Monday, 7 January 2019

Talking Coffee

I have an interest in a coffee roasting company. Long story short, the team there found out that I blog about investing and have made a writing comeback. They then asked me if I ever wrote about them and I must admit I had never thought about it before. The reality is the business is part of my investment portfolio. Tonight, I thought I could do two things:

  1. Finally acknowledge the coffee team
  2. Relate a few quick lessons about non-listed investments I have learn't
I remember my varsity days. We were all going to have our businesses. We were going to do what we wanted and work on our own terms- conquer the world. We all graduated and reality set in. We got jobs. 

Ironically, having your own business is anything but getting to do what you want or working on your own terms. It is not for everyone but it can still be fun. I am fortunate enough to have exposure to consulting, small private company investments and listed investments. So what's different?

In my experience:
  • Private companies trade on much lower multiples than listed companies (basically, R1 income in a small private company is usually worth less than R1 in a large listed company)
  • I was used to working with degree'ed individuals and a lot of CA/CFA types (who are great too :) ). It has been a breath of fresh air working with people from diverse backgrounds. We have really colourful characters that include a trainee pilot, a musician and an actor to name a few
  • Small private companies are much more management intensive. Even though I have a non-operational role in the business, I find that I spend more time on my private investments than looking at MTN or AVI shares. On the coffee side, I have a passion for coffee so often it doesn't even feel like work.
  • Being involved in running a small business means you need to consider everything. You are the lawyer, the accountant, the strategist and so on. Everything is just on a smaller scale. I feel like I have picked up some great general business skills that are applicable to listed investing.
Should you rush out and start/buy a private company? Only you can answer that. The same rules apply, though. You need to ask:
  • Will a private investment add value to my portfolio?
  • Will it diversity my income stream?
  • Do I have enough time to run/monitor it?
  • Do I have/need good business partners I can trust?
For me, I have been able to get involved in some great businesses and work with some awesome people. It is a welcome challenge. In particular, the coffee roasting business is in an industry that I love.