Episode 13: A Strategic View on M&A - Part 2
Episode Summary
In the second of this two part episode with Chris Helmrath, Founder and Managing Director of SC&H Capital, we focus on pragmatic tips for business owners considering an exit or a capital raise, in a conversation that will inspire anyone looking for creative business solutions in the current environment.
Episode Transcript
Key Words Middle market business, risk taker mindset, clear strategy, simplicity in crisis, long term value, business owner challenges, creative opportunities, raising capital, investor role, lender interest, strategic growth, private equity, scenario planning, controlling variables, customer insights, operational transformation, innovation in delivery, joint ventures, capital partner selection, pragmatic strategies, COVID impact, financial challenges, distressed assets, business agility, investor risk management, entrepreneurship, consulting firm, leveraging capital, distressed companies, academic curiosity.
Speakers Chris Helmrath, Stephanie Chambliss Gaffin, Mark Gaffin
Transcript
Stephanie Chambliss Gaffin [00:00:00]:
Sometimes there is just too much good information in a conversation to pack into a single episode. So today we continue the dialogue with Chris Helmrath, Founder and managing director of SC&H Capital. Join us in this second part of our discussion with Chris as we talk about the mindset of a risk taker, the importance of having a clear strategy for any transaction, and the benefit of simplicity in times of crisis. Welcome to Right in the Middle Market, a podcast about pragmatic perspectives on running, growing and selling your business. We talk about the challenges, decisions, and most importantly, the actions business owners can take to create long term value in their companies. Welcome to Right in the Middle Market, a podcast about running, growing and selling your middle market business. On today's episode, we are so excited to be continuing the conversation with Chris Helmrath of SC&H Capital. If you missed the first part of this conversation, we spent time going through all of the wonderful qualifications and expertise that Chris brings, but I actually today want to just dive right back in.
Stephanie Chambliss Gaffin [00:01:10]:
And Chris, when we finished our last episode, we were talking about the role of the investor and the role that the investor can play in being able to start to think about creative opportunities. What are some of those, those things that can open up. And our goal here is always to make sure that we're giving really pragmatic advice to business owners. And so if you think about this from the perspective of the business owner who's sitting here saying, okay, I can see some of the opportunities, maybe I'm ready to raise capital or to join forces, but where do I even start? How do I go about that? What would you say to that business owner?
Chris Helmrath [00:01:52]:
But it's really understanding what it is that you're trying to accomplish. Do you want to be part of something bigger or do you want to live on the beach for the rest of your life? And if you really want to be a part of something bigger, it's understanding what that means to you because there are so many investors and opportunities to join forces. We may call it sell into, but join forces with an investor or strategic group where what your business has built in its competency would be highly accretive to what they're looking for. And the value that you bring and the importance that you bring to the table could be dramatic and huge and it could be the great new opportunity that a business owner is looking for.
Mark Gaffin [00:02:38]:
And Chris, just kind of thinking down the options of even if you're growing, if you want to grow by yourself for a second, then maybe move to the sale. But I think I was just on a conversation with a client client this morning and his concern is that banks aren't lending. You know, it's kind of a full stop blanket statement. And then, and I think we, we talk to capital providers continuously. You know, 10, 10 times a day I'm talking to somebody across the United States and, and if I think down the balance sheet from a senior lender to junior lenders to even to, to, to, to stay above equity for a second, I'm seeing people that are still interested in investing at this point.
Chris Helmrath [00:03:16]:
Are you? Absolutely. But you have to have a plan. You can't just show up and say, hey, I need money. But what we're absolutely seeing are the lenders and the entire lending community are truly eager to play a part in helping people grow. But it may take the owner's ability to describe what it is that they're doing because it may not be transparent to the lender, but with, and if they can do that, I think the opportunities abound.
Stephanie Chambliss Gaffin [00:03:46]:
Chris, do you think, are you finding that lenders. So let's take that company that maybe doesn't have a well articulated plan, but they keep hearing that there are people out that want to put capital to work. In my conversations, it almost seems like there's a bifurcation of really looking to work. Those companies that are strong, they have a good plan, even if they've had a hiccup, they've got a good plan. There are people lining up to be able to work with them, provide capital. But those that don't, don't have a plan or are just on a slow decline, hopefully not a rapid decline, are really having a tough time. Would you agree that with that bifurcation, are you saying something different?
Chris Helmrath [00:04:27]:
No, no, no. I, I do believe that. I think that without a roadmap, it's very, very difficult to even know where it is that you're going. But let's go back just half a step. I don't know what you're seeing, but what we're seeing is there are several middle market private equity firms that are absolutely carving out part of their funds to make as lending vehicles to get into companies. Because then it's an unregulated lending environment which could allow for greater creativity, which could then allow for their ability to play in the equity stack later because they've gotten to know you well and yet they can still bring some of their value add to the table, even if it's in a debt environment. But that entrepreneur that can see through the clouds, can see through the fog and articulate something that has value and meaning will have a whole lot better place in time than the person that's cowering in the corner hoping that this all goes away.
Mark Gaffin [00:05:31]:
Well, I mean, I think, you know, back when I started in commercial banking, the commercial banks were somewhat relegated to formula based, you know, lending against a balance sheet. And that was important. X percent of receivables, Y percent of inventory and then maybe Z percent of fixed assets. And I think they have raised their game over the time. And there's a lot of banks out there that are. To your point, both of you looking through that thesis, what is the actual value of the company? The whole concept upon the leveraged lending market, which is very robust and it was robust through the last cycle and I'm very confident will be as robust through this cycle. But you're lending against the enterprise value. So it's that thesis and it's an articulating what the value of that thesis is.
Mark Gaffin [00:06:15]:
And that's there from a senior, from a senior standpoint. You have banks, you have non banks. And so I think one of the things that's really interesting is there's just an abundance to your point of the private equity folks being in this market. There's a bunch of people with different mindsets actually able to lend and able to invest further down the balance sheet. I think that's really important for growth.
Chris Helmrath [00:06:39]:
But that's the eye that I brought and the thought I brought to the investor or the entrepreneur that's seeing through. The private equity firms that have available cash and aren't seeing the ability to deploy it in what was their traditional equity formed investment are seeing that opportunity because there are many institutional lenders that are in the amend and pretend game right now hoping that this will change. And there aren't as many that are articulating your position, Mark. And it's a great opportunity and I applaud them for coming into the middle market and even lower middle market and becoming a resource for entrepreneurs where there was no resource like that before.
Mark Gaffin [00:07:29]:
Right. And I think I saw back in the day you used to have that kind of bifurcation where the buyout firms came in and then they've even started to last year in kind of this how do we deploy capital in creative ways? You've seen some buyout funds and I don't think this is something you can take haphazardly. We're a control buyout fund now we're going to start in growth equity. There are people that can set up a different team to do that because it's a very different governance, it's a very different investment thesis to be growth. But it can make sense.
Chris Helmrath [00:07:59]:
Absolutely. No, absolutely. And you're seeing that happening and it's looking at the market bringing in the smarts, not assuming the smarts were there already because that's how we all get ourselves in trouble is when we think we're the smartest person in the room, when regardless of how smart you are, there's going to be somebody smarter. And it's making sure that you have the right people on the team to help you to figure that out.
Stephanie Chambliss Gaffin [00:08:29]:
So my question then would be, is this changing the way that investors are thinking about risk management? Because historically a big part of that was, I know my swim lane. We're in a space or a business model that we know, we know it very well. And you know, a lot of times we would see really good investors that said, you know, part of their differentiation was that they did what they knew and where they knew they would be successful. So now as you're talking about those investors starting to look at different models, different markets, different parts of the market to be able to make sure that they can put capital to work. How does that change the way that they are thinking about risk?
Chris Helmrath [00:09:08]:
Well, I. Let's just go. Let's go to the biggest part of the market. We've had an IPO boom of late over the last several years in the technology community. And wouldn't you say that that is one of the greatest risks that you can take? A company that hasn't fully taken off yet that you're going to put capital into in hopes that it's going to go to the moon versus I found this sleepy little manufacturer in Des Moines, Iowa, and I can swoop in because the owner loves me. I bough it for a song and now I can turn it into gold. There's. You got to do a lot of those Iowa deals to overcome the return you can get on one really good ipo.
Chris Helmrath [00:09:56]:
So I think what we're seeing is the investor community willing to take risk. But let's also agree that the capital markets and the interest rate curve is not very steep. So the risk premium is not great to overcome. And so therefore I think we're seeing more of this happening and that willingness to take risk on the investor side. But not all investors have that mindset.
Mark Gaffin [00:10:23]:
Well, I think one of the lessons we learned coming through the great financial crisis I remember I won't name the consulting firm, but came out with a study that 50% of private equity firms would be out of business that the leverage lending market would lock up. There was such a. They had a wall of debt. You know, there was just. They had to be refined and guess what? The banks and everybody found that you had good companies with bad balance sheets that can be addressed. You had private equity firms go back to their LPs and say it is better not to deploy capital stupidly or in a stupid fashion. It's better to just to say we're not going to deploy. But.
Mark Gaffin [00:11:00]:
But what we saw is in same thing around 2001 and then after the global financial crisis, those funds that were raised in that time to go find that company in Des Moines to roll up your sleeves and say I'm going to buy it not at huge silly discount, it was trading at 9, I'm going to buy it at 4. That ain't gonna happen. But I can find the buy it away that's a fair multiple and then structure the deal with deferred compensation or something that so that you deal with the uncertainty. Those funds have done so well. Right?
Chris Helmrath [00:11:31]:
Beautifully well. Beautifully well. And it. But again it's the articulation of a vision and it's the ability to connect with an owner's objective and show that owner that beyond just the economics the rest of their object can be met. It's incredible what really, really well run private equity firms have been able to do.
Mark Gaffin [00:11:55]:
Are you seeing more standalone companies doing any kind of thing to buy side to actually thinking about I want to go in a year or two but I think I maybe have some work to do to maybe expand from a two state operation to a regional operation and then go do you see those? Do you see people taking that kind of forward look?
Chris Helmrath [00:12:16]:
Absolutely. But it takes the mindset of a risk taker to be able to articulate a vision that so many entrepreneurs don't have because they've only known what they know. They continue to do what they did yesterday, expecting a greater return tomorrow. And in this environment that's a little more difficult. Unless of course you just happen to hit gold because what you offered, nobody else did. And go back to if you were the king of hand sanitizers you took off, if you could produce toilet paper, you were king there for a while. But that wasn't the case for 99% of the Middle market. And it's been the wherewithal to see through this that I applaud those entrepreneurs to be open minded to see the cracks in the crowd or to see the hole in the street that if they patch it it's smoother and they can be successful.
Stephanie Chambliss Gaffin [00:13:11]:
So Chris, I want to drill down into some very pragmatic strategies for business owners right after we come back from a word from our sponsor. Right in the Middle Market is brought to you by the Gaffen Group. A full service business consulting firm. The Gaffin Group works closely with middle market companies tackling the big challenges of today's environment in capturing the value enhancing growth opportunities of tomorrow. Too often dogma, platitudes or wish lists get confused with strategy. Then it's no small wonder that execution can be muddled. The Gaffen Group principals work closely with company boards, executives and their teams to seek pragmatic, tangible results. They provide comprehensive advisory services across strategic financial, operational and merger and acquisition capabilities, all framed by the fundamental belief that real strategy drives real results.
Stephanie Chambliss Gaffin [00:14:05]:
The Gaffin Group is focused on delivering robust, practical insights and fact based pragmatic solutions. Their services are designed to support their clients profitable growth and sustainable long term value creation. Go to gaffingroup.com to learn more about how the Gaffin Group can help you and your company. Welcome back. We are here with Chris Helmrath of SC&H Capital. And Chris, I think you've had so many great points and always bring such a wonderful perspective around how business owners and deal professionals can be thinking about this particular environment. One of the things that I love to do and you know me, you know I'm a pretty pragmatic person and so I want to ask you kind of a couple of questions around this concept of if you're the business owner and let's take a couple of different scenarios and start to say what pragmatically can a business owner do? So let's start with, I always like to make sure that we're speaking to that subset of business owners that they're frustrated, they're scared. They are in a business or an industry that for whatever reason was hit particularly hard, whether it's their industry sub segment or just something about their business and they're feeling stuck, they're feeling frozen and they're listening to this and they're thinking, okay, I know I should be seeing opportunities, I know there's something there I should be seeing.
Stephanie Chambliss Gaffin [00:15:29]:
And I just, I'm frozen and I can't see it. So what's your favorite tip? Very pragmatic to somebody who's feeling stuck.
Chris Helmrath [00:15:36]:
So if I go back to my teaching days, I'll take you back to the early 1970s where when the oil embargo hit the world and certain companies just could not get through that. But a little company over on the other side in Europe, Royal Dutch Shell did. And through a gentleman whose name was Pierre Wack, who had deployed the concept of scenario planning within Royal Dutch Shell, they had actually thought through, what would we do if an oil embargo hit? And the first thing that they focused on was, what I can and I cannot control. And it was through that simplicity of that that they had built a plan, that when this happened, they went to the shelf and said, we have a plan, let's enact it, instead of, let's scurry, let's scamper, let's go everywhere to figure it out. And the concept of scenario planning had been out there, but they were the real first corporate giant that took it and became so feasibly strong that they were, I believe at the time, at the end of the oil embargo, they had gone from small and obscure to the fourth largest oil provider in the world. And it's as simple as even thinking of a farmer. A farmer could have been hit by drought, could have been hit by crop disease, could have been hit by insect, no different than we've been hit by the pandemic happened overnight. Let's say they had no idea it was happening.
Chris Helmrath [00:17:22]:
You're now a farmer. What do you do? And you panic and you say, oh, my gosh, my crops are ruined. I'll never be able to do what I do. But if you really stop and think about it, you can, because you can control what you grow in the ground that you have. And if you just stop for a second and do a little analysis and say, given the conditions I have, the drought, the insects, whatever it might be, is there something feasible that I can put in the ground that can withstand that, that I cannot control and allow myself to be successful? And it's that simplicity that the owner has to stop and really give thought to and think, okay, now where can I go? Is the first thing I work with within anybody's case of figuring out where they go next.
Mark Gaffin [00:18:15]:
But would you ask a question on that? We working with a lot of senior lenders. I know that one of their biggest gripes back in the fall was, you know, every time I go to credit committee, I've got some. Some wiseacre on the committee saying, okay, what would this, what would this company look like in. In the global financial crisis if that hit again? You're like, oh, my gosh, eight years ago, please. You know, how. How are we going to get to investment committees and credit committees where it's going to come up, hey, so what if the world shuts down for X period of days and it's not that you don't plan for it. I think in your scenario you've got to actually think about it. But I think you've got a probability weight it to some level, right?
Chris Helmrath [00:18:53]:
Oh yeah. This is not an algorithm where you weigh out a million different scenarios. You've got to pick a few. But it still gets down to what I can and cannot control. So if I was going in front of that loan committee, you could, okay, these are the things that I could pivot on if we go back to our first segment. The things in which I can be agile. And if this was happening, I could do this. If this was happening, I could do that.
Chris Helmrath [00:19:20]:
But these would be the two or three variables I would go to first to try to find a solution to come out of based on what it was that I was being hit with and at least have thought those out that you could articulate a plan. This is not a game of run a million scenarios and try to figure out what the outcome's going to be. But if you really do figure out at the core what you can do, it's incredible how you can get through many of these myriad of problems.
Mark Gaffin [00:19:51]:
But one carry on to that is thinking about game theory. Not to go into the depths of game theory, but I think one of the things where people who are saying, I'm just going to pause, I'm just going to just do nothing right now, you know, that presupposes that no one else is doing anything. And I think that's very risky because your competition is not stopping, your customers are not stopping, their needs are developing, morphing. And I try. We all do, I know we all do try and tell, you know, entrepreneurs that look, if you, the minute you stop growing, there's a whole bunch of knock on things, whether it's retention of talent, whether it's attraction of capital, whether it's retention of your, of your clients. And from there is as part of game theory, you've got to think of the response to your decision.
Chris Helmrath [00:20:37]:
A perfect example. Think of the fast food business for a minute. All of a sudden Covid hits, it's completely shut down. You can't go into a restaurant, you can't go anywhere. But voila, through an app, I'll deliver it to your door, touchless. Or instead of going into Starbucks to get my latte, I can go on my app and six to nine minutes later, it's sitting there waiting for me. It's been paid for. All I have to do is run in with my mask on and out I go for businesses that didn't think of those applications and they all had the ability to do it.
Chris Helmrath [00:21:14]:
But the ones that jumped on it first got that first mover advantage. And the ones that said, I'm going to do nothing were shuttered. And it's. We see it everywhere. Who would have ever thought that Chick Fil A delivered? You wouldn't have. You wouldn't have. But voila, they do. And it was not so far reaching.
Chris Helmrath [00:21:36]:
This little itty bitty company called Domino's or this little itty bitty company called Papa John's had been doing it forever. And this little itty bitty company called Uber had all of these component pieces that when brought together, they were things you could control and if you were ready for it, you could enact it.
Stephanie Chambliss Gaffin [00:21:56]:
I love the. Back to one of our points from the prior episode about innovation and you talk about Domino's. One of the things I love when they started doing contactless delivery was they. I don't know if you saw this, but. So they had kind of like a mini box. It was actually a little stand about an inch high. Because they started to think, what matters about the pizza is that it comes in, it's hot, and if I have to leave it sitting on your front step, it's going to get cold. And so I love it.
Stephanie Chambliss Gaffin [00:22:22]:
They made a little pizza pedestal.
Chris Helmrath [00:22:23]:
Correct.
Stephanie Chambliss Gaffin [00:22:24]:
And for their contactless delivery. And again, to your point, it was saying, okay, obviously one of the things that matters to our clients is the temperature. You know, it matters to our customers is the temperature. What can I do? I can't hand it to them, which is my typical approach. So what else can I do? Hey, I know how to make cardboard boxes.
Chris Helmrath [00:22:41]:
Exactly. And that's. And so oftentimes we'll hear business owners say, oh, I can't do that, it's too difficult. But when we see the largest of companies, and let's take the largest company in the world is Walmart, look at the transformation that they've made in online, in order ahead, drive up and they'll put it in your car. So if somebody that large can be that transformation informational that quickly, I have a hard time believing that the middle market business owner can't do the same.
Mark Gaffin [00:23:13]:
Well, and one of the things I think would be interesting, I'd love to find out who came up with that little, that little rectangle. I bet it wasn't the, you know, Ivy League marketing person somewhere. It's probably some very practical person in a shop in Oklahoma that came up with it. And it is brilliant.
Stephanie Chambliss Gaffin [00:23:30]:
It was a driver. Guaranteed it was a driver.
Chris Helmrath [00:23:32]:
Yeah, but the point is that you stopped and you asked. And it's no different than understanding objectives. If you involve your employees because they know sometimes what you don't, and you talk to your customers and you say openly, let's have an open discussion, that's where innovation happens. That's where change can occur. That you can come back and go, wow, we didn't produce that yesterday, but we could produce that tomorrow, and voila, it happens.
Stephanie Chambliss Gaffin [00:24:03]:
Okay, so I asked your pragmatic tips for the person who's stuck, and hopefully that listener is coming away. They're inspired, they're excited, they're getting some ideas. Now I want to talk, ask you about, let's talk about the business owner that says, you know, I do see some opportunities. I do see some new ways that I could maybe enter a new market or a different way to do things, and really a growth opportunity, but I need capital to do it. What would you, what would you advise a business owner right now? What should they be looking for in a capital partner? And has that changed from, from before?
Chris Helmrath [00:24:39]:
Well, let me come back first, Stephanie, and let me ask the question, do they really need capital? Because do they need to build it internally or could somebody else provide it through a joint venture or some other kind of development that allows faster go to market. Better go to market where one plus one actually equals more than two. And I think we've gotten so far away from that that we immediately think, I've got to build it, I've got to do it, I've got to go raise money, where the person down the street may have something and they're not applying it in the way that you are. Back to that investor conversation of earlier. And if you can be entrepreneurial, articulate a vision and articulate how that person, if they came together with you in that aspect, could make their world better, you win because you didn't need that capital. You were able to go to market faster. And they'd already learned all the lessons about what didn't work that you would have taken so much longer to do. So the first thing I would say pragmatically is let's not go out and try to rebuild the world, what already exists, that if you combine it with what you do and you can put something together, more power to both of you, faster, smarter, better.
Chris Helmrath [00:26:00]:
Now if it is that you have to develop it Yourself. That's where Then we go back to the conversation of I need to find smart money, not dumb money because smart money will see the value and won't put up the hurdles of balance sheet ratios and cash flow coverage and excess cash recapture. All of those things that hinder an ability of an entrepreneur to grow but that are typical in a capital environment. And it's finding those people that would be willing to see your vision that you don't have to teach your business, you don't have to teach your industry that when they hear your story they're like gee, I wish I had thought of that first. I bring something else to the table in addition to capital. That's where we see things happening fast and they tend to be more powerful.
Mark Gaffin [00:26:51]:
I look at people that at some level might even be as we talk about the future, they're still, still concerned about the survive, save the ship. Right? Every, every alarm bell was going off on the dashboard in March and April. And I would tell people in the entrepreneur if you're here and you have a company that is surviving, you have a lot to be proud of. You have a lot to be. You've got a company that has a reason to be. How we got here we can work on and I think we work with a lot of people and we call them small T turnarounds. You know, kind of going back and figuring out where did that margin, how do we get margin back, what's our cash flow forecasting, how can we be a little robust about that, how do we deal with communications with, with that providers so that everybody's on the same page to your point earlier, is bought off on where we are. Nobody I don't think should be embarrassed about where they are in the, in the conversation today.
Mark Gaffin [00:27:43]:
But what I think what we're trying to say is, is lift your head up. There's, there's opportunity out there. There's probably much more than you actually believe there is and there are people that help you find that.
Chris Helmrath [00:27:55]:
Yeah. And I will be self serving for a moment. I look at some of the things that we've done as a firm over the last several years just in that area where it was, I don't know that I can build it myself but that we need to add greater value for our clients. So in the area of healthcare, we've been doing a lot of work with large hospital systems, academic medical centers on helping them figure out where do I go, how do I get there if I have to to divest, et cetera. But the piece that we didn't have was the deep operational understanding of how do the component pieces in there working together make accretive financial sense. So we joint ventured with firms that brought that to the table. So when we now speak to people in the market, whether that be hospital systems or SNFs, nursing homes, etc. We're coming at it with a team of folks so that if they say, hey, I really need this, we already have it there.
Chris Helmrath [00:29:02]:
Because we found those people that were leaders in their field and didn't try to say that we had to be that person, but that collectively and together we do that. What's really interesting, and we'll see where this goes, but we were able to bring on a group of investment bankers that specialize in special situations or distressed cases. And that I definitely know is a very specialized world. If all you do is walk into a bankruptcy court and you hear acronyms and words and numbers that you've never heard before and processes that are very, very different, you realize very quickly that just because we can sell businesses in the healthy world doesn't mean that we're qualified in that world. And by now having seven investment bankers that have done that and over 600 transactions where they are deemed experts in over 70 of the bankruptcy courts in the United States, we're actually finding that businesses that don't know what their options are, if they feel they're at that end of the scale, those options are as bountiful as we've talked about in these two episodes, but in a different way. And just because you've been hindered, be it because of COVID yes, it may have eroded your balance sheet, but it doesn't mean that you don't have strategic value to somebody and that there isn't a way to take your business and move it to the next level. And that ability to understand that, that the owners have traditionally not seen, because it didn't happen over years, it happened overnight. And it's unfortunate, but it's not to say that there isn't hope and opportunity.
Chris Helmrath [00:30:45]:
It's just making sure that you know the options that you have and many of us aren't as aware of. But I'm proud to now have a team of seven people with us that have that deep skill set and are be able to bring advice to folks that heretofore we would have not been able to do so as an entrepreneur, I drank my own medicine and did that. And I would have to hope that that will come to fruition for us in the long run and for the clients that we work with.
Stephanie Chambliss Gaffin [00:31:15]:
So Chris, I think on that note, one of the things that we like to do here on Right in the Middle Market is to always wrap up again in that spirit of always being pragmatic. You've offered wonderful perspectives and advice throughout both, both the first part of this episode and the second episode. But I'm going to ask you to boil it down. So if you could give only two pieces of very pragmatic, tactical things that a business owner could do today, what would be your two top tips?
Chris Helmrath [00:31:43]:
And I've said it now numerous times. Talk to your customers. Really know who they are and what they have because if you've been providing them value, they'll see you as a value provider and it will give you many opportunities to pivot and be agile or maybe just bring something that you didn't know about because nobody else had asked them that question. And that also goes to your employees. What else could we be doing? What else might you bring to the table because collectively they're your greatest asset. We all hear that whether you're in manufacturing or in the service business. Business that would be from that standpoint. And then read, read a lot.
Chris Helmrath [00:32:26]:
I would I actually tell people stay away from social media. Stay away from all the talking heads and really dig in and be academically curious. Don't accept somebody else's word that this means that go take a little bit of time. There are academic journals, there are quality places to go for business owners to really understand and when really are pragmatic because you've allowed yourself to be smarter and not taken the advice just to somebody else that you now believe makes you smarter combined with really knowing your customer, you're in control. Back to my last point. What you can and can't control, you can control how you communicate and you control how you learn.
Stephanie Chambliss Gaffin [00:33:12]:
Maybe we can twist your arm to help us with a reading list of a couple of your favorite things to read that we can put in the episode notes.
Chris Helmrath [00:33:19]:
You know it's, it's, it's really interesting. Whether it be academic books, we can go back to Michael Porter's writing of competitive strategy in the early 1980s. And for people that don't know, he's still probably seen as the dean of corporate strategy in, in business schools, be it he's at Harvard and but his book is still exceedingly well read and known all the way to some of the real interesting accounts of where business owners have told what they went through and the lessons that they've learned. Be that through the Wall Street Journal or even through videos. The mind of Bill Gates on Netflix is an incredible view into how he as an entrepreneur thinks. And it really makes you realize that that didn't just happen overnight. He wasn't given just a gift, but he is an incredibly well read person. And, and whether politically you agree with the stances that he takes or not, the stances that he takes are because he seeks to learn and he doesn't allow any one point to be that point, but he seeks whatever it is that he's trying to read about, reads from multiple facets from left to right, from up to down, and makes his own decisions.
Chris Helmrath [00:34:36]:
So I don't have any one book that I espouse.
Mark Gaffin [00:34:40]:
Well, I will tell you this and this is the God's honest truth. Working on a blog post about strategy, kind of reimagining strategy. And one of the first place I start is Michael Porter. And I actually went back and pulled his is what his strategy was. The HPR article that he does when he talks about people will confuse operational efficiency. Yep. 1984 I think was 85. 84.
Mark Gaffin [00:35:04]:
85.
Chris Helmrath [00:35:04]:
Now the actual, the actual book because I do have it here on my stand that was Originally published is 1980.
Mark Gaffin [00:35:13]:
80. Okay. And it's, and it's still, you know.
Chris Helmrath [00:35:17]:
It'S still, it's the bible of this. And if you look at and, and here's the little tip I'll give as the professor for a second, everybody gets caught up in his five forces and how you approach markets. But the subtle piece that he brought out, and I bring this to every single customer that we talk about. If the two key strategic points, one, can you be a low cost provider? That doesn't mean low price. It means can you find a way to deliver what you're seeking to deliver at the lowest manufacturer to produce cost, which allows you competitive advantage against others. And number two is to be different. And in the book he says you better at least have one. But if you can have both, more power to you, you can take on the world.
Chris Helmrath [00:36:10]:
And that's what I would say out of that entire book is the most important aspect as a professor that I would give to any business owner without having to read the book. They're your cliff notes. You don't have to go through a two year program to get that degree. But if you can do that, you can win.
Mark Gaffin [00:36:26]:
Well said.
Stephanie Chambliss Gaffin [00:36:27]:
Well said, Chris. Thank you for joining us.
Mark Gaffin [00:36:30]:
Yeah. Well, hopefully we can have you back. I think there's a lot of topics I would love to Kenya, I know we've had some great breakfasts in the past talking about some of these theories, real options, game theory, how you apply some of that actually to middle market strategy. And I think it's, it's so important. Clayton Christensen, we could talk about a lot of these folks. Michael Jensen, one of my favorite professors. So would love to have you back and I wish you the very best to you and your family in the second half of 2022, 2020. Would you, can you give us any kind of update on the, on the personal front?
Chris Helmrath [00:37:07]:
On the personal front, we now have a second grandchild. So my oldest son and his wife had a baby girl a month ago. So that is great. And we've had the ability to see the family over this time period. Not all family, because that has been unfortunate that the older generations have been somewhat secluded and that is the smartest way to go. But with things like facetime, it's incredible what you can accomplish. Accomplish.
Mark Gaffin [00:37:35]:
That's terrific. Well, you will find a way. You always do.
Chris Helmrath [00:37:39]:
Yeah. So that's exactly right. You find ways through it and again through joint venture. I didn't create FaceTime, but I partnered with them to be able to use it.
Stephanie Chambliss Gaffin [00:37:49]:
Wonderful. Well, Chris, thank you again. I'm Stephanie Chamblis Gaffin, and you've been listening to Right in the Middle Market, a podcast about running, growing and selling your middle market business. We'd love to hear your comments about today's episode or ideas you may have for things you'd like to hear about in the future. Send us a message on LinkedIn or drop me a line@podcastaffingroup.com and don't forget to subscribe to hear more pragmatic tips. Until next time, be well and be giving.