Geographic Density & Industry Diversity

Little Engine Ventures serves two primary customer types. The foremost is the local, best-in-niche service business owner who wants to sell his or her company to a family member or small group of employees but doesn’t want to strap the business with debt. We provide this group an alternative path compared to selling to a competitor or a larger “roll-up” firm. We help secure the future by absorbing the risk.

The typical roll-up strategy might beat us on price (maybe) and will absolutely be faster on making changes to the operations. The leaders of these firms are likely hopeful to sell the larger firm at a larger price to some still larger private equity firm. We don’t have a need for that. This is not high finance. This is basic blocking and tackling.

Our model is different. Some tell us it is harder. We have not found it so. We don’t live on airplanes and hotels. We are home with our families. We meet people and have rich relationships. Perhaps it is not harder because we have a knack for it?

We prioritize geographic density. We do this because of how important the people in our community are to us. We want to help people in our community climb. This includes our investment partners, who are mostly local, but it also includes our teammates.

Below is a map of counties in which teammates maintain homes. My home is included in this map. So is Mikel’s home.

In 2022 we began estimating our Profit per Capita. We can aggregate each company, and look at local impact versus competitors. As we help more people in the same area, we drive up our aggregate impact per person. We can find local maximums and rest in that zone. If we maintain numerous best-in-niche companies, we can parlay good experiences -across a diverse cross section- into great referrals. These referrals are great because they come in with shared values.

Below are Little Engine Ventures’ values:

When we think about our community long-term, we want to make it a better place. To accomplish this, we find it best to be helpful to prospective sellers regardless of fit. If we are not ideal, we try to make recommendations. We have helped numerous employees buy out operations –and have received no direct financial benefit. Instead, we get massive, long-term social benefit. Both the seller and the buyer become referral sources. By this manner, we steadily compound.

Along the way we must be courageous. For us, this often looks like humbling ourselves before a seller who knows his or her industry far better than we do. His team knows the industry better, too. We cannot show up and expect to bring expertise to something we’ve never done. And right here is where most investor-types get hung up thinking about our model. They think us fools. Where is your edge? Many prospective sellers also think us fools. So do the roll-up junkies. Why? Because we take a different attack angle: We confront the facts: we don’t know everything.

We started into agriculture because we “knew the space.” And we made huge mistakes. We went into autoglass because the fundamentals reminded us of another service business I had founded years ago. I also trusted the sellers. We admitted we knew nothing about autoglass. It has worked wonderfully. When I’ve tried to smash together cultures or grow faster than my managers’ talent, it has gone poorly. As a result, we simply don’t do roll-ups as a strategy. If I meet another autoglass seller we will run it under its existing brand. And it will be run according to the local general manager’s gifts. Each community is special and we want to preserve and extend the company’s roll within that niche. We are not trying to whitewash everything.

We have learned some things though. We like (and are competitive buyers) of local, best-in-niche service companies. Many of these have some unusual ratio of B2B and B2C mixture that allows them to beat the national brands in our backyard. Sometimes they’re number one, sometimes they’re number two. They’re always the best in their niche.

The result of this know-something, confess-real-risk-of-loss posture is that we must be patient. And we must weigh relationships much higher. We have found this an enjoyable and rewarding course of business within our community.

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