Operator & Investor
“Take time to learn the craft and let those learnings compound daily because they pay daily compounding interest.”
Ben Rudman is the CEO of Western’s Smokehouse, a portfolio company of Charis Consumer Partners where Ben is the Managing Director and Founder. Prior to starting his own private equity firm, Ben worked in investment banking for 8 years at SDR Ventures after graduating from Cornell College where he played Varsity Baseball.
You started in investment banking. What Initially got you into investment banking?
Serendipity. I sort of backed into investment banking. I always thought of myself more as a consumer products person than a finance person. That started back when I was a kid. I used to really like going to the grocery store with my mom and I’d notice if your family was a General Mills family and ate frosted Cheerios or if another family ate Malt-O-Meal. I wondered what that says about what else will they buy and why? Why does somebody decide buy Value products – was it their income or was it something else? Those were the questions I was asking my mom when I was 11! I've just always been that way and knew I would be in consumer products.
So in college there was this internship program called the Fellowship Program with alumni who had senior management or board executive roles at public companies. And there was a board member of a company called Famous Dave's, a restaurant chain in the barbeque space. I really wanted that role because the internship reported directly to the CMO and I wanted to learn marketing. Like real marketing. I ended up getting the role and thought since I was an econ major I could apply my economics undergrad knowledge to this marketing department. I learned within the first 10 seconds that that wasn't going to happen. But I got up there and absolutely loved it and thought I was going to be a marketer for sure.
So I come back to Denver after school to get into the restaurant space. I start looking for jobs and I couldn’t find any. I ended up finding this investment bank that had some generalized focus and they just needed a temp Intern for two months. From there I just kept sticking around and they eventually gave me an analyst role. At the same time I started, they hired a woman on who was a former operator in CPG and specifically in the pet care space. So now I'm really leaning in! I started to learn the pet care world from her, and we got to be pretty instrumental in some roll ups in the pet food & treats segment and learn that space. I learned what it meant to learn the industry, become a player in it, and source opportunities. Fast forward to the end of my time at SDR, I was the full-fledged consumer person like I always wanted to be but what I lacked was the platform to do it. SDR was more of a generalized bank and I wanted to go hard after consumer.
It seems like a lot of people who go into PE like Robert Smith at Vista have an investment banking background. Is that Is that because the skills translate so well into private equity? Is an IB background necessary?
No, it’s not necessary, but it is helpful depending on what you are trying to do in PE. If you're earlier in your career and you really want to get into PE then yes, investment banking is really helpful. Investment banking is about finding the attributes in a business that make it attractive as an investment. You have to learn how to ask the right questions. You have to find the right data sources, conduct the right analysis, and then you have to communicate it well. You have to then zoom back out from all that detail and be able to tell that story from a 30,000 foot viewpoint. So you have to scale in and scale out of a business and that really helps get your foot in the door for a junior role in private equity.
After that, in private equity it becomes about a lot of other very specific skills such as how do you be a good board member, form an investment thesis for yourself, and how do you have you align stakeholders to pursue the investment thesis in a deal? Then there’s certainly the fundraising piece which bankers don't necessarily have as much exposure to. It just depends on where you're trying to get into.
You were doing really well at SDR in a Director role, why leave investment banking at that point?
I always knew that I wanted to build stuff. I like building, and I like the notion of owning something and growing it and nurturing it. Banking is none of those. You're sort of a mercenary. There are great bankers and I loved being a banker, but I just knew it wasn't where I was hoping to go long-term.
At the same time, I was sort of this underdog who went to a non-target school with an average GPA and couldn’t leverage my SDR experience into any PE fund. I wanted to be selective about how I went to that side and learned that business. So I waited. I waited until I knew I was ready and had a really good network of mentors who helped me make the jump. And when I made the jump, I was ready.
Was there a certain opportunity in the market that pushed you to make the jump into your own firm?
It was more related to my personal dynamics than the market. I don't think I'm sage enough to necessarily see something in a market that other people don’t. I did form a pretty unique perspective in terms of an investment thesis in the area that I cover in consumer. But that was something that I was forming for a long time and I probably would have found a way to deploy it as a banker if I wanted to.
Looking back, was there anything you wish someone had told you prior to starting Charis?
I don't know if somebody could have told me this and it would have resonated. I think I had to live it. But I've always been a big network and team guy. I like to build a team around me and I probably did that with Charis a little prematurely. I started working with people with pretty impressive resumes in CPG to try to get it off the ground. And I found that what I really needed were executors who were willing to get their hands dirty. I think having those people around me gave me credibility when it came to finding a deal and fundraising but I don't think it was mission critical credibility. I think I would have been okay without it. I spent a lot of time and energy dragging these stakeholders along, which was tough. That said, I'm grateful for the efforts they did give and for the opportunity to work with them. I just think there's this temptation for investors to put too much emphasis on operators, which I think is legitimate. There's almost too much of a premium placed on credentials and not enough on specific scope of work and what you're going to do for me. Get a better feel for that and don't just bet on credentials. I had had a grand vision that I was going to surround myself with a bunch of operators. The good news is that I was able to sell the vision to people. The bad news is that operators and deal people have very different experiences. Operators are used to shorter feedback loops than deal people are so it's tougher to get someone to wait 12 months to get a deal done.
You’re not a typical PE firm, can you explain your model?
We're called an independent sponsor, which is definitely a growing model. It used to be just for emerging managers, but now a lot of people have adopted this model. And the reason why is because it gives you a lot of flexibility. I don't aspire to raise a fund. I want to own three or four businesses at a time that are really good and focus on those and do what's right for them rather than have ulterior motives or external fund dynamics drive what we do for those businesses.
Is the main challenge with a traditional fund that you’re pressured to deploy capital in a specified period of time regardless of the opportunity?
I think that's one challenge, but I don't think that necessarily drives bad decisions. It does drive sub-optimal ones for sure. There's also exit dynamics, right? Liquidity. You need to get out in 10 years. And by the way, that fund is also a 10-year commitment. You're agreeing to a 10-year job for yourself. So You have the capital deployment, then the forced liquidity event at the end of that, and then you also have the commitment to that model for 10 years.
You’re now the CEO of Western’s Smokehouse, a portfolio company of yours. What do you think has been the biggest lesson learned as a first time CEO for you?
Learning how to lead. It has been the biggest learning curve for me. Fortunately, when I was a banker, I got to build some teams and we grew from four people to twenty and I got to be the manager of all the VP's and associates which was good experience. But it's different running a manufacturer with a couple hundred people. So trying to get people with diverse backgrounds, diverse objectives, and diverse incentives to understand what the organization is trying to do and how each individual plays a role in it while getting people to be excited about that has been a challenge.
I'm a big fan of reading leadership books and a lot of the messages really work but some of it you have to learn by sucking for a while and getting negative feedback, watching it impact things, and then be humble enough to adjust and own it. And then improve, fast!
If you look back at your career, what’s a habit you really instilled that helped you get to where you are today?
The habit of consistency. Back in the day, I used to compete in power lifting, and I trained with a guy who ended up winning the National Championship. He would always say, “consistency trumps intensity.” Anyone can show up at the gym one time and have a killer workout. But it's about the guy who shows up consistently. Maybe you trade off the amount of intensity. Don't go balls to the wall all the time. But you show up every day you make a modest .01% improvement over 10 years. Before you know it, you're a superstar at the end of 10 years, right? And that's always stuck with me. I feel like everyone has national champion itis from day one. But I would say, take time to learn the craft and let those learnings compound daily because they pay daily compounding interest. Every time you learn and grow in your field and learn your craft, you can go reinvest what you learned from the prior day and then expand on that the following day and just keep making those .01% improvements over time and you're going to surpass people. I'd say I was markedly behind my peers in my career in banking, and I ended ahead of a lot folks around my same age. It's not because I'm smarter. I actually don't think I am smarter at all nor do I have any sort of advanced ability to navigate politics or a great emotional IQ or anything like that. But my enduring quality was one that I had to develop. It was that willingness to be a student of Google University and always chase down the truth, develop that habit, sit there patiently, and let the opportunity sort of just emerge and nurture it.
I think that's helped me as a CEO as well. The feedback loops are faster, so the compound rate is quicker but so important to do those hard things early and stick with them even when you’re not getting the results. Then before you know it, you come out the other side with a really good team like I have at Western’s.
You talked about the hard things, what are the hard things that a CEO has to do?
I think most people who can get into a CEO role are smart and enterprising enough to develop a strategy and to learn any part of the business while becoming a meaningful player in any part of the business. I think the really hard things are looking into the mirror and identifying what has to change and navigating those dynamics because you're going to either say something about yourself or the organization. For example, let's say a company has a certain issue that you let go on for twelve months that you shouldn’t have. You were thinking about the problem a certain way and that was the wrong way to think about it. You have to say, “Hey team, I should have identified this earlier, but we do have a certain problem here and now here’s the plan.”
You also have to be able to confront people and then lean into that conflict. Perhaps you’re having a problem with a person and maybe their incentives are misaligned, or they’re incompetent, or their malicious. But whatever it is, you need to get to the source of it and have a tough conversation with somebody about something. That's like 90-95% of being a CEO is constant tough conversations with all of your stakeholders, your board, your investors, your lenders, your customers, your employees, your vendors, and your community. Constant, tough conversations with the spotlight on you. You're not going to please everyone. Get comfortable. That’s what you need to be able to do.
When you looked at the mirror, how often was it you personally that needed to change?
At first, it was probably about 10 times a day. I'm not even exaggerating. When I came in, I was pretty aware of what I didn't know. But I knew that even if I did know everything, nobody's going to believe I know everything anyway so I needed to earn their trust because nobody cares what I know. And how am I going to earn the trust of the people in this plant who are living this every day while I'm parachuting in from Denver, the Mr. fancy private equity guy. How do I earn their trust and make this authentic and not do a bunch of BS symbolic stuff with no substance? So I was constantly bumping off the edges of a wrong decision all the time. I was of looking down all these barrels and asking whether I should take this shot, or that shot, or even that shot. You have to learn how to trust and how to mistrust your intuition, especially early on. As you go on, you're going to learn how to reorient and recalibrate where you're going to go and have a pretty valuable gut and intuition. But early on, you have to be willing to kill all your darlings. Everything that you had as a philosophy, be ready to kill it.
When you don’t know the answers to some of these hard questions, do you have a set of advisors you go to for help? CEO can be a lonely position, so who do you go to?
I do have a set of advisers, but they're not as important as my team internally. I think the best answers come from below you on the org chart, not above. So I don't agree that CEO's are that lonely. If you're that lonely as a CEO, you haven't built a team. You should be questioning how valuable you are after a while, because you're able to get the team running. If your team is clear on what your company should be doing, which you should be setting that vision, and then clear on what their role is and they feel like they have authority on it as well as the technical ability to do it, then you don't need to be doing it. You need to let them do it. They're going to be better than you.
I have this philosophy - organizational clarity, delegate authority, keep responsibility, and everything matters. The whole point of everything matters is to keep me in the loop. I'm not lonely because I'm in the loop on a lot of stuff. But I'm also having people come to saying, “Hey Ben, I want to have blue balloons at the birthday party.” It’s usually pretty big decisions. But they know that I value their job and their roles so much that I do believe everything they do does matter. If It doesn't matter, then why am I having them do it? It's not respectful of their time. Everything matters but I don’t need to do everything.
When you’re lonely as a CEO, is that a sign that your leadership may be failing then?
Or that you’re making too many decisions. That's the biggest problem that I see with so many entrepreneurs that I know, especially founders, is that they are way too important. They haven't built a business; they've built a job. They do a big, big job and then everyone else around them plays a tiny, tiny role in supporting them. That's exactly what you don’t want as a CEO.
You’re obviously busy as the CEO while being a partner at Charis, do you have a certain productivity method?
Standard Work is a productivity principle of mine. I’m not a rigid person, but I do think standardization frees your mind up a lot. As an example, what is your email for? Your email is to receive communication. That’s it. So I have a I have an app that I forward everything to that I want to read later, then I have another app that I forward things to that I want to remember, that’s Evernote. And then I have a to-do list (not email) that I keep that organized every day. I also work my email to inbox zero, every day.
Then if I'm if I ever sit down and wonder what I should be working on right now, I go to my inbox or to-do list and everything is on those systems and it's not if it's not in those systems, I'm not doing it. And if I'm doing it, it should be in those systems.
I run my business that way too. At Westerns, we have something called a playbook where you have your strategy, your grand plan, the mission, the vision, along with a set of values. All those things imply what should be we be working on this year, which implies what should we be working on this quarter, which implies what should be working on right now. Then within the playbook, every to-do item ties back to the 2020 initiative and every 2020 initiative ties back to the mission, vision, and values. And we will stop and say wait a second, why isn't this working? Is it not working cause because we lack some sort of resource or sort of confidence in this area? Or is it just not aligned with our mission? Should we just should we even be working on this? We can be true to those things and I run that same system for my personal to-do’s as well.
Ben also recommends checking out Tiago Forte’s productivity blog - https://fortelabs.co
Where do you think the CPG Industry is headed?
To start with, I think consumer preferences have really changed a lot in the last 20 years. People started eating healthier and seeking more culinary delight in consumer goods. Specifically, in food. That created an environment that opened the floodgates for a lot of challenger brands. A lot of new brands showed up on the landscape, and it was easy to get new distribution, easy to get into grocery stores and on shelves. A lot of these new brands ran a few different playbooks to get up to 20-50 million in sales and then they got acquired by a strategic before they were even profitable. And a lot of those acquisitions haven't worked out so well. The reason being is because those brands were servicing a niche well and the acquirers’ idea of scaling them out to mid-America selling turmeric flavored Kombucha in Quincy, Illinois in the same high velocity as San Francisco is challenging. That learning from the industry has really changed things very recently. The emphasis has come back to not just growth but entry point on valuation as well. Raising capital is going to be more expensive as a result. I think margins are so much more valuable, which implies the means of production and supply chain are going to be really, really scrutinized. We now have to find a way to make all these small batch artisanal products at scale cheaply. I think that this concept is still in the early innings.
Lastly, what’s your advice to those who want to get into Private Equity?
It depends on where you're coming from. If you're just like an absolute rock star, valedictorian, got a job at Goldman, etc., you’re going be able to get into private equity. So assuming you're sort of another challenger type person, you're just going to have to be this weird combination of scrappiness, relentlessness, and patient. That said, my bit of advice to you would be to be open minded on finding joy in your work outside of the private equity aspiration. Because there's other things that are really interesting that you can go do. You can always start a business; you can always try to get a job in a really interesting business and learn from somebody really interesting that way. Just question why you want to be in private equity and see if there's a means to get that same reward elsewhere.
Thanks for reading. Check out more interviews here.