6 Lessons from 6 Months of Search

February 19, 2024
by a searcher from University of California, Los Angeles - UCLA Anderson School of Management in Tampa, FL, USA
I recently wrote a personal reflection on the 6-month milestone of my search and thought I'd share with the Searchfunder community.
I am a self-funded searcher currently doing a limited geographic search, so everything is written from that perspective. I've included a "TLDR" of the 6 lessons below, but for those interested to dig in you can access my full write-up here: https://drews-newsletter-771f01.beehiiv.com/p/six-lessons-six-months-search
Here is the TLDR of the 6 lessons:
1. Pick up the phone.
The more you pick up the phone and speak to brokers, business owners, lenders, CPAs, lawyers, and investors:
- the better you get at telling your story,
- the more deals you see,
- the more owners you talk to,
- the more feedback you get, and
- the more confidence you gain.
2. It’s OK if your acquisition criteria evolves. Expect it to change as you get more experience.
- You will NOT find the “textbook perfect” small business.
- As you see more deals, you’ll start to get a feel for what criteria you want to change. Take action – nothing forces you to learn quite like experience.
3. Industry matters. You shouldn’t be completely agnostic.
- Industry selection matters - especially if you are using debt. You can’t escape certain industry dynamics like cyclicality, average payment terms, and capital intensity.
- Understand your personal strengths and weaknesses. The industry should match your skills, interests, lifestyle, and experience.
4. If you want to win deals, you MUST move fast.
- You should communicate valuation early. Don’t be afraid to make an offer fast. I didn’t initially use an indication of interest (IOI) because I felt like it was overkill, but I started using them now and have seen good results because it lets me get valuation discussions out early in the process.
- To move faster, use tools like Kumo to see deals right when they come to market, build a simple financial model you trust, build a template IOI you can use to get valuation out early, and have some comparable metrics / comps you can use that are specific to industries you are targeting.
5. Authenticity wins over generic “carry your legacy” pitches.
- Seemingly everyone looking to buy a business is saying they will “carry on the owner’s legacy,” and “shepherd your company through its next stage of growth.”
- To stand out with an owner, you should be authentically you and approach them with genuine curiosity about their history with the business, their goals, and what they care about.
- Owners can tell a difference between someone rattling off a set of prepared questions vs. having a genuine conversation with them.
6. Searching for a business to buy is tough– be prepared with a peer network and prepare your family.
- I highly recommend developing a network of peer searchers, investors, lenders, and others experienced in the ETA community.
-I can’t emphasize enough how important it is to have candid conversations with your spouse about what you are signing up for. I could NOT do this without the unwavering support I’ve gotten from my wife.
Conclusion
I recognize there are many of you in the ETA community who are far more experienced than me. I'd be happy to get any feedback you have - even if it's because you disagree with some of my thoughts. After all, I haven’t successfully acquired a business yet!
from University of Southern California in Mid-Atlantic, USA
I agree with #5 as well. I know everyone is in the business now of moving fast, building a funnel, and moving on as quickly as possible. But if your conversations come across that way with sellers, you'll be just like everyone else bombarding them with offers on a regular basis. Building rapport can be a real differentiator in this sellers' market. This also comes in handy when people are trusting you with several years of their tax returns.
Also, yes to getting the souse/significant other involved. Just remember that if they aren't involved in the day-to-day of the search, it can become wearing on them over time. Definitely spend some of your time building your searcher support network. They know first-hand what it's like to be looking at several businesses in the low seven figure range and appreciate that it's not just a pipe dream.
Six months in - just keep swimming. And best of luck to you!
in Sioux Falls, SD, USA