SWITCHING FROM SEARCHER TO CEO MAY REQUIRE A NEW MINDSET
SEARCHFUNDER INTERVIEW OF GREG GERONEMUS
We spoke with Greg Geronemus (HBS Class of[redacted]who acquired and runs smarTours along with his Harvard Business School section mate David Rosner.
After the recording of this interview, Greg and David successfully achieved a recapitalization of smarTours by Summit Park, a Charlotte-based private equity firm. Greg & David will remain co-CEOs of the business.
In this article, Greg looks at his transition to running a company from his vantage point of several years into operating, especially as co-searchers and co-CEOs.
What do you wish you had known about searching that you know now?
In advance of the search, I wish I had known just how hard it was going to be. The search is taxing mentally, emotionally and (probably due to lack of sleep) physically as well. I would have conducted the search anyway, but perhaps I could have prepared my fiancé (who is now my wife) about the grind that was going to be taking place over the life of the search. Aspiring searchers don’t have a sense of how challenging the process actually is. This pursuit is painted in an overly rosy light. And, it is indeed a wonderful option, but it is very difficult.
Your personal support network is very important. I was lucky enough to have a very supportive wife, family and friends. I would just give them a heads up: “It’s going to be a grueling year or two.” It came more of as a surprise. The search fund process was described as a romantic pursuit of a business to become the succession plan for a business owner and to provide liquidity. It would have been nice to give close friends and family a heads up that not only was I was going to be entirely consumed for an extended period of time, but also that I was hoping to lean on them. Luckily, as the journey unfolded, I was able to lean on my support network time and time again.
What do you wish you had known about operating a business that you know now?
I wish I had known or been told to drop some of the scrappy “beg, borrow and steal” mentality that I had used in buying the business. By that I mean, during the search, the clock is ticking, the money is dwindling, you have to stretch the money as long as possible. You’re asking for favors from as many resources as possible. Your only expense is the relatively modest salary. It would have been helpful to hear from someone, “With the positive EBITDA and profitability you have, it is okay to hire and get additional resources to help you accelerate, get yourself more leveraged.” David and I both really internalized the scrappy approach of not spending a dime. It took us a couple of years to realize that we could be a little looser with the purse strings. Making that shift to a more open-minded approach helped us turn the corner from a growth standpoint.
Tell us about being co-searchers and co-CEOs?
Having two of us was invaluable in the search phase. We were able to cultivate more leads and to maintain our pipeline. About six months into our search, on October 11th of 2012, we found our business and closed the deal on October 11th[redacted]It could have gone faster, but we were working on other things and the owner got cold feet. We, however, were able to maintain our pipeline. It was helpful from a defensive standpoint in having a second set of eyes on the work and diligence for the ultimate acquisition. Also, it was helpful from a capital raising standpoint. We brought different equity investors to the table. We were able to buy a larger company than we had anticipated. We also had interns. Some searchers think they may be able to approximate a partner through using an intern; there’s nothing like a partner who is equally motivated.
As co-CEOs, we accomplish more. Where we disagree, we get to a better place by having to negotiate with each other. More often than not, we arrive at a better decision, even if we move a little slower. We have different domains that invariably overlap. We let each other breathe. I can’t imagine doing it without a partner. There are lots of great success stories of solo searchers. However, I’m very glad that I had a partner.
How did you become partners?
We met in business school and were in the same section. We both articulated that we wanted to do a search fund. I wasn’t sure that I could do it because I could only look for a business in the New York area. That geographic restraint was a no-no from a search perspective. Yet, David had a similar constraint. David and I had relatively similar backgrounds, but approached things quite differently. We viewed those differences as a strength that we could turn into an asset.
Tell us about the culture of the new company?
In many respects, we liked the culture that existed it was one of hard work. We stepped into a culture where people put their heads down. We became increasingly aware that even experienced people at the company didn’t have autonomy to make decisions. Over all, there was a lot about the culture that we liked.
I’ve learned a tremendous amount. I don’t know how others interpret the role of being a young CEO. For me, it was more about being a young entrepreneur and feeling like the stakes were extremely high. Indeed, the stakes still feel extremely high. David and I raised capital from everyone who had resources to invest in the deal. That weight led to my being (and Dave as well) pretty darn cautious in how we ran the business. We’ve shifted that recently as we’ve paid down the debt and gotten our feet under us. We’re now more on the offensive and less cautious.
As first-time business owners, we raised a bunch of debt and from everyone we knew who could afford to put money in the deal. That resulted in a real conservative approach. It oriented us towards not messing things up, rather than unlocking growth. Perhaps, someone with more experience could have taken more prudent risks. Being young, and it being our first real deal and establishing my and Dave’s track record, our being cautious was to our detriment.
I spoke with a searcher-CEO who felt hampered by not having an advisor familiar with his niche of business. Did you feel the same?
We had a great Board, and we actually had an industry veteran who runs a non-competitive company on our Board. At the same time, they all had very involved day jobs, so it largely felt as if we were on our own charting our own path.
Summary of Insights
Here are our a few of the key takeaways from our discussion with Greg:
- • Your search preparation should also incorporate preparing family and friends for its rigors.
- • Switching to the CEO role may mean a shift from a scrappy, can-do mindset to how to leverage resources for growth.
- • Being co-searchers and co-CEOs means you can accomplish more, especially if you view differences in approach as strengths.