Operational Thesis (1/3): We bought a business. Now what?

Dear Investors,
We hope you had a restful weekend.
With our investment thesis nailed down over the past 2 weeks, Zachary and I have been extremely busy evaluating targets from brokers and accounting firms. We have also come out with a company name, thanks to the inputs from many of you. This week, I would like to pen down our operating philosophy, from the time we take over the business to managing and growing it. Our objectives are broken down into 3 phases: (1) preserve value through its transition phase, (2) strengthen its foundations and optimize for reinvestment capital, and (3) reinvest into long-term growth. Over time, and with feedback from stakeholders and our advisors, we hope to refine our approach and develop a playbook.
Operational Thesis (1/3): We bought a business. Now what? The real work begins. We’ve taken over the business, and installed ourselves as the new chief steward of the ship. Where we set sail is clear: to increase shareholder value through levers like YoY growth, improving margins through smart operational improvements, optimizing the use of capital and reducing risks over the long term. To achieve this, we need to acknowledge that this journey is a marathon - a consistent, progressive journey.
The Importance of a Smooth Transition Instilling change requires a delicate touch. We will be leading an experienced group of people who have successfully identified the ingredients and created recipes in bringing success to the business to date. Through that process, many cultures, values and communities, whether desirable or not, have been formed organically, formally or informally. This includes getting those favors from your colleagues, processes that are not documented but are second nature to many, who really call the shots or just some additional unofficial discounts from vendors.
Tectonic changes may not be necessary right at the start. We all have good ideas on how to make a business better, but need to keep in check our enthusiasm in introducing drastic changes. Most of these changes can wait until we get a deeper understanding of the business and a firmer grip on the organization. We need to establish trust by seeking to understand, be empathetic through open communication and consistency in our actions and decisions. In time, once trust is established, only then will transformation take place.
Here’s sharing how we would approach the transition phase.
The Transition Phase: Keep Calm and Engage The first couple of months post acquisition, up to half a year, is the most pivotal. Our objective here is to preserve the value of what has been built and minimize leakage/losses. Acknowledging that there will be a lot of unavoidable doubt, fear-mongering and gossiping emanating from all corners of the office, we need to display our best leadership and people skills. The underlying principle here is to get a genuine and deep understanding of the business and organization as quickly as we can.
1. Business Nuances: The Seller(s), Ecosystem and Advisory Board Even if we are a perfect fit with our background, there will be a steep learning curve as new business owner. First order of things is to ensure the seller is adequately incentivised to stay on, minimally as an advisor. This would provide a generous beachhead, smoothing the operational transition, lessen any resistance from employees who are fiercely loyal to the seller. As part of our due diligence, we would have identified the key support structures to the business. We will meet with customers, trade associations, and critical vendors. It is crucial that we prioritize the transition of these relationships and start to build our relationship directly. Some could also assist Zachary and I from an Advisory Board standpoint - acting as sounding board, making sure we avoid any critical errors along the way.
2. Communications: Clarify, Feedback and Continuity It’s crucial we introduce ourselves and articulate our vision through town hall(s) complemented by 1-on-1s and other modes of communications. These artifacts should detail the leadership transition including specific tactical steps on what to expect in the next coming months. Importantly, we will assure that all employees will not see any immediate change as they will wonder if they will lose their jobs. Proactive and over-communication grants clarity and minimizes any guess work. Should we not communicate well, the staffers would form their own versions of reality, creating diverging paths of strategy and execution. Left unchecked, we will be spending a lot of time on realignment, significantly lowering the possibility of instilling positive change. Also, establishing a quasi safe space is important. The word “quasi” was a deliberate choice, not as an excuse for half-efforts, but an acknowledgement that establishing trust is not a straightforward concept and only earned in time through consistency. Our intention is to create anonymous channels of feedback with opportunities for us to address these feedback in an open forum. Whistleblowing policies can be put in place as well to protect those intending to assist the growth of the company from a healthy, constructive place.
3. Finance: Taking Control of the Cash Flow Access to the company’s bank account allows us to monitor its financial health. The biggest risk is large unplanned cash outlay wiping out any positive cash flows and reserves. We will start to track income, expenses, receivables and liquidity, at least on a weekly basis, which will inform our decision-making. In addition, we will set up a process whereby we approve all payments before they go out, with any unnecessary expenses being halted immediately, and commence a 90-day rolling forecast of our upcoming expenditure to ensure that we have the necessary liquidity to pay for upcoming major expenditures e.g. payroll, rental leases. This process will help us avoid cash crises by identifying early when cash gets tight so that we can redouble our collections effort, slowing payment of accounts payable or even arranging a line of credit at a bank. The next step would then be to identify and address the business’ genuine financial weaknesses which involves assessing revenue persistence, contract continuity and operational strengths and weaknesses. This in-depth understanding is vital to make informed strategic decisions down the road.
4. Operations: People & Processes Understanding the culture of the organization is essential to our success, and we do that by engaging employees at all levels. As a new manager, we see the power of informal meet-and-greets which serve as opportunities to map out the soft power landscape and reveal influential figures which often aren’t in the org chart. These figures typically wield significant soft power in the form of a substantial circle of influence and likely coupled with deep technical know-how/expertise. We listen to understand the motivations behind these individuals and commit to support them in that journey. Observing daily operations and workflows as detailed as possible may sound trivial but many operators go too shallow, and do not seek to understand the basis from a first principle perspective. This misses the opportunity to unveil insights into how the company functions on a practical level. We will spend time shadowing various departments, learning firsthand about the challenges and efficiencies of the existing process. Document them as well as we can.
We’ll stop here for this week. The first segment of our Operating Thesis, where we focused on the transition phase, is rooted in humility, respect and continuity. We seek to be a sponge to absorb what had worked for the business thus far - acknowledging sweat, tears (maybe blood) that had been spent. Our job is to preserve the good work and culture, as aligned with our vision. Lastly, is to provide a genuine safe space for the existing team to have a peace of mind and focus on building the business together with us, as the new owner.
Next week, we’ll talk about strengthening the foundations of the business and optimizing with a long term growth in mind.
Organization Update: Welcome Kyle for Joining us as Board of Advisor! A search company, centered around M&A and operating functions, is heavily focused on people. We are only as good as the people we work with and we need access to incredible talents - to join us on our journey, to be on our board as directors, or just to coach us. With this backdrop, we believe that Kyle is best positioned to advise us. Kyle currently leads Egon Zehnder’s CFO and Audit Chair practice in Singapore and is an active member of the Financial Services, Technology and Private Capital practices. Prior to joining Egon Zehnder, Kyle was the Vice President of Group Corporate Development with responsibility for M&As, investments, strategic partnerships, capital raising, and investor relations of GoTo, and was part of the team that consummated the Gojek-Tokopedia merger and its eventual IPO. It was during this time that Zachary got to know him, as he was Gojek's portfolio manager with EDBI. Kyle subsequently moved to GoTo Group’s fintech arm as Group Head of Strategy, overseeing the business’ strategic direction and corporate planning apparatus. Earlier he was based in Abu Dhabi with the Abu Dhabi Investment Authority’s Private Equities Department focusing on primary funds, co-investments and direct investments across Asia Pacific. Kyle started his career with McKinsey & Company, advising private equity funds, principal investors, and on corporate restructuring situations. Kyle earned a Bachelor of Accountancy with honors from Nanyang Technology University and an MBA from INSEAD in France and Singapore. Outside of work, he is passionate about private markets, advises startup founders and first-time funds, and is an active mentor to students and graduates of the Nanyang Business School. Kyle is a loving husband and a father of one daughter. He loves going on road trips with his family, spending time with his daughter to experiment with food and pastry in the kitchen.
We are really excited to have Kyle on board with us!
Our Key Asks: Thank you for looking out for us If you have made it this far, thank you for reading. We would very much like to stay engaged with every one of you as much as we can. Please reach out to Eric or me if you:

• Have any questions on our operating thesis or even a related topic in mind that you would like to hear our views on in the future,
• Understand the corporate secretariat sector well,
• Know of any potential investors keen to invest in private companies.
  Upcoming update next week: Operating Thesis (2/3): Strengthen its foundations and optimize for reinvestment capital
  Have a stellar week and see you soon!
  Best Regards, Eric and Zachary p/s: If you missed our Investment Thesis over the last 2 weeks, please find it here.