Operator or Investor?
A repost from 2019
This week we had the privilege to spend time with some graduate students talking about Chenmark’s strategy. A central part of the discussion pivoted around whether we are operators or investors. The fact that the answer is somewhere in the messy middle seemed to be discomforting to the class, as we do not fit into a neat little box.
This tension is actually at the core of our strategy. In fact, the first part of our Mission and Values statement is: “When we first started Chenmark we thought about our mission largely from an investment and deal-making perspective. We wanted to buy good companies and desired to build the type of firm that other sellers would seek out. To this day, our desire to be ‘the liquidity provider of choice for North American small businesses’ is still very much intact. However, now that we own several companies, we recognize that our original mission communicates nothing about our intentions for our companies post-deal. More importantly, we have realized that our status as a preferred counterparty will always be an outcome of our behavior rather than a cause of it. We can’t wake up one morning and say ‘today is the day people will want to do business with us.’ We can, however, make deliberate decisions about how we want to define success, what we want to stand for, and most crucially, who we want to stand with us. As a result, we now think about the mission of Chenmark less in terms of an entity to be built and more in terms of a culture and community to define. So, what is Chenmark? Put simply: We are a team of small businesses committed to the constant pursuit of better.”
As for the investor vs. operator question, we disagree with the notion that we must manage Chenmark with an either-or trade-off. To view those perspectives as fundamentally in conflict is to miss what each has to offer. Sound operations make for good long-term investments, and good long-term investors support the work needed to build durable operations.
Those who shun the operational importance miss the fact that there is a lot of attention to detail that must happen on the ground every day to make the work happen on time and within budget. But to suggest that the investment focus is not valid suggests that a business can ignore capital allocation, unit economics, or free cash flow entirely. The reality is that without growth and profitability, there is no work to be done, no people to employ, no vendors who can be paid, and nothing to build. The two must work in harmony to ensure each achieves its goal. And that, in the small business context, is what Chenmark is all about.
Have a great week,
Your Chenmark Team