What I Look For Before Creek Equity Buys a Company

Every few weeks someone asks me what Creek Equity looks for in a company. They usually expect an answer about industries or revenue ranges. Those things matter, but they are not where I start. I start with a small set of questions that I have asked, in one form or another, for more than twenty years of building and buying businesses in Michigan.

None of them is clever. The value is in asking all of them, in the same order, every time.

Would customers miss it?

The first thing I want to know is whether the business does something its customers would struggle to replace. If it closed on a Friday, would the phone ring on Monday? Companies that other companies depend on tend to keep their customers, hold their prices, and survive a bad year. Companies that sell something nice to have are harder to own through a downturn.

I look for evidence, not opinions. How long have the top customers been buying? What happened the last time prices went up? How many customers left last year, and why?

Who actually runs it?

The org chart tells you who has the titles. It does not always tell you who the customers call, who knows how the equipment works, or who fixes the problem at six in the morning. In many good small companies that person is the owner who is selling. Sometimes it is a manager two levels down who has never been asked what they think.

Before Creek Equity makes an offer, I want to meet those people and understand whether they intend to stay. A business that only works because of one person is a business with one point of failure.

Where does the cash go?

Profit and cash are different facts with different dates. I follow a dollar from the invoice to the bank account. How long does it take to get paid? What has to be bought before the work can be done? How much money does the company need to grow, and when does it need it?

A profitable company can still run short of cash, especially when it is growing. I would rather see that clearly before we own it than discover it the first month we make payroll.

What would we add?

Creek Equity invests its own capital. We are not paid to deploy money on a schedule, so the only reason to buy a company is that we can make it better. Sometimes that means capital for equipment or a second location. Sometimes it means management depth, a finance function, or simply an owner who is still interested in growth.

If I cannot name what we would add in a sentence or two, we are probably the wrong buyer. And if the honest answer is that we would change everything, it is the wrong company. We look for businesses that already work and need help getting bigger, not rescues.

Can I explain it in a page?

Every investment Creek Equity makes starts with a written memo. It covers what the business does, why customers choose it, what could go wrong, and what we would do differently. The memo goes to our investment committee under the rules in our Investment Policy Statement.

The page limit is the point. If I need ten pages to make the case, I do not understand the business well enough yet. A plan that fits on one page is a plan the management team can follow and the committee can hold us to.

What I do not look for

I do not look for the perfect company. Every business I have owned had problems when we found it, and most of the good ones still have a few. I do not chase sectors because they are popular, and I do not need a company to be the biggest in its market.

What I need is a real customer need, people who do what they say they will do, cash that I can follow, and a clear reason to believe the business can be meaningfully larger with the right partner. When those are in place, the rest is work, and work is the part I enjoy.