Durable Capital

Aug 23, 2021
365 is built on durable capital. What exactly does that mean? In short, our durable capital model means that we don’t answer to outside investor demands so we can focus on doing what is best for our team and the brands in our portfolio.

365 is built on durable capital.  What exactly does that mean?  Merriam-Webster defines durable as “able to exist for a long time without significant deterioration in quality or value”.  Durability is synonymous with “enduring, lasting, permanent, sturdy, and resilient”.

In short, our durable capital model means that we don’t answer to outside investor demands so we can focus on doing what is best for our team and the brands in our portfolio. When we do right by our team and our brands we are doing right by our most important stakeholders - our customers!  Investing in our people, our products and our customer experiences with a long term view is only possible when we have a truly long term capital base and this helps us make our customers successful.

It is not often obvious to the employees of a company or to the seller of a business that the capital base that their employer or potential business buyer is built on matters.  We believe that it is incredibly important to both constituencies.  Our view is that durable capital is superior to the other capital structures typically found in small businesses.

So what is the 365 durable capital model?  What does it mean to a job seeker and what does it mean to a business seller?  It means we are still a small business but we have big goals.  We are managed entrepreneurially instead of bureaucratically.  Our financial goals are long term oriented so we can make the right investments in the future.

Our view of durable capital extends beyond our financial capital and into human capital and the equity of our brands in the marketplace.  Yes, our financial base is strong.  We use appropriate amounts of leverage and focus on growing profitability.  Our view of the human capital and brand equity inside of our organization is similarly long term oriented.  We work hard to align those intangible forms of capital with the goals of our financial capital.

On aligning our team with our durable capital model:

  • Career growth - From our famous “fulfillment captain”’ role that has minted numerous leaders and key employees in the organization to our intern program we promote from within like crazy.
  • Profit sharing plan - We align the structure of our profit sharing plan with our long term view.  We simultaneously incentivize employee retention and performance and this “expense” on our income statement adds heavily to the immeasurable resources of our balance sheet.
  • Company Culture - Our four core values drive our culture.  If you believe that EQ is more important than IQ, that team and culture should come first, that winners do keep score, and that every goal should receive relentless execution until it is accomplished then you will probably like it here very much.

On aligning our brands internal capital investments with our durable capital model:

  • Diversification - every market sees cycles of growth and contraction.  The ebbs and flows are normal.  Having an internally diversified portfolio allows us to fund our brands through ups and downs.  We never have all of our eggs in one basket.
  • Long Term Investments - since we have a goal to operate brands for the long haul we can make long term investments in infrastructure, training, and resources that others simply won’t make.  When you view years in years or decades the picture changes dramatically from the view in weeks or months.

Frequently Asked Questions:

  • Does this mean 365 will never sell a brand it owns?
  • No, it does not mean that.  It means we have a goal of long term ownership and our capital base will never force us to sell a brand.  When the time comes that 365 isn’t the right home for a brand, yes, it will be sold to the right owner.
  • Does this mean every employee I have today will work for 365 if you buy my business?
  • No, it does not mean that.  Our company culture is very important to us.  We will analyze the needs of the business, the resources of our current team, and the fit of any new team members with our existing organization.  From there we’ll share an integration plan that is a best fit for all parties.

Influences: Brent Beshore at Permanent Equity, Rick Simmons at the Telos Institute, Bill D'Alessandro at Elements Brands.