The Knife Fight

Edition #4

August 2nd, 2019

Here at, we're in the business of helping small to mid-sized business owners run, grow, and transition ownership of their business more effectively. With that goal in mind, enjoy this issue of The Knife Fight, a weekly newsletter for operators in the trenches.


Pirate Equity: How Private Equity Firms are Pillaging American Retail (
It is no secret that e-commerce has pressured brick-and-mortar retail sales over the last decade. So, when an industry with challenging economics like retail is mixed with high leverage and short term objectives, it isn't surprising to see troubles emerge. While this report paints the private equity industry in overly dark colors as a whole, we operate on principles that are different than the typical PE firm - we buy with no intention of selling, use low or no leverage, and work as true partners with our family of companies.

Though this piece has a clear political and activist slant, there are several conclusions worth drawing from the report from the standpoint of a business owner.

1. Who you sell to matters.
Like any industry, private equity has a range of styles, motivations, and ethics. But unlike other industries, values particularly matter due to the nature of transactions, the power held by PE groups, and the depth of involvement. At, we have a strict pledge for how we treat our portfolio companies and partners. Maximizing sales price sometimes comes with strings attached and understanding who sits on the other side of the table is never more important than post-close.

2. Leverage matters.
Debt is an amplifier. If things go well, debt will create better returns for equity holders. That’s why the typical PE playbook is to load up the company with maximum allowable non-recourse debt, while putting in the minimum amount of equity. It’s also the quickest way to turn a good company into a struggling, or even bankrupt, one.

We typically don’t use debt. It hurts our quantity of earnings, but helps the quality of earnings and life. That’s a trade-off we’re willing to make, especially since the livelihood of many families hang in the balance.

3. All stakeholders matter.
Too often the only stakeholder interests taken into account are the buyer and seller. We think that’s a mistake. As a part of our pledge, we promise our partners to create and perpetuate work environments that encourage flourishing for our executives, employees, vendors, customers, and communities.

4. Investment horizons matter.
Short-term money will make short-term decisions that will carry long-term consequences. No one washes a rental car and a short-term business owner won’t make obvious, logical, and helpful reinvestments. Why? Because just like the renter, short-term owners won’t reap the benefits of delayed gratification. This effect is only magnified in a rapidly changing industry like brick-and-mortar retail.

When we buy a company, we don’t intend to sell, which allows us to play the long, healthy, fruitful game.

5. Who you work with matters.
We have a 'No Asshole' Rule here at Whether that is employees, executives, brokers, or capital partners, who you do business and spend time with matters.


The tiny brick-and-mortar video store that survived Netflix (The Hustle)
+ This is the story of how, despite the age of digital downloads and streaming, one man managed to eke out a living in physical DVD rentals with grit, perseverance, and a personal touch.

Amazon quietly launches AmazonCommercial, a private label for businesses (AdAge)
+ Amazon continues to introduce its own products alongside competitors who sell in its Marketplace.

Amazon is pushing brands to decrease product packaging with marketplace regulations (WSJ) $
+ Amazon is implementing smaller packaging requirements for businesses selling in its Marketplace in order to cut shipping costs and reduce waste.

Delaware bans plastic bags for big stores starting in 2021 (
+ "The new law, which takes effect Jan. 2021, bans plastic bags from stores with more than 7,000 square feet of retail space and chain stores with three or more locations with at least 3,000 square feet each."


Inside Nuuly, Urban Outfitters' attempt to take on the rental clothing market (Modern Retail)
+ Nuuly is URBN's newest rental service which allows subscribers to rent up to 6 pieces of clothing for $88/month, a new addition to the fast-growing multi-billion dollar sharing economy.


Mapping the four types of visitors to your website (The Atlantic)
+ The Atlantic website team segments its site visitors into Passerby, Occasional, Regular, and Superfan categories and discusses how best to serve each group with an online offering.

Retailers turn to podcasting to expand content programming (Modern Retail)
+ Content marketing has been around for ages, but the medium is changing and podcasting is now mainstream for retail brands.


The Culture Code: the Secrets of Highly Successful Groups (Daniel Coyle)
+ Coyle goes into detail on what makes some of the world's most successful organizations tick.


Putting brand names on stadiums can be extremely valuable - but at what cost? (Business Insider)
+ " Marketers know that putting a name on a venue (if there is no negative association with the place) can make billions of positive brand impressions in the minds of potential buyers."

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