4 Questions with David Shapiro
Position: Vice President of Marquette Capital Partners, a Minneapolis-based private investment firm.
Role: Investing in $10 million to $100 million companies experiencing a transition of ownership, rapid growth or a recapitalization of the business.
What do you look for when deciding to invest in a company?
We're most interested in companies that have developed an identifiable strategic value--or what you might call a "secret sauce." When we assess the strategic value of a business, we look at three components. First, has the company identified and are they competing in a
market niche where they can be successful? Second, have they been able to differentiate their product or service within those markets? And finally, is the business able to deliver that product or service in the most efficient way possible? Bring these pieces together and you
typically have a faster growing, more profitable business with loyal customers. We find that companies with significant strategic value are not only more attractive to investors, but they're also more attractive to customers, prospects, employees and lenders.
How can business owners gauge their success in achieving strategic value?
Two areas of measurement indicate that a company has that "secret sauce." The first is externally focused and has to do with customer relationships. These can include revenue growth, customer retention, customer profitability and pricing strategies. These metrics tell us
about the value customers place on the company's products or services relative to competitors. The second area of measurement is internally focused on operational excellence--including overall profit margins, quality, on-time delivery and productivity. With these metrics, you get a
sense of how good the company is at delivering their product or service. A company that can score high in all of these areas will receive a higher valuation from investors.
What role does Marquette Capital Partners play after it has invested in a company?
Most of the companies we invest in are at an inflection point and see the value an investment group like Marquette can bring to management as they think about taking their company to the next level. We never become directly involved in the operations of the business, but
instead look to be complementary in the oversight of our investment. We help management think about things like strategy, management team development, new markets and other opportunities for growth that will enhance the value of their business.
What advice do you have for manufacturers considering how best to grow their businesses?
Owners should be thinking about more than just growth in terms of revenue or employees. Focusing on the strategic value concepts I have mentioned tends to create a business that has both sustainability and momentum for growth. Customers of these types of companies tend to
place a higher value on these relationships, which leads to even more growth and higher profits. We've seen examples of manufacturers of electronic components, plastic parts or food ingredients--all industries that are fairly generic--who have been very successful in bottom-line
terms by focusing on specific market niches and positioning themselves well against their competitors.