Tailwinds Edition #10

Chenmark’s Palmer Higgins on Commercial Landscaping

September 28, 2019


The name “Tailwinds” has a threefold meaning; 1) If you’re looking to build something special, like a business or permanent capital, you should position yourself where there is a tailwind at your back taking the form of changes in the economy, culture, cities, demographics, or some other factor. 2) Buying an existing company, rather than starting your own, gives you momentum and a head start, a proverbial tailwind. 3) The concept of positioning yourself in front of a tailwind relates to a Charlie Munger quote about fishing where the fish are, rather than a crowded shore or dock. Private company investing is a space with opportunity that most investors and institutions cannot touch, and that leaves the door open for smaller investors to build portfolios.


A while back I had a conversation with Palmer Higgins from Chenmark Capital about landscaping businesses, specifically commercial landscaping, something Chenmark has developed a specialty in. I wanted to learn more about what they found so attractive in the business model and what they do after acquiring a landscaping company. Here are the notes from that conversation, enjoy!

What about commercial landscaping companies is attractive?

  • Commercially focused, maintenance oriented landscape. (contracted revenue)

    • Sticky business: If I perform it’s unlikely I will be replaced by another landscaping.

  • Long term demand is there and it’s an enduring industry. (snow plowing services can be rolled in)

  • Fragmented industry, it’s possible to find the #1 player in a market without buying a gigantic company.

    • Because it is fragmented, the professional perception of the industry is low - bar for pleasing clients is relatively low. Doing things that are table stakes in other industries can serve as an advantage in landscaping.

What processes are table stakes?

  • Customer service, quality, good user experience.

    • How your bid packet looks, introduction & overview of your company, how you’re staffed, equipment you use, present yourself in a professional and sophisticated way.

  • They (Chenmark) went to a big convention on landscaping and sat in on break out sessions. The gist of the 30 minutes was responding to customer calls within 24 hours. They concluded that if this is the benchmark, they should be able to exceed that.

Do you often have to add these processes or are they ideally already in place?

  • They look for companies that have some institutionalization of the business. In order to scale further, all small businesses need to invest more into this.

    • Step one is making sure you have access to quality business intelligence in a timely manner. Enhancing this is where we spend a lot of our time right after closing.

Is there a lot of competition for these companies?

  • Becoming more attractive, especially in search fund community. 

  • Some PE backed plays on landscaping, haven’t seen a ton of that in the Northeast.

  • Landscaping and snow are separate, not much about the work that’s similar - becomes more complex when you combine services into one company.

To conclude our landscaping discussion, he recommended I listen to his podcast with DHM Landscaping to dive deeper and I pass that same recommendation onto you.


Capital Notes

How a Former Software VP Transformed an Idea into a Portfolio of 30+ Online Businesses in 4 Years

“Running any business is hard. Running more than 30 distinct internet businesses is extremely hard. We excel by taking a data-driven, lean, and scalable approach. Any success we have or lesson we learn in one business gets translated across the portfolio, which leads to very cost-effective growth opportunities. 

For example, if we find out having an easy-to-find support phone number is a major win when it comes to building customer trust, we put one on all of our apps’ sites. When we tweak a blog design to optimize for free trial signups and find something that works, we do it everywhere. We use the same services, and a pretty consistent tech stack across our portfolio, too.”

Introducing The Messy Marketplace Podcast

“If we’re still selling the book (you can pick up a copy here), then why release the same content for free? For starters, we don’t think of this as a replacement for the book, but more like a “Director’s Commentary” version of a film. Hearing the book’s contents will help you digest the core concepts, but the physical book includes helpful frameworks, exercises, a glossary, and our full due diligence question list, which we believe will continue to be worth the sticker price for those contemplating a private business transition.”

Finding Genius: Keith Rabois, Founders Fund

“The Lean Startup is a dumb and bankrupt philosophy for mediocre people with mediocre vision and ambition. The methodology minimizes the challenge of short term failure but it takes away the opportunity for upside. Startups are not bottoms-up driven exercises. By that, I mean that the job of a founder is to paint a picture of a better world and then deliver that. It’s not to study the world, ask people what they want in a better world, and then create that. The Lean startup suggests you run around and discover and find success versus you willing it to succeed. It’s casting a movie about a vision and then delivering on that vision in a way that sells tickets. That’s a completely different paradigm.”

BuiltWith is perhaps one of Australia’s most profitable online companies and has zero staff

“It’s a small team because I am trying to make it as automated as possible,” says Brewer. “Everything is designed and created so that users can do it themselves by simply signing up to the platform. We set out to make it as simple as possible and if there is a problem they can email us. The responses to those emails are also automated to a certain degree as we’ve created guides and videos showing users what they have to do in specific situations. There is also no outbound sales team. The free tool is what gets users signing up to the paid service.”

Stratechery: Neither, and New: Lessons from Uber and Vision Fund

“That is why the best solution to the employment classification question is to realize that neither of the old categorizations fit: Uber drivers are not employees, nor are they contractors; they are neither, and new. A much better law would define this category in a new way that provides the protections and revenue-collection apparatus that California deems necessary while still preserving the flexibility and market-driven scalability that make these consumer welfare-generating platforms possible.”

If you found an interesting article, podcast, or interview that I missed, please let me know, I’m always looking for interesting stuff!

Photo courtesy of Brenda Stonehouse