The realities of working in small business
We have observed an increasing number of people interested in the small business “holdco” space because of the potential financial returns. We can’t argue with the thought process. When you model out purchasing cash generative businesses at attractive multiples and re-investing cash flows over the long term, you will see some interesting financial upside.
However, 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. We see this dichotomy most often when interviewing for our GVP program: it can be unclear whether an otherwise promising CEO candidate understands what we actually do.
So, we decided to put together some required reading for those interested in working in the space, whether it be for Chenmark or elsewhere in the ecosystem. Here’s a snapshot of the types of things our team handles on a regular basis:
- There’s a big winter storm coming and you own a snow removal company and you are short-staffed. Congratulations! You are now on deck to shovel snow at 2am.
- A major supplier sends you a notice on Friday afternoon saying the relationship is terminated. The person sending the email then goes on holiday for two weeks.
- You read a fashionable management book and start empowering your employees. After a week, a top employee quits because thinking for herself is too stressful.
- You find hard drugs in your (highly regulated) facility. You have to figure out where they came from...and call the cops to take it away.
- Your payroll provider inexplicably pulls twice the amount of your first-ever payroll from your bank account. You are now low on cash with no clear solution in your first week.
- A hostile competitor keeps calling the local regulatory body and telling them bogus complaints about your services.
- Your employees revolt over conditions in shared housing. Upon further investigation, you find one employee does not clean up after himself.
- You now have to conduct multi-hour one-on-one training about how to put dishes in the dishwasher and socks in the laundry basket.
- HR manager unexpectedly quits to start a custom unicorn t-shirt business. You now have no HR department.
- You find out that your controller is creating fake invoices in QuickBooks and paying himself fraudulently.
- A vendor's computer system was hacked; you pay a $40,000 invoice that inadvertently sends the funds to the wrong account.
- A major credit card provider shuts off your credit with no warning after an unannounced internal account review finds your credit card usage suspicious for a high-frequency trading hedge fund, which is curious because you are not a high-frequency trading hedge fund. You are now overdrawn on your credit line and they are demanding payment immediately.
- A customer alerts you to the fact that a person is doing hard drugs outside of your facility. You need to go outside and ask that person to leave without causing a commotion.
- You invest in a door-hanger program to market your services. A competitor goes around taking the door-hangers off.
- An entire crew smokes weed out of a makeshift bong from a Bud Light can on their lunch break while live streaming it on Facebook. They claim they can't be terminated because they were not on the clock.
- An employee calls out of work sick (though a co-worker). Three days later, you still can't reach him directly. You soon find out it was because he is in jail.
- Google Ads decides that your account has violated a marketing rule (but won’t tell you which one) and locks you out of your account for months.
- You hire a new employee. On day one, they don't show up. On day two, they do show up, but only to ask for an advance on their pay. On day three, they call asking to be bailed out from county jail where they have been arrested for grand larceny.
- The company you are leading still uses fax machines as a primary mode of communication. You need to figure out a solution on how to overhaul technology that is 20+ years old without interrupting daily operations.
The list goes on. Importantly for us, these are features, not bugs. Working in the "real world” gives our lives texture and we enjoy working through the associated challenges. It’s our firm belief that if you are not comfortable dealing with issues from the list above, you should not be working in this space. While that may seem harsh, we also believe it’s better to be upfront about such things and hope this required reading will give those interested a better sense of our world.
Have a great week,
Your Chenmark Team