At Purpose Group, we buy, grow, and hold purpose-driven businesses. We believe business should be a profitable force for good in the world, and we’re inspired to help prove that notion one portfolio business at a time.

Welcome to our 2024 Annual Letter. Following the lead of many organizations we admire (including, of course, Berkshire Hathaway), we have decided to begin publishing our annual letter publicly. Aside from our general “Do as Warren does” philosophy, we believe a public annual letter will accomplish two things.

First, it will hold us to a higher level of transparency and authenticity as we share our progress. We have nothing to hide, and sharing our missteps (of which we know there will be many, as building businesses is a messy…business) is the best way for us to learn and grow for the future.

Second, we aspire to see a world where more companies are purpose-driven. Sharing our experience building our fund just might inspire others to join the cause, and learning from us what works — and more importantly, what doesn’t work — could be the guidance they need.

Our plan at Purpose Group is simple: build profitable, cash-flowing, purpose-driven businesses (utilizing our Purpose Playbook™️) that we can be proud of.

Raj Choudhury and I remain the active partners in the fund, with David Cummings our GP partner. Additionally, we have four incredible advisory board members: Jonathan Morgan, Sanjay Parekh, Bharath Parthasarathy, and Kashi Sehgal.

Raj and I come to work every day with a smile on our faces (or, as Warren likes to say, “tap dancing to work”) for the privilege of building this business, and we’re excited to share how things are progressing.

Our model

We have a two-pronged strategic approach to our fund. We try to spend our time efficiently, so after a few rounds of careful deliberation, we landed on the very creative naming convention: S1 and S2.

The S1 side of our portfolio will comprise blue-collar, cash-flowing, people-based businesses in the Southeast. We currently have one S1 business, having acquired Kentucky-based Gerald Printing & Liberty Imaging (Gerald) in May 2023.

With our S1 businesses, we look for decades-old, cash-flowing companies in stable industries. We do not require rapid organic growth, though we would certainly welcome it. Our model only requires that these companies consistently and efficiently produce free cash flow, which we then will use to acquire more businesses.

The S2 side of our portfolio is centered on Alloy, under which we will continue building a diversified marketing and communications agency. Alloy joined Purpose Group in March 2024.

Aside from the fact that Raj and I each have over 25 years of experience founding, building, and selling marketing agencies, we also see it as quite an advantage to have a marketing agency in our portfolio to help support our S1 companies, allowing us to add a sophisticated marketing, sales, and e-commerce presence for each business in our fund.

As we enter year three of Purpose Group, we continue to hold dear several core tenets:

Run our Purpose Playbook operating model

Unlike most funds, we have a specific and proven point of view on how our companies operate. The Purpose Playbook is a methodology we developed over the last 15 years, made up of three core elements:

1. Develop a trusting leadership team

2. Operationalize the company’s PVTV (Purpose, Vision, Tenets, & Values)

3. Run The Great Game of Business (goal planning and profit-sharing)

If you’d like to learn more about The Purpose Playbook, you can check out the Turnaround Leadership Series of books on the topic.

Overindex on long-term thinking

We believe that stable, cash-flowing businesses, run with a purpose-driven operating model, will produce significant yields for our shareholders over time.

This long-term approach is, among other things, a core element of what we have learned from studying Berkshire Hathaway. Patient capital deployed against solid businesses is, in our opinion, the best way to generate the highest return over time.

We look for similar models of long-term thinking, and while we continue to be shocked by how few examples of this approach there are in our country, we recently read this BBC article that describes the business culture in Japan. Would you believe that there are over 33,000 businesses that are over a century old in Japan?

Long-term thinking allows us to focus on the actions that will create maximum long-term value, building solid businesses that grow and evolve over time. We’ve seen firsthand the effects of short-term pressure on leadership teams, and we’re bullish on our ability to find success over the long term.

Be the buyer of choice

What we offer is unique in the private equity sector. In fact, we hesitate to even refer to our fund as private equity, given the typical associations (right or wrong) that come with that moniker: aggressive, quick-turn, heavily leveraged, etc. Instead, we prefer to call ourselves a purpose-driven holding company.

This allows us to talk to business sellers about their business in a new light. Rather than looking to quickly cut staff, laden them with burdensome debt, and merge them with other businesses, we are inspired to work with their existing team and allow the business to continue running relatively as it has for decades. We will, of course, look for ways to help their business evolve, with our Purpose Playbook being a central part of that effort. However, we are explicitly acquiring businesses that are performing well (and have for decades), making our number one goal to let them continue doing just that.

We’ve seen this to be a tremendous advantage when competing for a business to acquire, and in fact, Gerald’s seller specifically informed us (after the deal closed) that our rather un-private equity approach was one of the major deciding factors for him.

Decentralize control / lean fund team

Ultimately, we want the decision-making for our businesses to reside within those businesses. Each team, company, and industry is unique, and we have no interest in building a large, micro-managing team within the fund.

We will work with our leadership teams to implement The Purpose Playbook, empower them to lead the company forward, and then quickly step out of the way and let them lead.

Additionally, our goal is to keep our fund management team as lean as possible. Currently, only Raj and I are full-time in the fund, relying on contractors and partners to meet our needs.

An update on 2024

While this isn’t the long-term plan for the fund, Raj is currently the CEO of Alloy, and I am the CEO of Gerald. We both have strong leadership teams that we continue to empower with more autonomy and decision-making ability.

We knew 2024 would be about holding serve (pardon the tennis parlance; it’s simply hard-wired into me). With high inflation, talk of a recession, and the presidential election, we knew our two marketing-oriented organizations would find it a challenging environment to grow. While the team worked hard to manage as much sales as possible, they also focused on the core of their businesses to build strength and momentum leading into 2025. We don’t get bent out of shape about a bad quarter or a tough economy, but instead, we look internally at ways we can strengthen our companies so that we’re ready for growth when it comes.

It is important to note that we do not expect linear growth — we’ve been doing this long enough to know that the ride will be anything but smooth — but we do expect that our companies will make smart financial decisions in difficult economic times, preparing themselves for a stronger future.

If you haven’t seen Duke women’s basketball coach Kara Lawson encouraging her team to “handle hard better,” we think it encapsulates the mentality that we have within Purpose Group. We expect hard times – they come with the territory – and with each challenge, we expect our teams to grow smarter, stronger, and more resilient.

Gerald Printing & Liberty Imaging

The focus for Gerald in 2024 was on retaining customers, continuing to implement The Purpose Playbook, and evolving operational structure.

While client retention was strong, overall customer spend was lower, and net new customers were hard to find. The economic climate resulted in increased cost of goods sold, while also making it difficult to raise prices accordingly. Competition, as one might expect, became more aggressive.

Fortunately, even though revenue was down in 2024, Gerald’s long tenure of servicing their local markets allowed them to achieve a +10% EBITDA margin. While adequate research has not yet been published on the state of the print industry in 2024, I am confident that our team measured up well against their peers.

The culture at Gerald has transformed since we acquired the business in May 2023. We’ve taken a culture of competition between offices to one of partnership and trust. Our Purpose Playbook was designed to unite teams around shared Purpose and goals, creating a “we all win together” mentality.

In November of 2023, I stepped in as the CEO of Gerald, relying on the leadership team to manage the business on a day-to-day basis. By the middle of 2024, it became apparent that we would need a full-time CEO in Bowling Green or an ELT (Executive Leadership Team) with more autonomy to make decisions on the ground.

We opted for the latter option, with me remaining CEO but relying more on the ELT to lead the team forward. I work with each of the ELT members individually and then as a group, making a visit to Bowling Green every few months.

To give you insight into how we are progressing, I thought I’d share this note I received from one of the leadership team members on Thanksgiving:

I wanted to express my gratitude for the impact you’ve had on us as a company and the personal inspiration you’ve provided me. For the first time, I feel genuinely fulfilled in my job. I never knew this level of satisfaction was possible until YOUR leadership guided us towards OUR purpose. On behalf of OneTeam, thank you—we are all forever grateful for you.

You’ll notice the use of “OneTeam” in her message. While the company currently has two brands (Gerald Printing and Liberty Imaging), since we’ve been working through The Purpose Playbook with them, there has been an undercurrent of esprit de corps in which a new, internal brand has begun to emerge: OneTeam. I would not be surprised if, at some point in the future, the leadership team decides to move to a fresh, unified public brand.

One final note on the impact of Gerald’s improved culture is the impact it has had on their employee retention rate. The print industry typically ranges between 25 – 40% annual employee turnover, meaning up to four out of ten employees will leave the organization each year, and prior to our acquisition, Gerald was right in that range. In 2024, employee turnover dropped to 7%.

The team also focused on improving operational and financial rigor over the past year. Among other things, we hired a CFO, onboarded an HR outsourcing partner (Insperity), and established a more secure IT infrastructure.

Overall, the team is bullish on 2025 and excited to continue working toward our goals.

Alloy

Alloy, an integrated marketing and communications agency, joined Purpose Group on March 31st, 2024, becoming the second acquisition and the first in our S2 portfolio.

Raj continues to run Alloy as the CEO, excited to grow an agency for the fourth time in his young career. I’ve been referring to him as the Joey Chestnut of agency building, a moniker his British heritage prohibits him from fully appreciating.

Unlike Gerald, which focuses on cash flow and profitability, Alloy is oriented toward top-line revenue growth. The team worked extremely hard to retain current customers and win net new accounts in 2024, resulting in a 3-year compounded growth rate (CAGR) of 43%. We’re more than satisfied with this result as the majority of marketing agencies we’ve spoken to lost net revenue last year.

Alloy’s culture

With all of our portfolio businesses, building a thriving and engaged culture is job number one. Alloy continues to develop and nurture a vibrant culture based on their core values (AROUND): Absolute accountability, Radical transparency, Overt empathy, Unwavering creativity, Nimble resilience, and Deliberate collaboration. The result of this effort is shown in the team’s 77% employee retention and satisfaction rate, which is a high bar for the agency industry.

The Alloy brand

Not surprisingly, Raj and the team were very successful at building the Alloy brand in 2024 (brand creation and awareness is something the team excels at). The effort, which will continue in 2025, has begun to pay off:

• #289 on Inc.’s Fastest Growing Companies List

• Won 16 awards (with a 64% win ratio)

• 44% growth in validation and reputation score (brand awareness)

• Ranked #1 Tech PR Agency in Both Atlanta and the Southeast by O’Dwyer’s Public Relations News

Sales growth

Overall, the team won 13 new accounts in 2024, and half are expected to be growth accounts in 2025. These new wins result in Alloy having 75% of its 2025 revenue goal already identified and secured, a truly terrific place for an agency to start a new year.

Client launches

The team had several exciting client brand launches in 2024. Notably, they introduced the new Atlanta Beltline brand and website and launched the new Nintex brand and website (both developed with decoupled architecture). They also made the Inc. 5000 list for the first time. In the agency industry, high-profile wins and brand/campaign launches like these significantly enhance name recognition and brand awareness.

New office space

While many competitors reduced office space post-COVID, we chose to invest in a new office in early 2024, currently under construction and opening in March 2025. Why this investment? Like an alloy, diverse elements enhance our strength. This new office space will help us tremendously with our goal to unite exceptional talent and our community for meaningful impact.

The new office is timely; in 2024, we learned that in the agency industry, the ground game is back. Before COVID, in-person meetings and industry events were key growth tactics. COVID changed this, with events canceled and meetings shifting to video calls. Our team has ramped up in-person initiatives, which we will continue throughout 2025.

We’re hosting a launch party on March 26, 2025, to connect leaders from the tech and non-profit sectors for valuable networking while unveiling our new office. Let us know if you’d like to attend.

Fundraising Strategy

Purpose Group’s strategy is to grow to a size where we can self-fund our investments from the cash flow of our portfolio companies. Until we reach this point, we will consider future capital infusions from existing shareholders or new partners.

There are four ways in which we think about fundraising:

• One-off individual investors. This would be if a person or entity approached us and wanted to invest significant capital. When this happens, we would certainly entertain the offer.

• Acquisition-specific raises. While we do not expect this to happen frequently, if we find a company that matches or surpasses all of our criteria, we may decide to fundraise specifically to acquire that business.

• Larger raise at a future date. There is always the chance that, once we have a few years under our belt (including several years of financial results), we’d consider a more significant fundraising event.

• Open annual fundraising period. Annually, starting this past December, we will open a fundraising period (running from December 15th – January 15th) for any existing or new shareholders who wish to invest in the fund. During this period, we will also be open to buying back equity if we believe it to be the best decision for the remaining shareholders.

Looking Forward

We’re truly excited about the future. And by ‘the future,’ we’re talking about the next several decades. That’s the kind of long-term view we have for Purpose Group. And that’s the lens we use when building our businesses.

Gerald and Alloy are a terrific start to our fund. Both companies are made up of smart, passionate, and capable people working together toward a common goal. When teams are aligned on values and ambition, nothing can stop them over the long term.

For each of the first full years of our fund (2023 and 2024), we made an acquisition, and we do not expect 2025 to be any different. Finding an agency acquisition for our S2 portfolio is at the top of the list. Below are the key attributes we’re looking for in the agency space, and we’d welcome any introductions you might have that meet this criteria:

• 15 to 40-person agencies with revenues of $3M to $8M.

• Deep experience in MarTech, Data Platform, or CRM capabilities. Additionally, agencies with CX, PR, and media capabilities would be considered.

• A heavier concentration of experience with technology brands or mid-market B2B brands would be preferred.

• We are still focusing on the next acquisition within the US. We currently have employees across the country, with a concentration in Atlanta and New Orleans, but we don’t have a preference for a set market.

• Above all, we are looking for incredible teams passionate about their craft.

For the S1 side of our portfolio, we will likely begin to actively look at acquisition candidates in late 2025, with an acquisition likely in 2026. Below are the characteristics of S1 businesses we would be interested in being introduced to:

• Enduringly profitable

• Minimum $1M annual EBITDA

• Over ten years in business

• Industry Agnostic (though we prefer business-to-business companies)

• Within a 6-8 hour drive from Atlanta

Note that we will happily send a $50,000 check to anyone who refers us to a business that we acquire.

Conclusion

I’ll end this annual letter the way I did last year, as this sentiment shared by the late Charlie Munger still resonates just as strongly with us today:

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

We’ll continue to do our best to consistently not be stupid, while relying on our purpose-driven strategy, decades-long experience building companies, and ability to ‘handle hard well.’ The road will certainly not always be smooth, just as it wasn’t in 2024, but we’re ready for it.

Jeff Hilimire
Partner and Co-Founder
Purpose Group

Note: figures in this report are unaudited and represent our most accurate representation at the time of publication.