Live & Learn: Larry Stevenson

The founding CEO of Chapters Books on private equity and why Americans are more adaptive than Canadians.

Born July 1, 1956, in Montreal • Private equity player and founding CEO of Chapters Books

If you get the product, price and location right, service is the most important variable. In the automotive service business, for example, if you have two businesses in the same area, selling the same products and service at the same price, and one is doing so much better than the other, you can bet it has an outstanding customer service manager.

Part of the fun in taking the Pep Boys job was turning around a company that represented an icon brand in Philadelphia, a company founded in 1921 and publicly traded for about 60 years.

By the time I left, it had been transformed into a good company, a stable company, though it’s not yet a great company. That may take time. At least it’s a company that will be here 10 to 15 years from now. Quite different from when I arrived, when most thought it was worth more dead than alive.

I grew up in Northern Quebec, a little town called Chibougamau. My father came from Scotland when he was 16 and learned how to fly. He became a bush pilot. He’s the only guy I knew who spoke French and Cree with a strong Scottish accent. Sometimes I couldn’t understand a word he said.

I went to Royal Military College in Kingston to become a pilot. I didn’t apply anywhere else. I found out for that I needed glasses. I was not going to become a pilot. So I became a paratrooper, jumping out of planes instead of flying them.

I loved military college, especially the camaraderie that comes from working well together with others. I also learned the value of peer evaluation. It’s something I use in the business world. People can put on a certain image for the boss, but it’s those you work with closely who know what you can do and how you work with others.

I went to Harvard for my MBA. It also was the only place I applied to. Fortunately, I was accepted.

I thought at first I would end up in something like venture capital or finance, but I got a job as a consultant with Bain in London, and stayed on. It was a great introduction to a variety of businesses.

After my years doing consulting work, in the early 1990s, I wanted to find a business to invest in, one that I could run myself. I settled on book retail. The superstore concept was getting big in the States, with the likes of Barnes & Noble and Borders.

The two largest players in Canada — Coles and SmithBooks — were owned by companies whose core businesses weren’t books. By putting the two chains together into Chapters, I thought I could build a viable book superstore business here.

People will always buy books in bookstores, because you can’t recreate that environment online. However, if you’re looking for a number of books, some obscure or hard to get, it’s a hell of a lot easier to buy them through the Internet.

When I returned to Canada after Pep Boys, I wanted to do something within the private equity sector, in an area where I could use two of my key skills — my ability to evaluate a business to help make it stronger, and my ability to recruit and retain good people to actually run the business. It’s the difference between being a player and being a coach.

There was a time when private equity was considered to only take the short-term view. But, increasingly, it’s the private equity firms that focus on the advice of good managers who argue that the business may not bear fruit for a number of years, but, boy, look at that fruit down the road.

The sphere I’m playing in now, the $50-million to $100-million level of private equity deals, is a very interesting place to be. There are a lot of baby boomers now retiring after building great businesses. In some cases, there isn’t a next generation to pass the business to; or there are partners who want to cash out their stake.

An important difference in doing business in Canada and the U.S. is that we are more conscious of the collective good — we’re only doing well if everyone is doing well. There is a strong belief in the social safety net. However, Canadians don’t package this advantage very well when it comes to selling our country as a place to do business. Health costs are a real disadvantage in the U.S.

Americans are more resilient and better at adapting to economic change. They’re willing to make difficult decisions during an economic restructuring, at both the micro and macro level. Us Canadians could learn something from them.