Shownotes
In this episode, the Shore Capital Strategic Planning team explores how they partner with portfolio companies to build and execute strategic plans. They discuss bridging the gap between the investment thesis and real-world execution, helping teams prioritize key initiatives, align stakeholders, and make data-driven decisions. Their structured yet adaptable process ensures companies stay focused, respond to market dynamics, and drive sustained growth.
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This podcast is the property of Shore Capital Partners LLC. None of the content herein is investment advice, an offer of investment advisory services, or a recommendation or offer relating to any security. See the “Terms of Use” page on the Shore Capital website for other important information.
Transcripts
Welcome to Bigger.
Anderson Williams:Stronger.
Anderson Williams:Faster.
Anderson Williams:the podcast exploring how Shore Capital Partners brings billion-dollar resources to the microcap space.
Anderson Williams:In this episode, we hear from the Shore Capital Partners strategic planning team about the flexibility of the strategic planning process for the stage The vertical and the unique needs of each portfolio company.
Anderson Williams:They dispel some important myths about developing a strategic plan and further elaborate on what a successful partnership with portfolio companies can look like.
Anderson Williams:This episode builds on the process discussion the team had in the first episode of the series, which focused on defining the Shore approach to strategic planning more broadly.
John Murdock:One of the things that we are, are sometimes asked is to what level was the strategy already developed, and I think.
John Murdock:It's a common question for CEOs that have exposure to, through some capacity, other private equity firms, normally later stage.
John Murdock:where it would be pretty standard for the investment team to have created a strategy, created a strategic plan, or a value creation plan, and sort of hand that to them and say, this is what we're going to do.
John Murdock:So, what is it that we do in advance of buying a company?
John Murdock:And to what degree is the strategy already formed?
Dane Drobocky:So, Shore underwrites an IC memo.
Dane Drobocky:That's an investment committee memo, which outlines a way to create value in a certain niche, certain market niche, et cetera, The initial investment of a platform.
Dane Drobocky:What we do is bridge that gap from past to present to outline to all stakeholders.
Dane Drobocky:What is going to be truly valuable in that session?
Dane Drobocky:So what may have worked in a document that was underwritten before the initial platform investment may not work today.
Dane Drobocky:Sometimes that initial investment is also not in that direct, think of a bullseye, that direct middle of your underwritten value prop.
Dane Drobocky:It lies maybe a few degrees outside or off from the initial understanding.
Dane Drobocky:And as the world changes, dynamics in the market and competitive forces change as well.
Dane Drobocky:Thus, our strategic planning sessions help mitigate any discrepancy from what can derive true value in a business's vision.
John Murdock:And I think one of the things I'd emphasize on that IC memo that you so well defined is that is, it is so high level that it is possible to execute on in infinitely different ways.
John Murdock:So for an operator, which is not the person involved in making the IC memo, because that's very smart investment team members, an operator is going to say, this is not a plan.
John Murdock:If you read it, you would say, this is not a plan, right?
John Murdock:There are so many markets here listed as options.
John Murdock:There are so many products or services listed as potentials.
John Murdock:How do I prioritize which of these I'm going to do?
John Murdock:Cause we know that most of them are not ever done.
John Murdock:When you look at what we call the honeycomb slide, just, just a big picture of.
John Murdock:Different in markets or different products or services that a company might want to enter into.
John Murdock:They're only going to actually choose to do a few of those.
John Murdock:So the choosing is what you need to do.
John Murdock:And then prioritizing how you're going to get in there and how you're going to win is what you need to figure out that hasn't been figured out yet.
John Murdock:So there really isn't a strategic plan and there isn't really.
John Murdock:Anything other than the most general concepts of a strategy.
John Murdock:We need to build a strategy and a strategic plan with you.
John Murdock:So it's not determined, I would say, almost to any significant degree from an operator's perspective, typically, uh, for what they're gonna do.
Dane Drobocky:It also doesn't outline who and when any action might need to take place in order to move forward, which is a key outcome of a strategic planning engagement with our team.
John Murdock:And we learn so much from the actual doing of the business.
John Murdock:And so much depends on who we buy first, right?
John Murdock:You're the initial CEO and you're in one geography, then that probably means the strategy needs to go one direction rather than another.
John Murdock:Um, countless examples of situations like that.
Dane Drobocky:Yeah, I just think back to a time in which in the underwritten investment committee memo, strategic acquisitions were going to play a heavy focus in the growth of a business.
Dane Drobocky:After some time in the market, after competitive forces have shifted and changed, we understand organic growth might need to be the bigger play.
Dane Drobocky:And guess what?
Dane Drobocky:Our business is growing at a faster rate than the market on average, which is amazing news.
Dane Drobocky:Sometimes that's not always the case, but in this case it was.
Dane Drobocky:So our ability to realize that through strategic planning sessions, through continuous follow up and engagement allows us to double down on, look, there's another route to victory and this route may give us a better victory than originally anticipated.
John Murdock:For sure.
John Murdock:And in that lens of, there's high level strategy and then there's the attempt to narrow the focus to where it's something that we can actually implement on and have a higher degree of success with.
John Murdock:One of our constant battles in session and in all of our work with our portfolio companies is to help them decide what they won't do.
John Murdock:To help them decide at least what they won't prioritize for the next timeframe.
John Murdock:And then.
John Murdock:That will leave them with some opportunity to decide what to do next.
John Murdock:Sarah, how do you handle that conversation when you have the team, CEO, whoever in front of you saying, Ah, I don't want to limit myself.
John Murdock:I don't want to have to focus.
Sarah Giblin:Yeah.
Sarah Giblin:Um, that happens fairly often and it's, it's both not easy, but we're well equipped to manage it.
Sarah Giblin:Um, I think my initial response or my initial thought is always that if you aren't going to narrow the set of possibilities, then you're, you're not probably not going to do as much.
Sarah Giblin:You're not going to learn as much.
Sarah Giblin:Um, and you're not going to learn, um, what, what works and what isn't going to work.
Sarah Giblin:And so I certainly understand and can empathize with that position, right?
Sarah Giblin:You don't want to miss out on a great opportunity by narrowing in or focusing your strategy.
Sarah Giblin:However, by not doing that, what we see happen is then, uh, that the execution really isn't there.
Sarah Giblin:Right.
Sarah Giblin:So we want to explore this end market.
Sarah Giblin:We want to explore this end market.
Sarah Giblin:We want to explore this end market.
Sarah Giblin:And in exploring, you miss out on the great opportunities or at least learning from those great opportunities.
Sarah Giblin:So I think what we try to do in session when that dilemma comes up in it, I think almost always comes up in almost every session is really trying to get folks to zoom in, um, to, to basically evaluate the options that you have in front of you, make a strong case for and against each of those options, kind of weigh those options, and then ultimately commit to, um, to just, you know, a smaller set.
Sarah Giblin:And in the strategy itself, if, you know, for example, in a recent session we had, there was some hesitancy to zoom in on, um, a particular, you know, Uh, type of service and, um, we weren't saying, no, you have to zoom in on this service if you're not ready to zoom on this service today, but you at least need a method to test out all of those options, um, and a timeframe by what you're going to do it so that you can then decide, okay, which ones are we going forward with?
Dane Drobocky:That's great.
Dane Drobocky:I want to add to that.
Dane Drobocky:And just also, we emphasize don't let perfect get in the way of good and, you know, through your hold with short capital partners, one quarter.
Dane Drobocky:Is ultimately 5 percent of the whole.
Dane Drobocky:So by keeping options completely open and not putting a plan in place to act on anything or those options.
Sarah Giblin:I think connecting back to that.
Sarah Giblin:I mean, we had, um, uh, an experience about a year ago where, um, a company was very hesitant to narrow their, um, acquisition targets, um, for the reason that they didn't They didn't want to, um, eliminate potential great targets.
Sarah Giblin:And again, we empathize with that.
Sarah Giblin:That was a real kind of worry or risk.
Sarah Giblin:They only have one, um, M&A person.
Sarah Giblin:They only have one person in, in, who's working on that.
Sarah Giblin:The CEO is helping, but it's really just one person.
Sarah Giblin:And, um, In the session this year, they said they have and I'm, I might be wrong on the number, but like 700 potential targets.
Sarah Giblin:And so like, how on earth is that person going to, uh, to, you know, evaluate all of those?
Sarah Giblin:If there isn't some, um, filter, some funnel, some way to know which ones are better or which ones are, are, are more, um, likely to succeed within their space.
Sarah Giblin:So, I think that's just like one of the many examples where prioritizing, Zooming in, narrowing, is, is essential.
Sarah Giblin:And then if that, like, unicorn company comes along that is maybe outside of what they had settled on, of course they're gonna consider it.
Sarah Giblin:But like, that's, that, that doesn't happen very often.
John Murdock:I think, to your point, a couple of the things that we see, like, the unicorn is helpful to keep in mind.
John Murdock:Because sometimes there's the fear is stated as, well, I don't want to turn down a great deal that comes through the door.
John Murdock:And it's like, well, no one is ever going to tell you to turn down a great deal that walks through the door.
John Murdock:Now, we may disagree, and by we, you and your board or your fellow management team members may disagree of whether or not it's a great deal.
Sarah Giblin:Sure
John Murdock:And that's a different conversation.
John Murdock:But just because you're focused doesn't mean that you are completely closed off.
John Murdock:And I think management teams worry that we are saying or that they are being told to close off possibilities.
John Murdock:Forever and instead it's really no focus your energies here for now into kind of Dane's point earlier Imagine that you don't hit your goals Because for whatever reason you don't hit them if you walk into the board meeting and you say I don't I didn't hit my goals And I don't know why that's a problem because there was no gain made in that question Right?
John Murdock:You didn't learn anything and you didn't make any money.
John Murdock:And so there's no adjustment going forward.
John Murdock:So how is this useful?
John Murdock:If instead you're able to say, you know what, I exhaustively searched this one end of the market, and it is not a good place for us to win.
John Murdock:Then you have at least learned something that increases your odds for success in the next quarter.
John Murdock:And as Dane mentioned, those quarters are each 5 percent of your hold period.
John Murdock:So time is going away.
John Murdock:All right, Sarah, every portfolio company that we work with is its own unique company and sometimes, understandably, we hear the concern that our session, our process, won't account for their unique circumstances, conditions, status.
John Murdock:What would you say to that portfolio company?
Sarah Giblin:Yeah.
Sarah Giblin:I mean, at its core, we do have a process.
Sarah Giblin:We rely on a process.
Sarah Giblin:Um, we find that the process does drive significant value.
Sarah Giblin:So that is important to note.
Sarah Giblin:Like our process is Is part of the success that we are able to achieve and the process that we use relies on and and builds in the opportunity to specifically tailor, um, our sessions to, um, the phase of the course.
Sarah Giblin:The company, you know, where they are in their hold period, um, the vertical, um, and just the certain set of circumstances that they're in.
Sarah Giblin:Um, so it is our process accounts for opportunity to find out, you know, what are the most unique issues and challenges for you all.
Sarah Giblin:We do this through our key meeting calls.
Sarah Giblin:We do this through our survey.
Sarah Giblin:We do this through conversations with the investment team members where we're getting all of that information so that we can really tailor the experience.
Sarah Giblin:Um, to what it is they, the company needs getting, you know, coming out of the session.
Sarah Giblin:Um, that helps us to the fact that we have this process enables us as a team to be able to more, um, accurately identify, um, winning patterns, um, coach teams along those patterns, um, and recognize them when they're kind of coming up.
Sarah Giblin:And then additionally, and we've talked about this a bit, we have run over 100 sessions, over 100 strategy engagements.
Sarah Giblin:And the fact that we've done this so many times, is, is testament to, and is, is part of the way that we're able to to kind of adjust course or adjust based on a company's unique set of circumstances.
Sarah Giblin:So in my mind, it's both the company and their perspective.
Sarah Giblin:And then our process that that really is like the winning combination, um, and ultimately leads to such a great outcome in session.
John Murdock:So for, uh, the group, what are Some of the ways that the customization manifests, or the ways that a session might vary from year to year, or industry to industry, or circumstance to circumstance.
Adam Shibley:Yeah, I think early on in the hold period, we're working on some of the more foundational decisions, as you discussed, like what end markets do we want to be in, what capabilities do we want to have.
Adam Shibley:Sometimes we look at the mission, vision, and values of the company to really strengthen those before we start to acquire other businesses and make sure that more employees who are joining the platform are in alignment with those mission, vision, and values.
Adam Shibley:So.
Adam Shibley:It's a bit more foundational in the early phases of Shore, but as you start to grow and move throughout that phase journey, we're going to start to focus on some of the more major decisions that can affect your exit valuation.
Adam Shibley:Some of those things, for example, we'll be working with a company in January and really diving in deeply into their technology base.
Adam Shibley:Making very detailed decisions about what changes need to occur over the next two years within their technology.
Adam Shibley:And I think those decisions become a little bit more clear as you age throughout the Shore journey.
Dane Drobocky:Definitely.
Dane Drobocky:I also think it defers and manifests And different verticals of Shore through many different reasons.
Dane Drobocky:But some of those may be trends.
Dane Drobocky:So if you look at the food and beverage business, the way we facilitate a conversation around labor optimization is going to be different than that of a practice manager at a different clinic or an account manager for different accounts in the healthcare space.
Dane Drobocky:It's just going to look and feel different.
Dane Drobocky:And we're here and have seen that in the past.
Dane Drobocky:So we are able to adapt to it, customize your need to fit our strategic planning process that Sarah so clearly outlined and create maximum value as well as great time spent.
Dane Drobocky:It's like in the food and beverage industry, you're gonna see different trends that will impact the way our session is customizable that can be through health and wellness or sustainability and the impact that may have.
Dane Drobocky:And the different services we're offering or manufacturing of goods we are making technology integration as well or transparency and traceability and flexible product lines.
John Murdock:Yeah, I think there's variation by vertical.
John Murdock:In general, that we are aware of that the, whether it's workforce, uh, the types of workers that one company's working with in a healthcare company versus a food and bev company versus a business services, pest control company versus a roofing company like that, there's going to be some different dynamics there, the industry trends, whether it's a growing industry, a shrinking industry, whether it's being disrupted at what rate by technology, all things that we keep in mind, we know that a food and beverage industry Company on average is going to worry more about acquisition for new capabilities or new geographic touch and reach.
John Murdock:We know that in a lot of our healthcare multi site models, it's going to be more about just expanding capacity.
John Murdock:And so we know there's variation that is kind of thematic and that's a pattern that we can see, but we're aware of by industry.
John Murdock:by phase of your time in the hole at Shore.
John Murdock:And then we also make sure with that survey and all those other questions to, to identify what's the right issue for you.
John Murdock:Two healthcare companies in similar industries, one might need to talk about account management a lot more because it maybe just lost a big client, or it's trying to make sure it can land a big client.
John Murdock:While another group needs to talk about M&A because it hasn't had a successful acquisition in a year.
John Murdock:It's what the company needs to, um, and really it's what the company needs first and foremost.
John Murdock:We just bring our knowledge to try to help enable that.
Dane Drobocky:And one really cool thing we're doing on the back end is tracking all of this qualitative and quantitative data through a compiled database that will allow us to understand.
Dane Drobocky:What are the biggest things keeping companies up at night in phase one?
Dane Drobocky:Or what are the biggest things keeping companies up at night within food and beverage?
Dane Drobocky:What are the top initiatives in this industry?
Dane Drobocky:Or what is the overall just team alignment around their mission, around their vision, et cetera?
Dane Drobocky:Which is a really great tool that we show companies in session so they know how are they comparing against the rest of Shore and just Microcap in general.
Dane Drobocky:Really great stuff that the team's working on.
John Murdock:So.
John Murdock:Adam, and the team can chime in too, but what is the promise that we are making to a company that goes through our session?
John Murdock:Are we saying, if you engage with us, you will be successful?
Adam Shibley:No, we are not.
Adam Shibley:Wouldn't that be amazing though?
John Murdock:That would be great!
Adam Shibley:If we could promise success to each company we worked with.
Adam Shibley:I would be very happy, uh, and there would be no reason for anyone not to work with us, but when you think about it, um, it is a proven fact that consistent engagement in the strategic planning process can help deliver over two times your valuation at exit, um, if you're engaging in that strategic planning process over a three year period.
Adam Shibley:While that is true for some companies, it's not true for some others.
Adam Shibley:Uh, there are many factors that go into having a successful strategy.
Adam Shibley:You're going to have to update it with market trends.
Adam Shibley:It has to be the right strategy.
Adam Shibley:Uh, things change over the course of time.
Adam Shibley:You're going to have turnover within your management team, most likely.
Adam Shibley:So there are a lot of factors that are going to change after our strategic plan is set.
Adam Shibley:However, at Shore, we like to promise the process, not the outcome.
Adam Shibley:That's the same within strategic planning.
Adam Shibley:Our process is going to enable you ultimately to have more success than if you were not engaging in that process.
Adam Shibley:But we are not saying that this will lead directly to the perfect exit.
John Murdock:I think if, if someone were asking what's the value that we provide, I would tell them that we are going to help you have the best chance to maximize your outcome in this engagement with Shore.
John Murdock:And we're gonna make it better.
John Murdock:Like your experience going through it at Shore better.
John Murdock:The strategy and the strategic plan will enable you to have the best conditions to maximize value, to grow EBITDA, to have a successful exit event.
John Murdock:And by having.
John Murdock:your board, your investors, and your management team better aligned on that journey, you will have fewer headaches.
John Murdock:You will still have headaches.
John Murdock:Because it is not easy doing what we're asking you to do.
John Murdock:Um, and you probably wouldn't have signed up for it if it were gonna be easy.
John Murdock:But it will be drastically better the more aligned your team is with you on the journey and that's what we're here to help facilitate and do.
John Murdock:And so anytime that a leader needs something or wants help, we're here inside or outside of our engagement structure to provide that support, so.
Anderson Williams:If
Anderson Williams:you enjoyed this episode, be sure and check out our other Bigger.
Anderson Williams:Stronger.
Anderson Williams:Faster.
Anderson Williams:epsidoes, as well as our Microcap Moments and Everyday Heroes series at www.shorecp.university/podcasts or anywhere you get your podcasts.
Anderson Williams:This podcast was produced by Shore Capital Partners with story and narration by Anderson Williams.
Anderson Williams:Recording and editing by Austin Johnson, editing by Reel Audiobooks, sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.
Anderson Williams:Special thanks to John Murdoch, Sarah Giblin, Dane Drobocky, and Adam Shibley.
Anderson Williams:This podcast is the property of Shore Capital Partners, LLC.
Anderson Williams:None of the content herein is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security.
Anderson Williams:See the terms of use page on the Shore Capital website for other important information.
