, especially service so carefully watched as that of the POTUS.

WITH ALL THAT SUCCESS, WHY APPLY FOR A JOB?

It begs the question why Trump would decide to trade his clear influence for, arguably, the toughest job in the world. I believe Mr. Trump would answer this question the way he has answered this in the past, i.e., because he wants to, “make America great again!”

Of course, although I am far from an expert of the plethora of conflict of interest policies that swirl around the office of the presidency it might also be the case that a wall paid for by a foreign entity would be open to bidding by what is ostensibly a Trump-controlled entity. The “Great Wall of Trump” might be just the thing to make a man thought to be worth around $3 billion shortly after groundbreaking worth upwards of $50 billion.

He has argued, and I must say that I agree, that the United States is on the verge of becoming, if it has not already become, a second or third world country. Before anyone starts arguing that “we still have the greatest economy in the world today, that we still have positive population growth, that the Dow is still above, or at least near, 18000 (forget about that 1000 point one day drop…it was a fluke)”, and another million details that simply serve to obscure the forest by focusing disproportionately on the trees, the simple fact is that one of the core reasons for his popularity is that the average American doubts the attainability of the American dream.

The fact is that there is a large pool of people who believe immigrants, both legal and illegal, have a better chance of buying that house with a white picket fence than those who are native born.

The members of that pool with children are fearful that their children will have less opportunity than they had.

Trump, like Rockefeller, is an aggressive businessman, and generally is a shark amongst guppies. But perhaps the biggest difference between Trump and those others mentioned is that, as a class, what was once the “silent majority” is now feeling the pressures often felt by minority groups; albeit a vocal minority that may now feel the need to openly do what in the past was not necessary to openly declare given the circumstances.

THE DEMOGRAPHIC CLIMATE IS CHANGING

In the next 40 years Latinos will become the dominant racial affiliation in no fewer than six U.S. states. According to the most recent figures released by Pew Research, “Since 1970, the Hispanic population has grown 592%, largely because of the arrival of new immigrants from Latin America — especially Mexico. By comparison, the U.S. population overall has grown 56% over the same period.”

For Asian Americans the Brookings Institute recently released estimates predicting the doubling of their category of the population, achieving an effective growth rate of 129% by 2060.

According to the U.S. Census Bureau during this same period the forecast for the black population trends slightly upward, and the nation’s white population trends downward.

THE RISE OF TRUMP REX

If we had the ability to see a live tyrannosaurus rex in captivity I am sure it would be an awe inspiring attraction and generate some of the largest, if not the largest,  revenues of any venue it may happen to appear at. The T.rex of lore was a smart, insatiable, apex predator dominant until its extinction.

In the end a similar sense, that is, of impending extinction may be what is spurring on Trumps supporters. A sense of impending doom, as if perhaps our great country may go the way of the dinosaur if something is not done quickly pervades the current presidential campaign. Of course it is actual terrestrial climate change that we blame for helping foment the end of the reign of mighty tyrannosaurus rex. Right now the greater focus is obviously the political climate.

Yet as dominant as Trump Rex appears today, I am still not sure the meaty prize he has set his eyes upon will not be the very thing that diverts him from it. The same ability he has to cut through topics or people to simplify the debate is more often divisive than substantive. The Tyrannosaurus ate what it killed and did not leave enemies behind. As efficient and unapologetic a predator as Trump may seem to be he seems just as efficient at making enemies. It seems only a matter of time before Trump Rex bites off more than he can chew.

BEING POPULAR NOT NECESSARY TO WIN

To win the popular vote Trump will need the support of Latino and Asian Americans. Of course, the electoral college has been known to “trump” the popular vote from time to time. Since the founding of our country, from as far back as 1824 (Adams vs. Jackson) until as recently as 2000 (Bush vs. Gore) the popular vote has not been sufficient to elect and seat the president no less than four times.

Ultimately no matter what November has in store, as it has always been the case it will be up to us, united and not divided, to make it (the world) a better place. I hope we can keep America great while we’re at it!

Todd

Why time management doesn’t work for the talented.

Without a doubt time is our most precious resource. Money cannot buy a second of it back. Little wonder that time management has become so important to the majority of us.

Today’s topic is a diversion from my ordinarily more serious and entrepreneurial tone.
The talented underachiever often finds time management difficult. I may not be numbered among this group but I definitely struggle with the productive use of my time and in the spirit of opening a dialogue I thought I might share a few thoughts on the subject.

I submit that the conventional approach to time management is all wrong, especially when it is applied to the very creative or the otherwise especially talented. I further proffer that the conventional approach when applied to the categories of those aforementioned generally leads inevitably not only to lowered performance and achievement, but a sense of  malcontent that further exacerbates the performance problems one tried to address by adopting a time management system in the first place.

“How can this be?”, ask you my dear reader.

The majority of time management systems express implied bias towards maximizing the efficient use of your time. This efficient use invariably can be reduced to maximizing the number of tasks one can accomplish in a day, from walking your dog to your daily exercise routine, work tasks, family and relaxation time, and finally the extremely important task of sleep.

The majority of us, as neophytes to time management apps, tend to overestimate the amount of things we can do in the ideal task structure that the majority of tools present us with. Although i acknowledge that with the continuous and disciplined use of our time management tools we may one day develop those skills necessary to make better planning decisions, the combination of the initial learning curve combined with the disappointment that follows in the first few weeks of consistently missing our self-inflicted productivity targets is usually sufficient to immolate any future efforts to use these tools while further reinforcing the often misguided sentiments of under achievement that many of the most talented carry within us unto death.

 But then you ask, gentle reader, why am I not preaching diligence and perseverance in the use of a written or digital task master?
 The flippant response is that this particular musing is more about maintenance of your status as an underachiever and as such is meant simply to explain why under achievement in this aspect of your life is completely reasonable and normal.
 But the deeper issue may simply be that detailing a number of tasks fails to account for how important those tasks are to you.
The above is different from saying what tasks should be important to you. That is what we tend to do when we sit down and plan our days…we detail tasks that should be important to us but are not necessarily. Consequently often times we make excuses about how “the day got away from us” because we allow those unplanned events to derail us from the list of things we had planned. The discipline and perseverance required is not in the use of the tool but in sticking to the plan when life’s inevitable events occur.

Modern mergers and acquisitions have changed. So has the cost of money. What remains the same is the need to carefully align the business goal with the target.

Modern mergers and acquisitions have changed. So has the cost of money. What remains the same is the need to carefully align the business goal with the target.

BACKGROUND

The buyout or purchase of a controlling share in a company as a component of private equity investing has evolved significantly from its origins. In the past buyouts were referred to as “bootstraps”; financial entrepreneurs or management insiders would buy a company with borrowed money (i.e., loans/debt) generally for 90 percent or more of the purchase price. Oftentimes the buyout would be financed with virtually no equity capital. These transactions were commonplace in the late 1970s and early 1980s, and at that time often focused less on the quality or nature of the business than on the financial “engineering” of the deal. Frequently, the thinking was that if a company was bought with 5 percent equity and the business was able to pay down some debt and improve the margins a fraction or so, then one would realize a very large return. Ultimately if the business failed to thrive, the lenders bore the greatest risk of financial loss and the brunt of the actual losses, which was a much better outcome for the buy-side entrepreneur.

Ahhhh….for the good old days of yesteryear.

Buyout investing has transformed from the bootstrap purchasing of businesses using large amounts of leverage and tiny amounts of equity as a hedged bet on the, oftentimes, misguided  hope of profitability. Today, equity is king and the triumvirate of the modern competitive landscape, the pricing of transactions, and credit parameters of lenders all require that buyouts be structured with significant amounts of backing.

In the current market climate a feasible buyout must have a disciplined investment strategy coupled with a clear vision for each company it buys and a well-defined path towards value creation.

“THE NEW APPROACH DEMANDS A NEW METHOD TO CHART THE COURSE. ONCE CHARTED, ACTIVISTS ARM THEMSELVES TO WIN.”

Successful companies execute their vision of value creation. Generally a unique mix of strategic support services and planning are required to successfully target, acquire, or merge portfolio appropriate companies.

We specialize in providing strategic and tactical support services that are generally some combination of fee or equity-based.

PROJECT PARTICIPATION CRITERIA FOCUSES ON MAKING A POSITIVE IMPACT

After many hard lessons learned I now prefer to participate in the pursuit of profitable companies with a value of between $5 and $250 million.

Generally this means companies that have EBITDA (earnings before interest, taxes, depreciation, and amortization) ranging from $2 million on the low side to $30 million or more on the high side. Generally I will not invest my time or capital resources in smaller companies or “Mom & Pop” businesses for a variety of reasons, the most important of these being that businesses smaller than the aforementioned generally cannot attract, afford to pay, nor effectively utilize the level of professional management I believe companies need to have in order to benefit from my participation. Ultimately businesses outside this range tend not to have developed the scope and scale to be leaders in their industries, and suffer from increased instability.

 After determining that a company falls within the requisite size parameters, there are three additional criteria I look for:

  • First, does the company have what I believe are sustainable competitive advantages?
  • Second, are there clear, identifiable opportunities to build the business in an industry disruptive way, i.e., to take the company to a game-changing level while working as partners with management?
  • Third, are there mechanisms to help these mature and profitable organizations stay adaptive and increase their social impact?

In my view, for a company to be considered to have sustainable competitive advantages it needs to be one of the leaders in its market. Given that private equity investors will someday seek an exit to provide returns to their investment in us, this leadership must be based on competitive advantages that can be sustained not just during our ownership and/or partnership, but a future owner’s as well. These advantages often take various forms, but often include scale that few competitors can match, proprietary processes, products, services, technology and/or distribution channels, as well as time in business. These advantages invariably present significant barriers to new entrants to the company’s markets. I want the company to be able to differentiate its products or services from competitors’ on a basis other than price that allows it to command pricing that results in strong free cash flow.

Companies that meet this criterion generally have excellent returns on investment capital, strong customer relationships that have stood the test of time, and usually do not suffer from excessive customer concentration.

The second criterion is arguably the most important for my internal consideration. I am looking for companies where my team can build the business while working as partners with the management team. I will not, and should not, pursue any transaction unless I can identify opportunities to achieve significant growth or create value. I learned this lesson the hard way, but now this criterion is ingrained in my approach.

The third criterion I seek is that my involvement represents capital for change and impact. Frequently companies I invest my time in were previously family owned or business units of larger companies. They may have been restrained from pursuing growth opportunities because the family or parent company

  • prioritized cash distributions to the owners;
  • was averse to the perceived risk; or
  • chose to focus on other priorities.

Unleashing companies I invest in to take advantage of opportunities is integral to our future success. I trust that acquisitions, including add-on and strategic acquisitions, are a very important growth strategy for the companies and I put specific emphasis in building relationships that create a clear path to achieving success utilizing this approach. I strive to find areas where companies can also improve the breadth and scope of their social impact as well as evaluate the positive social and/or environmental outcomes of my participation as an integrated component of the investment process. Growing a business and managing that growth are ever-present problems, but the opportunities to be found for creating value during these transitional periods in a company’s life are the greatest by far.

NEW OPPORTUNITIES FOR THE INDIVIDUAL INVESTOR

Although still in its infancy, the Jumpstart Our Business Startups (JOBS) Act, passed in 2011, is a game changing piece of legislation. The new legislation amends the Securities Act of 1933 to establish guidelines for what constitutes an Emerging Growth Company (EGC). As defined in the Act, an EGC is a company with annual gross revenues of less than $1 billion. A company can remain an EGC until the earliest of the following:

► Five years from its IPO.

► It reaches $1 billion in revenue for a given fiscal year.

► It issues more than $1 billion in non-convertible debt over a three-year period.

► It is deemed a “large accelerated filer,” defined as having $700 million or more in outstanding common equity held by non-affiliates.

With the ability for both accredited and unaccredited investors to participate jointly in offerings for the first time in nearly a century we believe that we can provide investors from all strata unique opportunities to generate value.

COMPANY POTENTIAL & MY PHILOSOPHY FOR SUCCESS

Ultimately the goal is to make money for ourselves, our investors, and our stakeholders. That is the first goal of any business in a country based on the democratic and persistent practice of free enterprise. The philosophy and approach to accomplishing this goal is tried and true. It requires a team committed to developing a corporate culture, practice model, and customer depth and breadth that drives:

  • Thoughtful, conscious strategic decisions specifically geared to avoid one-offs — Our commitment to generating value should be thought through, carefully planned, and deeper than the execution of a single transaction.
  • Steady, sustained growth — Clients and new service additions should be cultivated slowly and carefully to avoid disrupting our current client relationships.
  • Broad and deep client relationships — This is an essential point of potential differentiation and our dominance here requires the efficient and effective delivery of services that result in high levels of customer satisfaction.
  • An institutionalized/systematized service model — This will help us ensure that the infrastructure is in place to support new relationships while effectively managing and sustaining client expectations and high service levels.
  • Awareness of new products, solutions, and industry players — Technology developments are a cornerstone of modern industry and it has become a critical business practice to have the ability to identify technologies that may enable more efficient and profitable operation. In addition, vigilance in regards to competitors and service developments are necessary as part of a discerning approach to identify and implement the best new solutions for value creation.

To be successful, a buyout firm must have a disciplined investment strategy and a clear vision for each company it buys, with a defined path towards value creation. A key criterion I look for is whether I can build the business, working as partners with the management team. I will not pursue a transaction unless I can identify opportunities to achieve significant growth and value creation. I have often found acquisitions to be a very important growth strategy for those companies I have worked with. A successful acquisition strategy entails planning the targets in advance, and pursuing candidates that create real benefits to the combined company.

My experience is that this is achieved in acquisitions fitting one of the following profiles:

  • Geographic expansion (the target company enhances penetration of the acquirer’s products or services in specific geographic markets)
  • Augmentation or expansion of products or services (the target company provides the acquirer with broader services or products to put through its sales and marketing channels)
  • Acquisitions of direct competitors, especially where there are infrastructure savings or opportunities for vertical integration

CONCLUSION

In times of change winners disrupt the paradigm.

It is essential that the team, from the employees to the officers to the esteemed members of the board, have and contribute specific expertise and knowledge with respect to the business, its clients, and my clients’ acquisition targets. While comprehensive due diligence is essential in all transactions, acquisitions also require integration plans that must also be carefully developed.

 

My focus is not only minimizing the inherent risk of any acquisition, but the realization for the client companies in the shortest path possible the benefits of the acquisition.

Prevailing wisdom is that acquisitions often do not create value, and in fact compound the inherent risk of buyout investing. By utilizing our strategic services and support approach to acquisitions not only has our team never had a portfolio company under-perform due to an acquisition program. Our ambition, our call to action, our purpose is to spearhead a series of acquisitions that prove to be an integral aspect of building numerous portfolio companies and creating significant value.

As companies seek more growth and greater value for what they spend, they’re looking for new ways to monetize what they have, beyond incremental or simply iterative product innovation. In the new world order, innovation can mean turning a product into a service, or taking an experience and turning it into a product. It can also mean discovering and opening entirely different channels for existing products, even if that causes the need for disruptive change in existing dealer networks.

In the near future, I expect M&A activity to accelerate. That said, I am not an M&A Adviser, which is a regulated task limited to (SEC) FINRA-licensed broker dealers, and consequently you should do perform your own due diligence before attempting to apply anything you read here.

SAFE HARBOR STATEMENT

This paper is part of a series of my own internal policy and approach viewpoints and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of May 2015 and may change as subsequent conditions vary. The information and opinions contained in this paper are derived from proprietary and nonproprietary sources deemed by myself to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Todd Hill nor any organization which I may consult with, work for, or own including any such organization’s officers, employees or agents.

This paper may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this paper is at the sole discretion of the reader.

This document contains general information only and is not intended to represent general or specific investment or professional advice. The information does not take into account any individual’s financial circumstances or goals. An assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial or other professional adviser before making an investment decision. This material is solely for educational purposes and does not constitute an offer or a solicitation to sell or a solicitation of an offer to buy any shares of any stock or fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that they have not been registered with any securities regulator in any country and no such securities regulators have confirmed the accuracy of any information contained herein.

Ruminations on the reckless and indefatigable pursuits of an entrepreneur.

My last two entrepreneurial endeavors have been learning experiences. In entrepreneur code speak experience is “what you get when you don’t get what you want.” Experience is a great teacher, but it can be the teacher you least like to learn from directly.

I decided to build this site to share, and I hope that if you have found this site you will also find it of some use as a resource to you regardless of your current state of success or failure.

I do not believe that in living our lives, whether we are engaged in the pursuit of happiness, our lifes ambitions, a business, marriage and raising a family, making art or trying to learn something new, we should fear failure. Failure is a natural and common occurrence and ultimately anyone who has ever truly succeeded has or has been prepared to fail. A healthy respect for the potential consequences that result from failure is prudent, and required for those who are committed to the path of success.

Whatever your personal definition of success may be, I do not believe anyone is truly successful until they have assisted someone else, not for money nor for personal gain, simply because one of the greatest acts of a lifetime can be realized when one selflessly helps another achieve their dream.

Here’s to those helping to make the world a better place.

Todd

Promethean: Agents of Change

Agents of change.

Be greater than average. Be an agent of change. Be the solution. Be Promethean.

How many times have we passed someone in distress only to pass them by in the hopes that someone else would arrive, perhaps better qualified or less pressed for time in that moment, to assist them. I am guilty of this, and I imagine most of us can remember at least a time or two this has happened.

And yet I stand behind the statements initiating this entry, for that is the reality of the culture we are creating at Promethean Biofuels.

We are not perfect. We do not need to be. In fact our imperfections contribute to our ability to find solutions to problems, whether they are implementing changes to our process to improve efficiency, or simply overcome the fact that individually moving 6 tons of butter every day quickly leads to exhaustion in humans.

We have problems. Some are more easily resolved than others.

We are a microcosm of the human condition and at times we lose sight of what is really important. We also lose sight of how much power we have as individuals to positively or negatively impact the lives of our families and neighbors, whether these impacts are ultimately realized in their level of happiness or the preservation of the environment that sustains us.

We strive to overcome our imperfections. Those we cannot overcome we at least do our best to understand.

We work really hard to make the world a better place. We work as a team. Understanding our strengths and weaknesses, and having the strength to inform those around us, makes the team more effective and helps us achieve our desired goals.

We believe in what we do and the ultimate value of our products and services.

We are responsable and accountable.

We serve the community, intelligently, utilizing sustainable technologies.

I have the privilege of working with an amazing cadre of talented individuals. We are always seeking others to join us in our cause and approach, which I have outlined briefly above. I would love to hear from anyone out there that is interested in working together with Promethean.

As always, make it a better place.

Todd

Promethean growing pains: 2012

Every organization that survives the initial stages of growth goes through “growing pains”. The type and scope of the pain may vary, but generally they range from issues with internal communication, inconsistent adherence to quality controls or other corporate policies, and consequently an increase in the number of events in direct correspondence to lower levels of customer and team satisfaction . As the pace of business increases, the likelihood of these newly emerging issues manifesting themselves becomes inevitable, often necessitating changes in personnel, corporate culture, and the addition of increasingly stringent controls.

At Promethean we find ourselves experiencing more pain, and we are preparing ourselves for rapid growth. At the same time I realize that we are walking a fine line; we are skirting the edge of greatness and oblivion at the same time.

Two weeks after hosting a very successful conference we are in the midst of a paradigm shift in our culture and mode of operation. The next few months will determine our place in the rapidly maturing, but far from mature, California bio fuels market place. More importantly, the new technology few weeks will see the formation of the team that can take us from a small production plant placed somewhat counter-intuitively in the midst of southern California wine country to a readily recognized global market participant.

Those of us who have more than a few years under our belts in this industry know that it often seems as if we are on a roller coaster, with highs and lows that sometimes obfuscate the reality of how well, or how poorly, our individual enterprises are actually performing at any given moment. There are many that I count amongst my friends who will not have the same opportunity to experience the joys and pains that the next few years hold for those of us that continue to actively fight the good fight and produce our often under appreciated fuel. Many will go on to be agents of change in other industries.

Nothing is certain as it pertains to the future. For now we simply need to do our best to enjoy the ride.

Make it a better place.

Todd

2012 Collective Biofuels Conference: Day 1

In the past I have always been excited in the days leading up to the conference, but never more so than today.

Within a few short moments of my arrival at the Temecula Creek Inn, this year’s primary conference venue, I found myself in the midst of a discussion with Gerhard Knothe (USDA ARS) regarding alternative fuels feedstock. A few minutes later Rod Yawn and I are in deep discussion about cationic resins, which is then followed by me meandering over to Leon Griffin of WVO Designs who is intently constructing his Beast Centrifuge which will be on display at the vendor tables.

This years participants number slightly less than a hundred. Many have come long distances, from Europe, to the Eastern United States, Canada, and India.

Many old friends are here, and in some ways it is a time for us to reflect on our past year in the industry. Sometimes our discussions evolve into a type of cathartic commiseration.

Don Scott of the National Biodiesel Board said something to me earlier in the evening that struck me as as especially applicable for the folks here. The essence of what he said to me is that a person’s dedication to a cause tended to increase in a manner proportional to the amount of suffering one has endured in its furtherance.

We are all survivors here. We all have spent the year learning, making mistakes, and recovering from them.

I am proud to be here, amongst others who share a similar devotion to making our fuel an integral part of a solution to our global energy needs.

Make it a better place.

Todd