Partnered, Self-Funded Search: From Family Business to Search Funder

As this is my first post, and I want to get Search Funder for free this month… I thought I would reflect on my past and how it relates to my decision to found Stanley Mueller Capital Partners. This jumble of thoughts may be of interest to nobody, but I felt compelled to share my story. Hopefully, another searcher will read this and find some nugget of hope.

As the former business leader of a family company, I enjoyed the freedom to execute my long-term vision for success. I dealt with the short-term challenges of profitability, government regulations, and the ever-increasing needs of employees. With a staff of 3,000 employees, I found I spent equal time developing programs aimed at hiring and retention of employees as I spent on advertising to customers. We developed an industry first, Path to Success, for employees to strengthen our pipeline and increase our talent as we executed our roll-up strategy. This talented group of employees allowed us to expand into territory over 1,000 miles away from the home base while driving topline profitability.

In the highly competitive world of delivered pizza, our family business stayed ahead of the curve by consistently driving topline revenue through price-oriented sales campaigns. My Uncle is credited with developing the usage of car top signs in the industry (early ‘80s) after seeing the effectiveness of car tops on NYC taxi cabs. His maniacal focus on price spurred the “pizza wars” of the 80’s and 90’s and he is widely regarded as the person who invented the Two for Tuesday campaign. Sadly, the era of price was over when I arrived, and this forced an approach that was more relational. I forged relationships with our local communities and drove support through campaigns aimed at hiring employees and the benefits of purchasing pizza from our company. We developed a Domino’s first (for a franchisee) Corporate Social Responsibility report, to foster the culture of success among our employees, customers and the franchise system. Our partnerships with local initiatives furthered our market share. In my final year as President, our New Orleans market sold 40 cents of every dollar in pizza in the territory. This included pizza sold at supermarkets. Practically 1 in 2 customers purchased pizza from our brand and furthered the cash cow in the general New Orleans area. We have dominated the New Orleans market for over 30 years. I successfully piloted that cash cow for over 7 years and used that cash to execute roll ups in territories with heavy growth opportunities.

We used this dominant market presence to aggressively expand into territories where Domino’s was the number 4 or 5 player in the market. We used our aggressive sales and growth strategy to become number 1 in several Indiana markets before my departure. We grew from 115 stores to 192 stores under my leadership. We grew revenue from $115 million to $185 million. Our $5 million Indiana acquisition profited $400,000 in the first 6 weeks of operations as I developed an aggressive employee retention and marketing plan for our first weeks of ownership. This excitement drove better performance at the store level and our sales lift helped pay a major portion of the investment during our first quarter.

As with all things, my time at Domino’s came to an end. I had decided being the owner of a franchise business was not for me. I had to deal with too many adjustments to the profitability model from the franchisor. A franchisor is usually set on keeping returns for their units around $150k per 750k invested. Domino’s is no different and the never-ending conversation over Domino’s demanding more fees lowered my returns and became demotivating. I never truly owned my business with unlimited potential for growth. Add a family component to that, and it was too limiting to my potential in the free market.

What I like about search is the professionalism and opportunity provided. I want a team of people working on a business (not just myself). I want to share in equity with likeminded partners who share our core values. I believe the model developed by my business partner, Clay Stanley, and myself lends to a higher quality acquisition and more opportunities for investors to profit during our business hold cycle. I believe our reputations within the Leeds School of Business allow for unique sales opportunities to create heavy recurring revenue across a myriad of business opportunities.

As the Leeds School of Businesses first search fund, we are destined to acquire. We have too many advisors and fans at Leeds who wish to see us acquire a company. The true test of our fund will happen post close. When we make our first returns to our investors, it will validate the hypothesis that Clay and I are ready to be in the top 1% of all CEOs in the country in terms of our Industry, our topline sales growth, and our returns to investors. We believe a seller will be happy with our acquisition as they are entrusting their legacy to us. We believe our investors will appreciate our investment opportunity, future investment opportunities and the ability to expand their search network into the Leeds School of Business.

Our core values are to operate like a family business and treat our employees like family. We have budding families and we are looking forward to growing our business the same way we focus on growing our families: with mutual respect, love, and a passion for personal growth. My time spent in franchising honed my skills on retaining employees and focusing on the bottom line. Sales are inherent to everything I do, and the process of selling is similar to a basic checklist rather than an applied science. I learned what programs work and what do not. This useful skill is the special sauce that our firm has, and nobody else in the country can emulate. Our first acquisition will mimic this performance, as our two founders have the energy and forward vision to make it happen.

Clay and I met skiing and rock climbing. When we are stressed, we send big walls or send the sickest lines. I may be the best skier who also owns a search fund in the United States. If anyone feels otherwise, meet me at Loveland Ski area any Monday, Thursday, or Friday morning. We can settle it, and post our results on search funder. As a shameless plug, any investor who wants to click into some skis and get a tax write off doing it – gimme a call###-###-#### . You will find a fun, engaging team who skis way better than you.

I have been asked, “what’s different about Stanley Mueller?” I would say everything. We are a partnered search. We chose lower equity compensation to each founder (by percent) to achieve a more efficient pool of talent and acquire a larger deal poised for growth. My favorite mentor always said, you can’t put percentages in the bank. We chose to go after $1 million to $5 million in EBITDA with a minimum IRR target of 33%. Our IRR for base case deals should be closer to 55% and our growth estimates should be in the 100% range. We believe our expected returns and growth strategies will result in returns north of 100% IRR during our exit window. As a caution to risk assessment, we value our deals at our lowest reasonable outcome. This risk assessment coupled with growth opportunities eliminates significant market risk and allows our operations to drive world-class returns.

We chose to self-fund our search and deliver deals to investors that are investable. This lowers the lead time from Investor meeting to deal close, ensuring efficiency of capital outlays. We also believe the self-funded, partnered approach offers a perspective that we are betting on ourselves to deliver a deal. That seems to be the most difficult aspect of this whole endeavor, and Stanley Mueller’s seed capital is from the founder’s personal savings. We have capital to do a search for the next 28 months. We are both self-funded and have the drive to see our seed money develops into an acquisition. We will entertain an investor sponsor (or lead investor) who pays a small deposit to be named as the lead investor on our website. Our lead investor agrees to commit capital based on terms we agree upon. We believe an investor sponsor approach is not necessary but can give our firm more credibility in the acquisition of a deal.

As I reflect on my past, I look to my future. After receiving a large buyout from my role in Domino’s, I spent time pursuing my hobby of flying airplanes. I acquired a Cirrus SR 22 and achieved my instrument rating. As a pilot for over 22 years (with a license for 20 of the past 20 years), I learned how to handle emergencies with a patience, resolve and a focus on checklists. When your alternator fails, you have 30 minutes to land your plane. When your engine catches fire, one of the checklist items is to add gasoline to the fire. If you fundamentally don’t understand why, then you’re unfit to fly an airplane. What I learned in flying correlates to the business acquisition cycle: focus on your process, make your best choice in the moment and always remember to fly your plane. Too many pilots get mired in the business of reading their checklist (ie studying, living behind their computer, allowing problems to fester) and forget to turn away from the mountain where they inevitably crash. Plenty of investor horror stories from search (and we’ve heard a ton) explain how searchers “get in over their head” because they lacked the ability to translate their forecasts into executable plans that are attainable by the acquired staff. Some searchers get swindled in the search process, but those searchers (generally) lack the attention to detail to be successful. Some searchers get lucky, but at Stanley Mueller your success is a derivative of experience, team stability, and a maniacal focus on growth that drives long term value.

Looking forward to searching. I hope to be a valued asset in the space.

Glenn