Acquire and Innovate

by Neil Banwart

As we approach the two year mark at Little Engine Ventures, it is appropriate to look back and reflect on how far we have come in this relatively short period of time.  As you peruse our website, you read that ‘LEV acquires meaningful portions of traditional small businesses.’  How have we done with this mandate?  As of the end of Q1 2018, LEV holds significant (and in several instances complete) control over 6 relatively small businesses.  Are these businesses ‘traditional’?  It depends on the definition.  The six businesses provide a range of products and services to end customers, from non-GMO seed to roll off dumpsters.  What knits these businesses together?  It’s a combination of things.  First, these businesses are all within our prescribed ‘geographic moat.’  For a variety of reasons, at the current time, we are pursuing businesses within a 180 mile radius of our corporate office.  Next, it is important to understand that we purchased all of these businesses at an appropriate margin of safety.  Finally, these businesses are run by CEO’s who are both humble and hungry.  Buying small businesses and inserting leaders in this manner is a recipe for success.  Importantly, we have developed a streamlined process to acquire an increasing number of these small businesses over the next decade(s).

Our website also indicates a tilt towards innovation.  We (and our outstanding CEO’s) are not satisfied with the status quo.  We allow our portfolio companies to explore new and better ways of doing business.  Some changes can be made without external assistance.  In fact, current employees who have this mindset will often times come up with fantastic ideas which can transform the business.  Other times, LEV can help with a particular project.  Sometimes the innovation requires a new piece of software, or a new machine.  If the expenditure will result in a positive ROI in excess of our hurdle, we are glad to make the purchase.

I believe we have ‘checked both boxes’ of the mandate of acquiring and innovation.  Importantly, having a solid and repeatable process for acquiring these businesses gives us the ability to scale.  Then, once in the LEV fold, the innovation commences and does not cease.

We appreciate having you with us on the journey.

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