Small Business Private Equity
By: Paul Wormley
This week I was having BBQ and beers with a successful small business owner who wanted to learn more about our ‘first, do no harm’ approach. He thought it was pretty unique.
Hadley Capital focuses on buying solid small businesses with bright futures. Of the 1,000 or so businesses we evaluate each year, we negotiate to acquire less than 5%, so I think it is fair to say that these are some of the best small businesses in America. And since that’s the case, it’s just common sense to not break what isn’t broken. So instead of coming in with grand plans for change, we seek to ‘first, do no harm’ by taking 6 – 12 months getting to know the people running the company, learning more about the business, etc.
Then, after building mutual trust and confidence, we begin implementing 1 – 3 strategic initiatives per year. We tend to focus initially on the lowest hanging fruit in order to achieve small wins that require relatively little capital and involve low risk of failure. In our experience, it’s very difficult for a small business to successfully implement more than 1 – 3 strategic initiatives per year because small businesses are often resource constrained – in both human and financial resources.
Our ‘first, do no harm’ approach is also well aligned with our long term strategy. Since we’re not looking to flip companies a couple years after acquisition we can take the time to make incremental improvements. We can create a lot of value in a business by consistently hitting singles over a long period of time…it’s kind of like the power of compounding.
This approach is delivering long term value in our companies. Whether we are working on improved fulfillment systems and processes or sales force development and training or new market or geographic expansion or add-on acquisitions or facility expansions or upgrades, we find the ‘first, do no harm’ approach works…for us anyway.