Weekly Thoughts


Not For Everyone

Paradox of the “and”

The Brothers Osborne’s I’m Not For Everyone is one of our favorite songs.  The main course goes like this: 

I’m like scotch and zydeco bands / I’m like B-side Townes Van Zandt
I’m always speaking my mind / When I’m better off biting my tongue
I’m a bad joke at the wrong time / Hell, I’m a legend in my own mind
I’m good for some but I’m not for everyone

The Brothers have noted that this “song in particular is the both of us saying we’re not everybody’s cup of tea and that’s okay” which is why we find the song so appealing.  We like living in a world where it’s OK to be different.  So what does this have to do with small business? 

A couple of weeks ago, we wrote a “Required Reading” note about our experiences of working in small businesses.  The note aimed to make clear that “the day-to-day gritty reality of working in small business often does not match the elegance of theoretical financial models.  The notion that we are mini Berkshire Hathaway people sitting in our office drinking Cherry Coke and reading financial statements all day is at best misguided.”

A.J. Wasserstein, lecturer at Yale School of Management (and a good friend of Chenmark), read our piece and asked to collaborate on a more detailed case note, which we finished this week.  The case note — Check Your Strategy and Capital Allocation Aspirations — expands upon the observation that while many people are attracted to big picture strategy and capital allocation aspects of the small business space (particularly the “holdco” version), the reality is that these topics don’t really take up much time.  From the note:

“We have good news for aspiring CEOs: strategy and capital allocation are absolutely part of the CEO’s job function. The bad news is CEOs just do not do them that frequently. When we speak with students and aspiring entrepreneurs, they envision spending all of their time on these topics – which is just miles from reality. We think of strategy as an episodic event. The CEO must establish and craft it every once in a while, but certainly not daily. Once a comprehensive strategy is in place, the CEO and company work diligently on executing that strategy. Frequently formulating a fresh strategy means the strategy is not working – and keeps the CEO’s attention away from actually executing a strategy that is viable.” 

Take, for example, the Chenmark experience.  We put together our business plan in September 2014, when we were W2 earners.  At the time, the articulated plan was to:  

1. Buy cash-flowing, steady, businesses at attractive valuations from retiring owners

2. Own and operate those businesses for the long-term

3. Re-invest cash-flows into other cash-flowing, steady businesses at attractive valuations

Our goals were to have: 

1. Interesting work with a positive impact

2. Long-term compounding

3. Income to support ourselves at modest levels

Since 2014, our core strategy and goals have remained unchanged.  So, what have we been doing for the past nine years if not working on strategy and capital allocation?  Sitting around on a beach somewhere?  As if! 

We’ve been doing all the other stuff that goes into operating businesses: banking relationships and talent management and incentive planning and recruiting and articulating values and company retreats and holding people accountable to a standard and upgrading technology infrastructure and AR/AP procedures and equipment purchasing and vendor management and Google ads and social media programs and pricing adjustments, and, and, and.  We live in a world of and.  

The case note expands upon this idea: 

“When we think about strategy, capital allocation, and the crazy situations we describe above, we rationalize this as a paradox of the ‘and’. CEOs do not bifurcate strategy and capital allocation with everything else – that would be an ‘or’ construct. Being a small business CEO is a jumble of everything – an ‘and’ construct. The absurdity is that CEOs spend relatively little time on strategy and capital allocation, which has an enormous impact and is akin to playing offense. They spend a great deal of time on arbitrary, haphazard things that have relatively no effect but require gobs of time and are mostly about playing defense.”

In our world, it’s not enough to say we have a great strategy or capital allocation approach.  To survive, we need to do that AND everything else.  Thankfully, we enjoy and embrace the paradox of the “and”.  We also realize this reality may leave others uncomfortable, and that’s alright.  Those people should probably do something else.  As the Brothers sing, [we’re] good for some but [we’re] not for everyone.

Have a great week,

Your Chenmark Team

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