Budgeting for traditional search fund in 2023

July 17, 2023

by a searcher from Harvard University - Harvard Business School in Washington, DC, USA

Looking into details of the traditional search budget. It's mid###-###-#### Assume 2-year search:

1. Is it still $500K for a solo searcher, or has inflation helped push that up to $600K?
2. How does the breakdown work, especially how much % or $ should be allocated to
(i) legal and diligence
(ii) search tools and brokers?

Any rough guidance would be super helpful! Thanks!

*December 2023 Update*: I have found many >$600K due to cost of living increases as well as the increases in more experienced, post-MBA searchers. E.g., $600K for fresh MBA from top 10 program and $670K for a highly experienced searcher. Looking at salary trends###-###-#### , it makes sense that search prices have gone up too.

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Reply by a searcher
from York University in Toronto, ON, Canada

Your goal should be to be accurate, not overly precise. You can raise up to $600K without encountering significant pushbacks. Raising more funds doesn't necessarily mean you need it, but in my experience, it’s more correlated with the opportunity costs of another job. Compensation: Aim for a salary around the latest Stanford study average: $120,000. "The range of annual salaries during the search phase was $30,000 to $200,000, with a median of $120,000 (and mean of $116,508) and no bonus." – Stanford 2020 Search Study Tech Stack- Here is what you will need: Systematic Data Tools: Grata (~$1000 per month, seek discounts). CRM & Marketing Automation: Streak (Free for one user), consider alternatives like Reply.io, HubSpot, Outreach.io. Website Domain: Google sites (~$7 per month). VoIP Phone: RingCentral (~$50 per month). Deal Aggregation: Axial (Free, with a success fee based on Lehman formula if the deal closes). Incorporation Fees: Allocate around $20K to $30K. Accounting QoE: You need to budget $24k, $8K for broken deals and $12K to $18K if the deal closes. You will budget for 3 broken deals. (Shop around before you choose who you work with) Legal Fees: Budget zero, most search fund lawyers roll their fees forward. (Less room to shop around). Travel Expenses: Can vary, considering flights, hotels, dining, and entertainment as needed for your specific activity. Feel free to email me – redacted

Reply by a searcher
from University of Toledo in Toledo, OH, USA

Thanks for the tag ^redacted‌. So many variables here, how much you need for yourself to live, if you are going to be running a full-time search? What industry are you interested in? Is your bank going to give you are hard time with financing? Are your LPs going to effectively do their own diligence for your deal, extending the time necessary for a deal to be completed and possibly recutting the price. How are you doing your searching? How are you sourcing your deals?

Not to get on my soapbox here, but I have read for some time. how people are having trouble finding deals and I find this puzzling, My suggestion would be to use LinkedIn to source deals and reach out to owners in the industry you are interested in. Even if they aren't currently for sale, my guess is they will listen at least and if they are not willing to entertain a transaction, will know the market and refer you to a more likely prospect. Make connections, send emails, make contacts, ask business owners their plans. By the time you see something for sale, you have to compete with everyone else who is seeing the same thing for sale. Your advantage over PE firms and family offices could be your time and industriousness. Make calls, send emails and get first mover advantage. Chances are, many more business are probably available than you think.

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