Is Finance or Operations a better background for a successful Searchfund?

searcher profile

May 23, 2024

by a searcher from Cornell University in New York, NY, USA

How important do you think an experience in Finance ( corporate finance, IB, PE etc.) against one in the Operations of business ( Marketing&Sales, Operations) is important for the success of acquiring and growing a company?

Put in a simple way, my view is the discipline of Finance is crucial, but at the end of the day the numbers seem to be the result of delivering value created in operations and sold to clients. Finance will organize and might enable it with additional properly projected investments.

1
5
16
Replies
5
commentor profile
Reply by a searcher
in Vancouver, BC, Canada
I have a background in Marketing with no formal education in Finance. Working as CMO for a PE-backed tech company the past 3 yrs has been a crash course in Finance, which has helped me see both sides of the coin.

Comparing myself today against the person I was 3 years ago (without any Finance knowledge), today I would be more strategic in what I execute on from a marketing perspective. I would focus on CAC, payback, NRR as metrics, whereas before I looked primarily at leads/MQLs without really understanding the underlying economics of the business.

I think having a strong background in Finance helps you think about the business in a more strategic way, while a background in S&M helps you scale quickly. However, you might scale inefficiently, make poor decisions, or allocate capital incorrectly, which could impact profitability or EV.

IMO, a background in Finance is more important if you acquire a company with a management layer. A background in S&M is more important if you acquire a smaller company, without a professionalized GTM.

In the context of analyzing potential acquisitions, those with the finance background have a massive advantage. This is something I'm struggling with now, but have a found a number of excellent resources to help with the learning curve.
commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
Speaking from my experience on the lending side I can say operational experience seems to provide more value to the companies my clients have acquired versus just finance experience. Don't get me wrong, understanding the operational numbers is important, but it is not terribly hard to learn and there are plenty of resource, CFO's, financial consultants, accounting firms, etc. that can help provide this support. Being able to understand the intricacies of operating the business from production, sales, marketing, customer relations, etc. is the most important thing for an owner to have to operate a business. Especially if they are replacing a seller who is providing this level of experience. Sitting behind a desk reviewing financial data only provides so much support.

I can tell you lenders look for buyers with either direct industry experience or related operating experience. Not that lenders do not value individuals with finance experience, but they prefer operators. I hope this helps. If you have additional questions you can reach me at redacted
commentor profile
+3 more replies.
Join the discussion