Republic Square Partners is an Austin-based operating company focused exclusively on acquiring and owning market-leading Texas insurance businesses in perpetuity.To achieve our goal, we actively seek ownership of a diversified group of outstanding Texas insurance businesses that generate cash and consistently earn above-average returns on capital.We offer a fair choice to Texas insurance business owners who wish to sell: a permanent home in which the company’s people and culture are retained. Our decentralized philosophy is rooted in local entrepreneurship and autonomy. We remove bureaucratic layers to empower frontline management closest to customers. We have no interest, at all, in ever selling any good business we own to competitors or out-of-town investors. Our preferred holding period is forever.

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Owner-Related Business Principles

Rules, Philosophy, and PrinciplesRules:
Rule #1: Don’t lose money.
Rule #2: Never forget Rule #1.
Rule #3: Incentives are the most powerful force in the universe. Never think about something else when you should be thinking about the power of incentives.
Rule #4: Integrity is everything. Lose money for the firm and we will be understanding. Lose a shred of reputation for the firm, and we will be ruthless.
Rule #5: Embrace your inner pirate. It’s better to be a pirate than join the navy!Philosophy:
• If you see a snake, kill it. Don’t form a committee on snakes.
• If you build the right structure and stay the course, time becomes your greatest superpower.
• The road to success is paved with problems well handled.
• Authenticity outruns the competition.
• The clear, unmistakable sign of a bureaucrat is someone worried about whether he has a window.
• There are times when certain cards sit unclaimed in the common pile – when certain properties become available that will never be available again. A good businessman feels these moments like a fall in the barometric pressure. A great businessman is dumb enough to act on them even when he cannot afford to.
• Every problem, no matter how extreme, has a rational solution if you keep your wits and focus clearly.
• A good plan finely executed today beats a perfect plan next week.
• We have a strategic plan – it’s called “doing things.” Make a decision and do it like hell!
• Things that have never happened before happen all the time.
• If we tap dance to work, we’re winning.
• Be kind, listen before speaking, have fun, and do the right thing – most importantly, trust your gut.
• Stay in your circle of competence.
• Well done is better than well said. A man cannot build a reputation on what he is going to do.
• To try is scary – you can lose it all! But otherwise, what’s the point?
• There is always room at the top.
• Forced consistency is the hobgoblin of little minds.
• Not everything that can be counted counts, and not everything that counts can be counted.Principles:
Our managerial approach for compounding earnings growth can be summarized in six owner-related business principles:
1. Reinvestment Rate. We consistently reinvest more than 80% of our cash flow back into the company. Reinvestment rate is the key driver in earnings growth. The higher the reinvestment rate, the more powerful the compounding effect.
2. Hurdle Rate. We efficiently allocate our capital into investments at an average annual return on invested capital (ROIC) of more than 25%. For compounding to occur, our incremental ROIC must remain high (and higher than cost of capital) over time. Our disciplined allocation of capital allows us to compound earnings and sustain growth in perpetuity.
3. Duration. Time allows compounding to reach its full potential. Our focus on deep, untapped markets and enduring competitive advantages makes duration our secret weapon. The longer we reinvest capital at higher rates of return, the greater the exponential growth. It is simply not possible to successfully pursue active investment without a long-term view.
4. Target Niche Businesses in Our Core Regional Market. Texas has been a very good place to grow up, raise a family, and build a business. Through dumb luck, we get to put all our eggs in the Texas basket and focus on niche businesses within our core regional market. The businesses we target are generally under the radar of larger private equity players. Less competition for acquisitions usually means more attractive prices and higher shareholder returns.
5. Our Form Is Corporate, but Our Attitude Is Partnership. We believe a corporation taxed separately from shareholders is the best corporate form, by far, to incentivize long-term growth. The modern fee-dependent GP/LP/LLC corporate structure has regrettably become the standard and its short duration the expectation. Modern fund structures create misaligned risk/reward incentives for sponsors. Pass-through entities like limited partnerships and LLCs distribute, after fees, taxable earnings directly back to investors instead of reinvesting for future growth. This “leakage” of cash out of the business profoundly reduces the compounding rate and reflects a short-term orientation in lieu of long-term growth. In line with our long-term orientation, our managers have a significant majority of their net worth invested in the company. Our management doesn’t take large salaries — we make money when our partners do and in exactly the same proportion.
6. Share Repurchases Instead of Dividends. Our shareholders are our partners. We firmly believe that elective share repurchases, fairly priced, are the most efficient way to return capital to partners. We want our partners to make their own individual decisions about liquidity events. We do not “force-feed” our partners cash flow in the form of double-taxed dividends. Elective share repurchases incentivize the long-term orientation necessary to compound earnings growth by reinvestment.

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