StoneBrook's managers and advisors passionately believe that a well-organized service company, which provides effective solutions and products in a professional manner through a motivated team, will thrive long-term.
We are committed to hands-on basic service businesses (including those that offer products) because:
- Service companies have the opportunity to apply the world’s best technologies and techniques. Such inevitable technical changes do not render a service-based company obsolete, but instead drive it to become more adept at meeting the needs of its customers.
- Basic service companies cannot be “off shored”. Unlike manufactured products, that someone overseas will always be willing to make for less, services must be provided on location in the community.
- These companies do not try to distribute to the masses, making them less likely to be run over by Big Box stores.
- Most service companies do not have prohibitive barriers to growth such as an endless need for capital.
- The service sector may be one of the last segments of the market to consolidate in a meaningful way. Does that mean it will consolidate eventually? No one really knows. But, in the event it does, StoneBrook is prepared to effectively position its holdings.
- Many service companies could grow “to the next level” if they could get the right “mix” of people, vision, capital, and other resources.
- In the end, regardless of interest rates, globalization, changes in technology or other macroeconomic factors, StoneBrook believes that a well-organized service company run by energetic people who are “good to do business with” will thrive.
StoneBrook also believes that many of these quality companies can be hard for the current owners to transition. Service-based businesses can be great to own (because they tend to provide nice cash flow), but can be very difficult to sell (and therefore to buy). An ideal suitor for this type of company possesses a rare combination of skills, experience and capital. For instance, the smallest companies can often be bought, sold or financed through individuals, local banks and/or the SBA. Larger companies can attract big-time capital providers of all sorts. But, who is capable and willing to work in the areas of hands-on smaller middle-market companies that provide basic service-driven solutions? StoneBrook purposefully targets companies that are classic “tweeners” in size that have been largely ignored.
Through its Unique Approach to Private Equity, StoneBrook offers valuable skills, experience and capital to fill this void in the market.
What situations fit best with StoneBrook?
Of course every situation is different, but in StoneBrook’s experience these circumstances can create the best fit:
- An owner who has tired of his/her business. In reality, many people need change to realize their full potential in life. StoneBrook can bring new energy and vision to a company before it stalls. Everyone benefits.
- An owner who would like to see the management of his/her business transition to chosen operator, and wants a quantifiable transaction. Business owners often know someone within the business who would take good care of the company, but who may not have any money or transaction experience. Although an owner might be willing to turn the business over to this well-qualified operator as a gift, that may not be the most appropriate or prudent transition for the business or the new owner. StoneBrook will work in concert with such owners and well-qualified operators to facilitate an orderly transition AND an equitable transaction.
- A company needs capital for growth. Many areas, including receivables, inventory, service trucks, equipment, adding products/services and opening new geographies can consume cash. At some point, most companies need a deeper pool of resources to support growth. StoneBrook has proven its ability to access various types of capital.
- A company needs something more to achieve its potential. Often the entrepreneur with the skills and fortitude to start a business from scratch is not the same person who knows (or wants to know) the best path for perpetual growth. If a “hunter” tries to become a “chef,” the results are not always good! StoneBrook has fine-tuned its skills and resources to build a company that has an established base.
- Internal conflict, perhaps between partners, has stifled growth . The marketplace is tough enough that most companies cannot move forward if they are not in harmony. StoneBrook can be the objective 3rd party that can help resolve disputes and free an organization for growth.
- It’s just time to sell. An owner may feel the business has peaked in its current cycle, or may have some other pursuits in mind, or might like to see another person move the business forward or may simply not want to take another step in the current direction. StoneBrook provides the unique balance of understanding, patience, vision, sense of urgency and drive needed in these sensitive situations that require skills, experience and capital.
Regardless of the situation that stimulates the fit, StoneBrook expects to first work with individuals within the company. These people are often by far the most informed about a company’s strengths and weaknesses. Such collaborative efforts with people at every level in the company should provide for the overall development of everyone in the organization and provide rewards for those who play the most prominent role(s) in growing the business.
StoneBrook can provide daily leadership and/or recruit needed talent. However, based on many years of experience, we prefer situations that initially present a legitimate candidate for the primary leadership position. StoneBrook loves to work with hands-on people who know a business well, but who may not yet have had the education, financial resources and/or the opportunity to fully develop their leadership potential. We want to provide these leadership-ready individuals with a unique and rewarding opportunity of a lifetime. Through hard work and performance, these individuals can dramatically increase their regular pay and participate in the capital appreciation of the company.
Each business is unique and presents its own opportunities, but many service-based companies can dramatically improve in at least three general ways:
1) Enhanced Organization – most entities evolve over time. As such, it is difficult for daily management to retain an objective view of what makes the most sense for every aspect of the organization. An outside entity can suggest improvements in the areas of scheduling, accounting, purchasing, customer databases, hiring/training, sales & marketing systems and even the basics of who reports to whom. Such changes can often free a company to grow. Based on years of observing both effective and weak organizations, StoneBrook is convinced that being able to execute every task well is essential if a company wishes to become a top performer. This is especially true for any company that competes on a relatively level playing surface in which their competitors offer similar products and services.
2) Proactive Marketing – Yellow Page ads are not enough. Most service companies have tremendous potential to develop simple systems that will allow them to effectively sell themselves. Many service companies need the discipline to effectively use sales calls, mailers, telemarketing, customer referral programs, trade shows, technician incentives, sponsorships, up-selling opportunities, free press and countless other tasteful ways to proactively approach customers. Within a few years, StoneBrook believes such measures will not only facilitate tremendous growth, they will be essential to survival as the competition becomes more and more sophisticated.
3) Extension of Products & Services – Most customers work hard to find a company they like doing business with and would prefer to simplify their base of providers. With an appropriate level of effort and capital, most service companies can strategically develop closely related products and services as well as expand geographically through in-house development or by acquiring another well-established entity. StoneBrook has extensive experience in planning and executing this type of growth.
In spite of the ideas set forth in this web site summary, we realize that companies are like people: each one is different. We do not have any pre-conceived notions about what the best opportunities will look like, what companies might need or the ways in which they may be improved. As we hold dear any companies we become involved in, StoneBrook will invest the time and energy to understand all the issues facing a company and its people. Often, the solutions themselves are easy. Identifying the true ailments is the hard part!StoneBrook Capital, LLC is committed to its Unique Approach to Private Equity. We will apply our broad base of skills, accelerated experience and capital to acquire and improve service based companies so that:
1) An integrity-based owner may effectively transition his/her business to similarly minded principal(s) under equitable terms & conditions
2) A mutual understanding of trust and hard work can develop between employees of the company and its new owner to preserve viability
3) Gradual improvements can be made to allow the business to thrive long-term
4) All stakeholders can equitably participate in the future of the enterprise.