Boise company busy buying, turning around, businesses

HB Ventures, a year-old Boise business that buys other businesses and turns them around, sees the tough economy from all sides.

The HB Ventures portfolio comprises two acquired Huntington Learning Centers locations in Boise, one in Eagle, and one in Draper, Utah; a recently launched Huntington Supplemental Education Services franchise serving Idaho and Utah; HB Ventures Consulting; and the recently acquired Portico Pharmacy, Meridian.

Managing partners Dan Burton and Paul Horstmeier see improvements in the businesses they have acquired and promising results in those they have launched.

They also see a challenge in their own business: obtaining financing.

It’s still tough for even highly qualified businesses to obtain capital, Burton said. “For example, HB Ventures beat its most aggressive forecasts, yet we’ve had to go through a significant process to continue to secure financial capital,” he said. “We’ve been fortunate to be successful, but we know of many other small businesses we feel are qualified but are not receiving financing.”

HB Ventures uses a mix of debt and equity to buy businesses. So far, it has purchased 100 percent ownership of businesses. Burton said none has been purchased based on expected new products, technologies or markets; the idea is to acquire a business, keep employees in place, and improve existing operations by using approaches that he and Horstmeier put into action while working for large corporations.

Whether HB Ventures is turning around a business or consulting, the partners and staff believe strongly in “keeping score,” he said. This means taking a data-rich snapshot of who is winning and losing in the industry based on fundamental measures that drive how the business creates value, he said. The HB Ventures staff develops and tests hypotheses as to why one player is winning or losing, and what the winners are doing differently.

“Paul and I are both very metrics- and data-oriented,” Burton said. “We implement processes and get reports daily, weekly and monthly.”

Horstmeier worked for 22 years at Hewlett-Packard Co., most recently as a marketing vice president. He holds a bachelor’s degree in computer science from Brigham Young University and a master’s degree in business administration from BYU. Burton – who most recently worked for Micron Technology for two years as head of strategy and previously worked for Horstmeier for eight years – earned a bachelor’s in economics from BYU and an MBA from Harvard.

Both have had success in business entity launches and turn-arounds, Burton said. HB Ventures applies many of the methods used in larger businesses in Corporate America, “and so far, it has translated very well,” he said.

The businesses that HB Ventures acquired in the past year increased revenue 80 percent overall, he said, and are profitable or on the verge of becoming so. HB Ventures also added staff.

Management consistency, marketing refinement, and results measurement have been key to turn-around success so far, Burton said.

“Many small businesses are not applying some fairly well-tested management tools to evaluate and improve their businesses,” he said.

Huntington Learning Centers from 2008 to 2009 reported slightly lower companywide revenues, and several competitors struggled. The units that HB Ventures owns were up slightly – in part because HB brought “significant consistency” to businesses that individual owners had operated differently previously, Burton said. One location was performing well already, so acquiring it was a move to realize scale advantages, he said.

HB Ventures also stepped up and targeted Huntington’s marketing. Struggling businesses often cut their marketing, but HB Ventures has found that it pays off to keep marketing, to invest more in marketing, and make marketing more effective, he said. In the franchise sector, some franchisees were undercapitalized when they got into the business, and then strayed from corporate guidelines and cut staff or marketing expenses when the economy turned down, he said.

Portico Pharmacy is similar to the Huntington Learning Centers locations in that its main function is to help people, Burton said. From a business standpoint, Portico Pharmacy, acquired Feb. 1, offers promise based on its location next to St. Luke’s Meridian Medical Center and medical office buildings in the Portico development, and near a number of assisted-living centers.

“A pharmacy, like any other business, requires a good deal of attention and ongoing business management,” he said. HB Ventures also brings “bandwidth” to Portico Pharmacy, whose previous owners were involved in multiple other activities.

“Those building blocks are proving to be fundamentally strong, and we foresee a great long-term, healthy business” at Portico, Burton said.

HB Ventures is based on Lasalle Street in the Boise Research Center. More than 100 people work at the businesses in its portfolio, including six in the consulting firm.

Demand remains strong for business turn-around activity, Burton said.

“More businesses are on the verge of failing, but we currently see signs of hope in the businesses we are managing,” he said.