The week it almost died In a hotel room on a Friday evening in late June 2021, just five days before my scheduled close, an investor holding about ten percent of my committed equity backed out. Five months under LOI. Weekly investor calls since February. Their team had asked dozens of diligence questions and never raised a concern. They dropped with four hours left in the subscription period. I’ve built a pretty hard candy shell since then, but that night I was shattered. I spent the weekend ‘dialing for dollars’ everyone I knew and finally filled the hole. Whew. The deal was going through! Then Monday, the day I took my brand new leadership team-to-be to lunch, a backup investor emailed to say they had only come in because the first investor was in. So they were out too. I was short again, with the rest of the equity and all of the bank debt lined up, and two days until close. I told the sellers I might need more time, and they responded by telling me, “Nope. You have 24 hours to raise the funds or we’re walking.” Miraculously, (truly, a miracle), we ended up finding the final funding, and we closed that Friday morning. Five years later we sold the company to a private equity firm, and the people who wired money into that scramble did very well. I have been on Searchfunder a long, long time (6+ years). I promised myself that when we sold, I would write the whole thing down. The whole thing. Warts and rainbows. Almost everything published here is a piece of the puzzle. This is the full cycle, cradle to grave: the failed self-funded search, the funded raise, the insane week above, five years of operating, the board relationship I never got right, the highs and lows of the sale, and the places I would give real money back to undo. I am an old military guy, and we have an expression, "Give me the gouge." It means the unvarnished truth about what actually happened. That is what I am trying to give you, at the cost of looking bad in several spots. Take what is useful and throw out the rest. I did one search. I barely know how I did it, let alone how you should do it. Ninety percent of the mistakes below were mine. Ten percent of the success was. Part 1: Why search, and the detour that nearly ended it I grew up lower middle class. There was always a roof overhead, but Christmas gifts were made, not bought. I joined the military because I didn’t have the money to afford it on my own and graduated from the Coast Guard Academy. After that I got my MBA, joined GE and led a business there, then consulted at BCG, and did a little angel investing on the side. Two things became clear. I did not like working for large companies. And with small children at home, I did not have the risk tolerance for angel investing or for starting something from zero. Most importantly, I did not have that one great idea I believed would change the world. But ETA was a perfect fit. Buying a business matched my desire to scale something, without needing the amazing startup idea I did not have. I was all in. The family business detour There is a trope that once you start telling people you are searching, business owners start trying to hire you. That is exactly what happened to me. A third-generation owner invited me into his family business as COO. The pitch: in a couple of years I would become CEO, get equity, and scale it up. I 100% fell for it. He hired me to be a change agent, but he never got his family on board, and they had to report to me. They did not like it one bit. They fought me for two years, and it ended with me getting fired for reasons they couldn’t quite articulate. First time in my life I had ever been fired! I spent two years making somebody else's family a ton of money and then was shown the door. The lesson is simple, and I will save you the two years: it is never a good thing to be in a family business if it is not your family's business. The people with real power are related to the owner, and you are not. The second lesson was worth even more. I learned the dangers of being a bull in a china shop. Paced change. Bring the team in early. That made me far more effective when I finally bought something of my own. Change is inevitable in search. How you do it and the pace at which you do it always feels too slow for investors and too fast for the team. You need to thread that needle quickly. Part 2: The search Right after they let me go, I started searching in earnest. I was worried about supporting my family. Small children at home, and I had just been fired from a job I had moved my career for. I picked up enough consulting work to hold my old salary while keeping two days a week free to search. That model is underrated. The consulting kept the lights on, kept my skills sharp, and kept me in front of business owners. Most of all, it took the desperation out. When you do not need a deal to pay the mortgage, you make better decisions about which deals to chase. After I got over the shock of the transition, it was actually a very fun time professionally. Random thought of the moment: Swap the proprietary and broker ratio My view here is different from a lot of this community. I believe searchers should spend 75 to 80 percent of your effort on proprietary deals in year one. And flip the ratio in years two and three. Proprietary deals get bought at far better prices, and you make your money when you buy. That was true of my deal, and it is one important reason why our exit succeeded. Here is the part nobody says out loud. Brokers hook up their buddies first. It works like a realtor who calls three investor friends before the best houses are ever listed. The good deals go to the local buyers who close often and close fast, and what reaches a new searcher is the leftovers: hair, high price, or both. That is not a conspiracy, it is rational behavior, and it is still working against you. It changes once you own something, have a disciplined M&A approach, and the brokers know you are a real buyer with cash. As a searcher, you are rarely seeing the best stuff from rando brokers. So why move toward brokers later? Volume. Eventually you need to see a lot of deals to find the one, and you really do want to get a deal done. People say the worst outcome is not a failed search, it is buying a bad business. There is truth in that. But most searchers want to buy a business, and a business that is quite good rather than a grand slam can still turn into something excellent. I always wanted the best deal available. I was also not going to finish my search without buying something. Failure was not an option (for me at least…). One way, not the way, one way to kick off a search - The color-coded list Before the deals came the list. I built a spreadsheet of every company in my hometown area that might fit, using a free trial download from a data vendor at the local library (I passed on paying $10K for it), public PPP loan data, and an old data.com pull. That took 6,000 companies down to about 150 local targets after two weeks of non-stop website searches (how I wish I had AI for that 2-week slog). Then I color coded it. Green meant good fit. Yellow meant later. Red meant dead. Then I forced myself to make a top ten list. My “Purple List.” Then I made it my goal not to reach out to those owners, but to find a warm lead to those owners. I went to breakfast, lunch, or coffee w/ every CPA, business lawyer, and business banker in my city with the goal of sharing my story and asking them if they knew of anyone thinking about selling in the next few years. And then I asked if they knew anyone on my “purple list.” And they did! Data finds the company. A trusted connection gets you the meeting. The early swing and miss with my own funds One that got away: early on I negotiated a highway weed-spraying business with a million dollars of SDE down to 2x. It was an incredible deal in nearly every way. I even got certified as a weed sprayer, which not a lot of HBS grads can say! Then my banker and I were walking the property and found an environmental issue (dumping chemicals into the ground water!) that killed it. A local searcher friend of mine took on that risk, reimbursed my diligence costs, and has been pulling a million dollars a year out of it ever since. Was that failure or success? Time will tell. But if I had bought it, I never would have bought the company I did buy. I am happy I walked, but I still think about it too. Old man breakfast Early in my search I talked to the owner of a bowling supplies manufacturer. His business was falling off a cliff, so I was not interested. But I asked him if he knew anyone else who might sell. He walked me next door in the industrial park and introduced me to the owner of a trucking company. That deal had too much hair and went nowhere, but what it did produce was an invitation to what I call “Old man breakfast.” You have seen it. A table of older guys at a breakfast place, coffee, two hours, no agenda. His group was all local business owners. I went many times. I talked shop and asked for leads. Most had already sold their businesses, so no deals ever came out of it. Just good conversation and good friends. Many searchers measure every conversation by whether it produces a deal or not. Most of the best relationships I built during my search never produced one. They produced friendships, advice, introductions, and in the end, the money that saved my deal. Keep showing up when there is nothing in it for you. Remember those guys. They come back later. Another piece of Random Advice - The Thursday group If you are a solo searcher, make friends with a few solo searchers who are searching at the same time you are. Two buddies and I met every Thursday for an hour. Searching alone is lonely. Most of the week you are getting rejected by owners, ignored by brokers, and asked by family when you are going to get a real job. Having two people who understood exactly what that felt like kept me sane. We traded deals that did not fit our own criteria, shared broker contacts, pressure-tested LOIs, and told each other the truth when one of us was falling for a bad deal. Neither of them closed a search deal. Both started their own businesses instead, and both have been wildly successful. That group mattered more than I expected. Highly recommend if you’re going solo to find a few fellow lonely travelers to keep you sane. Open wider than you think I started narrow. When people asked me what I was looking to buy, I told them “Blue collar, Midwest, near home, something that fit my military and GE background. Energy industry or manufacturing, something I could get my hands dirty in.” Something loud, hairy, masculine! I ended up buying a financial services compliance software business with a fully remote team that was 90%+ type A, brilliant, detail-oriented women. We make plans and God laughs. And He has been laughing at me for the last 5 years as I’ve been constantly putting my foot in my mouth saying the wrong things to this incredible, professional, extraordinary team. Lesson – Don’t close yourself off too quickly to unusual businesses. There are some riches in niches! Part 3: The raise and the close How the company found me A buddy owned a business in Atlanta that I badly wanted to buy. I pressured him for months to let me bid. He resisted so hard that he eventually introduced me to the founders of a company that actually was willing to sell just to get me off his back. My first reaction was lukewarm. It sat well outside my criteria, and its core vertical did not excite me. At the same time, I was deep into a rebar fabricator business in Oklahoma, negotiating an LOI and flying down to visit. So I handed the compliance business to one of my Thursday searcher buddies. Over the next month my rebar deal died, and he found something better. He came back and asked if I wanted it before he walked away. Forced to look again, I saw what I had missed the first time. A vital service for something mission critical for our clients. A team with enormous tenure, quality, and character. Software that was industry agnostic, which meant we could take it into new verticals. I had given it away. I took it back and fell completely in love with it. About three months later, the rebar owner called to say he had sold to a buyer who offered about five percent more than I did. I was furious. I would have paid that five percent if he had told me it was his line. But it was his call, and he owed me nothing. Hang on to him. He comes back too. The Search Fund Mafia is real Spicy take. I was an older searcher with a global P&L and executive roles behind me, so I negotiated slightly better than market terms on my search deal. That taught me something no case study mentions. Traditional search fund investors are extremely close to one another. Some have invested alongside each other for thirty or forty years. The moment I pushed on terms, I found out they call each other and talk about searchers without you knowing it! Mostly that worked in my favor. People shared the good story and helped me raise money for the search and the deal. And there is a real reason the network behaves that way: these investors have backed hundreds of searchers, they have seen what works, and comparing notes is how they protect both their searchers and the industry. That shared pattern recognition is a big part of why search has the track record it does. But know this going in. Your relationship with any one of those investors will never be as strong as their relationships with each other. If you push on terms, everyone knows by Friday. If you handle a hard moment well, everyone knows that too. Your reputation travels fast in both directions. And if you’re fortunate enough to have a good outcome and smart enough to learn from these OG investors, you might be lucky enough to join the mafia yourself one day! Too many cats I was told that a larger investor group means less control exerted by any one investor. I did not want the tail wagging the dog, so I went wide. Way, way too wide. Because I wanted out-of-market terms, I leaned on high net worth individuals rather than the typical big firms in search, and I capped the units any one investor could buy so that nobody but me owned more than ten percent. I ended up with 35 people across 27 investor groups. Then I spent the next five years herding cats. I still would not want a single sponsor. I would have felt like an employee instead of a CEO with an investor group behind me. That said, the single-sponsor model is killing it right now. They build strong searcher networks, they get great deal flow, and the odds of closing go way up. Know yourself. If I did it again, I would target 10 to 15 investors. Large enough for great advice when things go sideways. Small enough that a follow-on acquisition or a K-1 problem does not mean juggling dozens of people. Each check material enough that they care, not so big that they want to run the company. One more piece of advice that paid for itself many times over. When you meet an investor you really like, close with two questions. Who do you like to invest with? Would you make an introduction? My raise took about two weeks, and I met ninety percent of my investors that way. And nearly every single one was awesome. We really do have the best investors out there in the Search world. The quality of earnings disaster This is the clearest penny wise, pound foolish decision I have ever made, and it almost lost me the company. We spent five months under LOI because the business was complex: multiple entities, several service lines, and real revenue recognition questions. That is plenty of time to get the quality of earnings report right. I did not. I got quotes across the range, from established firms down to solo practitioners. I should have picked someone in the middle who had done plenty of these. Instead I picked a very entrepreneurial provider who was just getting started and could do it for a fraction of the cost. What came back was not ready for a sophisticated investor audience. Rough spreadsheets, an unpolished deck, and a number of errors. It looked nothing like the sample I had been shown. My investors found issue after issue. They were right to. By then I felt we were too far along to start over, so I went forward with it. Several very influential, very good investors in this space walked away because they did not trust the numbers. They were a modest share of the equity but a very large share of the credibility. Every new investor I approached afterward got that same weak report, and I had to explain why the business was good despite it. I understood the numbers cold because I had lived in them for months. My investors had my assurances but a bad report. They had every right to ask hard questions. Two things to do instead. First, ask your largest and most influential investors which quality of earnings firms they like receiving reports from. You do not have to use those firms, but you will learn what quality they expect and what it should cost. The report is how people who were never in the data room decide whether to wire money. Its credibility is your credibility. Second, do not hire someone brand new who is trying it out. Get someone with real reps. This knucklehead promise the world, but he used me as the Guinea pig. The near-death close, day by day Summer 2021 was an insanely busy time in search. Searchers who could not close in 2020 were closing in 2021, and my class, who started during COVID, were trying to close at the same time. Equity was stretched thin, which is why I lined up a deep bench of backups. Before close, every investor has to respond to the subscription rights notice. I had people who had been with me the entire search and the entire LOI period. They were on my weekly calls and asked great questions. My cap table had three categories: Out, Gap investor, or Committed. But that was not the right way to look at it! Soft committed means nothing until someone signs. I assumed that being there the whole time meant being in. It most certainly does not! Friday. Four hours before the notice expired, an investor who had backed me since day one of my search decided not to invest. Their team had attended every call since February. I had successfully (I thought) fielded every question from them. Their reasons were fair: concerns about the vertical, and not enough time to finish their own diligence before a fast close. The senior decision maker had never actually said yes, and I had never directly asked him. Lesson – Investors are not committed until they actually sign on the line. Corollary, owners are not committed until they sign the APA. Don’t count your chickens people! So with them out just before close, I had to give up and fight. The weekend. I called and emailed every person I knew who could write a significant check. I looked at my old emails as I was writing this post. Texts at midnight. CIMs sent at 1 AM. Cap table updates every few hours as the gap shrank. It was insane. Some of the most generous responses were from strangers who said no. One searcher-turned-operator I had never met read my LinkedIn message on a Saturday, wrote back that he could relate because a quarter of his equity had dropped out twelve days before his own close, and promised an answer within a day. He passed, kindly, because he did not know me or my board well enough to move that fast. He was right, and he proved the point of this whole section: in a crunch, money comes from people who already know you. This is when the old man breakfast guys came through. I told them what was happening. They did not hesitate. From that one table (and their friends and family), I raised over $2M in that final weekend. The Oklahoma rebar owner, the seller who had picked another buyer for a few points more, committed $750K. By Monday morning I had everything I needed. Deal done, right? Monday. Supposed to be the victory lap, I took the new leadership team and sellers out to lunch to share the excitement I had for the business and how we were ready to close in the next few days. I was riding high. Then one of the backup investors, saw the updated cap table from the weekend. They had known me for about a week and had come in largely on the strength of the names already on that table. When one of those names left at the 11th hour, they thought I was misleading them because had them on my spreadsheet as “committed.” And no matter how much I pleaded w/ them, sharing my ignorance of the terminology, was enough to save them. I reached out to the sellers to ask them for a bit more time. The founder gave me 24 hours or they were walking away. (Side note: I asked him years later if that was a bluff, and he said ‘no’. He was legitimately going to walk away after 5 months if I couldn’t figure out how to land the plane on time!) Tuesday. It became clear the wires would not all land by the scheduled close. My lawyers told the sellers' side we were aiming for Thursday. I kept calling anyone who I could find related to search investing. That day, one of my lead investors gave me the advice I needed. I had been living in a hotel near the business for about three weeks. He told me to stop, step away, and decide with a clear head whether I still wanted this deal knowing everything I now knew. I am an outdoors guy, so I went for a long walk in the woods and took a blank-slate look at the company, the industry, and the deal, as if seeing it for the first time. After several hours the answer was still yes. Even a bigger yes than it had been before. A super strong business, great team, strong sector (financial services), and new verticals that opened a much bigger opportunity. I was in, and I was not giving up on it no matter what. One thing to ask for before you need it: some lead investors keep a list of people who fill late funding gaps. One of mine offered me theirs in the middle of the scramble. Ask early. Wednesday. I wrote that lead investor and owned what I had done poorly in the raise. He wrote back that the most important thing was learning from mistakes, and asked for wiring instructions. He invested anyway, despite real concerns. I have never forgotten that. I was still short that morning. Then something I never expected. One of the sellers (not the one who had given me the ultimatum) asked if he could invest in the deal. The person who knew the business as well as anyone alive, who had just watched me stumble through the hardest part of the process, wanted to put his own money in alongside mine. It closed the gap, and it was the strongest vote of confidence anyone could have given. We talked about a Thursday evening close. The bank would not do an evening close. Friday morning it was. Thursday. Wires landed all day. The rebar owner did not just send money from his personal account. He formed a brand new LLC to make the investment and was rushing signature pages to my lawyers the day before close. Think about that. A seller I had been frustrated with months earlier was filling out subscription documents on deadline to help me buy a different company. Friday. At 8:49 that morning I emailed my incoming board: funds wired, bank ready, sellers still on board. "Unless something else crazy happens, we will close at 10:30 EST today." Nothing else crazy happened. We closed at 10:30. It was the hardest week of my life. And it nearly died because I treated soft commitments as hard ones. What I would tell you: 1. Get the hard commitment from the senior decision maker, not the junior people who like you. 2. About a month before signing, bluntly ask every investor whether they are in or out, and whether they are ninety percent in or one hundred percent in. 3. Know who your backup investors are relying on. Some backfills are followers, and they leave when their anchor does. 4. Over-raise your backup bench. My weekend over-raise is the only reason Monday did not kill the deal. 5. Camp out near the seller for the final two to three weeks. I did this, and I do not think the deal survives otherwise. On a later bolt-on I did not, and that deal fell apart days before signing. 6. Stay connected to everyone. The seller who picked someone else and a table of retired guys at a breakfast place saved this deal. 7. The redemption fight nobody warns you about Spicy take again. Closing did not end the investor dynamics. In a funded search, investors who backed your search capital choose whether to join the acquisition. The ones who do not usually get their search capital back with a step-up, commonly fifty percent, for the risk they took funding the search even if they don’t do the deal. Read that again. Several of the people who stepped away at the last second, including some whose exit w/ four hours left and nearly killed the deal, asked for their money back plus fifty percent. I did not understand how firmly that norm is held. A couple of weeks after close I sent redemption paperwork to my non-participating search investors, and I immediately started getting different answers from different people about what was fair and what our documents actually required. One investor wrote me, very politely, that he believed the fifty percent step-up was fair and standard, that he had never seen a redemption for less, and that people in this world talk. He was not wrong, and he was not trying to make waves. I wrote back the plain truth: I was hearing different things from different folks, and I had never done this before. We worked it out with counsel and the board. Read your search fund documents on redemption before you close. Know the norm. Budget the cash. And understand that your board will likely want to take care of other investors whether or not they are in your deal. Hardest check I wrote in 5 years was giving investors who backed out of the deal last second a 150% return on their investment after one year. Ugh. You never know why someone is pushing for or against a sale The company had three founders, and two of them were married to each other. One of the unseen forces pushing the deal across the line was the wife in that couple. One week after we closed, she filed for divorce. I do not think anyone saw it coming. It is a sad part of the story, and I wish it had not happened to them. I share it for one reason. Every seller has motivations you cannot see in the CIM or the board room. Health. Family. A tired partner. A kid who does not want the business. Sometimes those hidden forces push a deal forward and sometimes they quietly kill it. You will never see all of them. Stay humble, ask open questions about what life after the sale looks like for each owner, and do not assume a seller's urgency or hesitation has anything to do with you. Part 4: Five years of operating bliss (nope!) The founder matters more than he/she says Even absentee owners of lower middle market businesses have outsized influence. They have done the reps so many times that ten minutes in the building tells them everything. The couple of hours a week they claim to spend are insanely valuable. Your first job is to replace that knowledge as fast as you can. Nobody hands it to you in a binder. It lives in the founder's head, in relationships, and in a thousand small judgment calls the team stopped noticing years ago. You only learn it by spending real time in the work. The three things I would do differently right after buying First, do no harm. You have years. Take months. I spent one day with each category of employee, then about three days with each a few weeks later. I should have spent several weeks with each. Because I did not, I was still going back in years three, four, and five admitting I had not understood things as well as I thought. I probably still do not. Searchers are smart and learn fast. You do not need to become an expert in every role. A good standard is you should be passable as a new employee in each one, i.e. you could do the job w/ a ton of help. Once you get there you can actually drive value, because you know what each role needs and what good work looks like. Build the scoreboard. What numbers matter? What is a good trend and a bad one? What were the historicals? Nearly every one of these businesses needs this and does not have it. It is amazing how much behavior changes with no carrots and no sticks at all, simply because people know you look at their scoreboard every week. I got talked out of it. A founder told me, "You will be fine as long as you don't do any meetings here." The culture was allergic to anything corporate, so I avoided the meetings and reports that would have given me good data. That was my call, and it was wrong. Two or three core KPIs per functional leader, reported weekly, even on a sheet of paper. Be careful not to overwhelm a small business with a nerdy MBA reporting package. Two or three metrics, every week, consistently. That is it. That simple. Sales before cost-cutting. Someone told me “Sales cures a multitude of ills.” It is the absolute truth, and I did not follow it. With a military, GE, and BCG background, I went straight at operations, technology, cost-out, and vendor negotiations. I cut to the bone. Margins grew every year I was there, faster than revenue. But if I had put that same energy into growth, profit would have grown faster still. The math is simple once you see it. Cost cuts are (mostly) a one-time gain. Once you have moved the office, renegotiated the vendors, and trimmed the software stack, you are done. Sales growth compounds, and in a recurring revenue business every new customer pays you again next year. A dollar of energy spent on the growth engine in year one is worth far more than a dollar spent on cost-out. The cost-out will still be sitting there waiting for you in year three. Here is the sequence I would use: 1. Metrics and scoreboard, leading indicators and not just lagging ones. 2. People, as assessment and not replacement. Understand before you change. 3. Growth engine. More of what you already do, with unit economics that work. 4. People again. Now you know who you need, so reinforce the team with people who can take it further, faster. 5. Operations and cost-out, in years three through five. And when you sell, buyers underwrite the growth story. It is much harder to put a big multiple and a lot of debt on a flat business than on one whose earnings look like they will keep climbing. I went way too cheap on the office Before COVID everyone worked in a palatial office. Great location, gorgeous hardwoods, private offices, over $12,000 a month in rent. By the time I arrived most people worked from home. Within six months, I terminated that lease and moved into a space at about a quarter of the cost. A-class to C-class, in a fairly seedy building. My thinking was simple. We never spend time there, so why spend money there? We never had clients in the office either. It saved money and it added enterprise value. It also ignored the fact that people want to be proud of where they work. It was a fine space for a guy like me. It was wrong for our team. Last year we moved to a small build-to-suit for about $4,000 a month with a modest build-out. Lots of windows, lots of light, and a couple of teammates decorated it. It is now a beautiful, airy office. If I had been smarter, I would have gone there immediately. Notice that this is the same mistake as the quality of earnings report, wearing different clothes. I saved a small number and paid a large one. Twice. Watch for your own version of that pattern, because you will have one. The 85 percent stat and the real job Going in, I heard that about 85 percent of the employees you start with will not be there when you sell. I wanted to be different. We did not end up that high, but I was amazed at how many people we lost (and gained). A lot of turnover has nothing to do with you. Some is natural attrition. Some people do not like change, even change that is good for them. I raised salaries dramatically, but with high inflation some people still felt it was not enough. Strategy changes cause churn too. I wanted to build out the technology, enter new verticals, and grow faster than the business ever had. Not everyone wanted that. And you will have to hire. I brought in a new head of technology and a new head of marketing early, because new markets needed real marketing and a much stronger platform. There were external factors too. I bought the business after everyone had gone home for COVID, about a year into remote. Many employees connected the loss of culture with my arrival. Some of that was my style. A lot of it was that they missed seeing each other every day. Leading a remote team is much harder than leading one on site, and management by walking around does not work over Zoom. Do not go into an acquisition looking to swap out a ton of people. But do not take churn too personally either (unless it really is your fault). The hardest calls were about standards. It is easy to talk about standards in a classroom. It is much harder with someone who has been there fifteen years and is not meeting them. Hardest of all is when someone was excellent at the old job and the company moved past them through no fault of their own. HR is a necessary evil, and restrictive covenants are not optional I have never been a huge fan of HR. We hold extraordinarily high standards for how people treat each other, but I never wanted a hall monitor watching everyone. That is far too simplistic a view. The most important part of HR is what happens when things go sideways. For us that was non-solicits and non-competes. We learned the hardest way possible. In one case we lost a massive client when they poached one of our team members to run the program internally. In another, an employee somehow found a way to not sign our non-compete (and we didn’t notice in the flurry of post-close admin work), and she ended up taking our customer information and soliciting our clients directly. We are still paying lawyers over that one. Redraft all of your restricted covenant agreements and have everyone sign them immediately after you buy. Everyone. No seriously. You need to double check every single one is right and signed correctly. File them where only you can get them. It is worth a hundred times the cost. AI changed the math My team fully embraced AI, and it is now central to what the company is worth. We run a two-person marketing team punching far above its weight and a software business with just three developers. The only reason we could build and grow that fast is AI. If you are searching now, ask two questions about every target. How can AI improve this business? And over the next five to ten years, will this business be swallowed by AI or enhanced by it? The shrinking market It is cliché, and it is true. Better to be the third-best company in an exploding market than the best company in a declining one. When I started, our primary vertical came under growing regulatory pressure, and at the same time there was heavy M&A consolidating it. We had fewer customers, and our customers were buying each other. What saved us was the growth plan: new markets and new services. If we had stayed in the core vertical for five years, we almost certainly would have had a flat or negative outcome. Research the fastest growing industries when you start your search. Healthy businesses in growing markets rarely sell, and when they do they sell at high prices. It is still better to slightly overpay for a great business in a rapidly growing vertical than to get a bargain on a faltering one in a weak industry. There’s an outstanding article out there on this very topic. Part 5: The board, where I made the most mistakes If you read only one section of this post, read this one. Board management was the single area where I made the most mistakes as a CEO, and it is the area the search literature covers the least. How I picked, and what went wrong In summer 2021, it felt like every new search CEO was looking for board members at the same time. I started with the investors I had connected with most during the search and assumed I needed someone representing my larger investors. That is a weak filter. It optimizes for cap table politics, not for judgment, connection, and value add. Twice, a partner I genuinely loved had too many board seats and offered someone else from their firm instead. Those folks were capable and generous people. But I had built my relationship with the original partner, and board chemistry is deeply personal. If the person you want cannot take the seat, do one of two things. Build a real relationship with whoever does, before you close. Or decline and ask someone you already click with to join instead. Do not accept the substitute out of politeness. Independents are the gap My biggest structural regret is that I never added independent directors with deep domain expertise. My board was all capital, no operators from my industry. In a niche like mine, there are not many people who truly understand the regulatory landscape, which makes the ones who do enormously valuable. An independent who knows your industry can tell you when your strategy is wrong in a way an investor director usually cannot, because the investor is reasoning from a portfolio and the operator is reasoning from the work in the industry. If I did it again I would seat one independent operator before I seated a second investor. I would pay them properly. And I would pick someone who had already sold a company in a similar situation, because that person has seen the movie you are about to be in. What I owe my board, and what I never delivered My board was generous with its time and supported me through some genuinely hard moments. Where we fell short, most of it is mine. We never found our rhythm. The business was complicated, with multiple entities, several service lines, and a regulatory layer that takes months to understand. I did not do a good enough job teaching it. I would walk in with results and strategy, and spend the meeting answering questions that existed because I had never built the shared foundation. That is a teaching failure, not a board failure. We also held almost every meeting remotely. Near the end we started bringing the board onsite, and it was immediately better. Break bread. Let them see the team. Read each other's faces. Meet in person from the start, or at minimum every other meeting. Here is the thing I most wish someone had told me. A board is not an audience to report to, and it is not a boss to manage around. It is the only group of people who have both the context and the standing to tell you that you are wrong. If you present to them instead of thinking with them, you have converted your most valuable asset into a compliance exercise. I did that for at least two years. What to look for People who will challenge you and hold you accountable. People who understand the business, or who are willing to do the work to learn it. People you actually enjoy spending time with, because you will be in hard rooms with them. And at least one person whose job is not to protect capital, but to share years (or decades) in the industry you are just learning. Do better than I did here. You will be better for it, and so will the business. Part 6: The sale Why we sold, and who was right My board believed it was time to sell before I did. I wanted to hold longer. I had been reading all the literature on longer hold periods, we had just come off our best year ever, and I had almost all of my net worth in the business. They read the moment better than I did. We needed fresh equity to fund the next stage of growth, and the market was unusually receptive. Looking back, their timing was good and my instinct was wrong. If your board tells you it is time and you disagree, that is a signal to go get a third opinion, not to dig in. It is very hard to be objective about timing when the asset is also your identity. Run the process. Just run it. A large strategic in our space had recently gone to market and gotten a price nobody expected. On paper, that same kind of buyer should have paid a big number for us. We did what they do, in a different industry, with capabilities they needed. The BCG guy in me was so certain of that strategic logic that we ran a streamlined, limited process with a short list of high caliber candidates instead of a full one. Then the strategic I knew would have the most upside lowballed us. In that limited process a different partner was willing to pay more. They understood where we were going and they turned out to be a much better fit. I am not unhappy with where we landed. The firm that bought us is exceptional, and I am excited to keep building with them. But we paid a banker a lot of money and then handcuffed him. We should have run a standard full process. Plenty of buyers would have engaged, nothing would have stopped the strategic from participating, and with competing offers on the table I believe the number could have been materially higher. This was a very searcher mistake. I had spent five years being the person who knew the business best, and I assumed I therefore knew the buyer universe best. I did not. Bankers run full processes because nobody, not even the CEO, knows who will see the most value until competing buyers are forced to show it. Let the market and bankers do their job. Do not roll too much I wanted to signal to the market how excited I was about the future. What got stuck in my head was a round number: roll ninety percent of my equity. I still believe that equity will earn a better return than anything else I could have done with it. But I wish I had taken about half off the table, for my wife's peace of mind. Rolling fifty percent would have shown plenty of commitment. It was still a great outcome for my family. We are comfortable, college is covered for the kids, and we are putting in a pool (“Finally!” – my wife). We will also be waiting quite a while for the rest. Most people I have talked to since agree. Roll something, because there is almost always upside. Just do not do something like I did and roll too much no matter the certainty of upside. But maybe ask me again in five years, and I’ll say it’s the smartest thing I’ve ever done. The structuring decision I would give real money back to undo This is the part I most want you to read, and it is the part I got wrong in the most boring way possible: a paperwork decision in my first few weeks of ownership. There is a section of the tax code built for roughly what searchers do. Section 1202, Qualified Small Business Stock. In plain English: if you acquire stock in a qualifying C corporation directly from that corporation when it is issued, and you hold it long enough, you can exclude a large share of your gain from federal tax when you sell. The limits are per holder, per company, so it can apply to the searcher and to qualifying investors on the cap table. The company was a C corporation when we bought it. Shortly after closing, I converted it to an LLC. My thinking was that we would make regular distributions to investors, and a pass-through made those more tax efficient. It was a great cash generator, and who wants to sit on a bunch of cash? That is not what happened. We reinvested almost everything into technology, marketing, new verticals, and people. We spent far more on those than my original model assumed, and that reinvestment is what drove the growth that made the great exit possible. A business that reinvests its cash instead of distributing it is exactly the scenario where a C corporation and Section 1202 shine. I will not put a dollar figure on what the conversion cost, and I want to be precise about why, because the precision is the lesson. I am not going to tell you I definitively left seven figures on the table, because I never got a clean answer on all the tests and I am not going to pretend otherwise. What I will tell you is this: I made a structural decision in week three of ownership, based on a distribution plan I abandoned within a year, without ever asking what I was giving up. That is the mistake. The dollar figure is unknowable and the carelessness is not. The 2025 tax law made all of this more valuable for anyone buying today. For stock issued after July 4, 2025, there is a tiered exclusion: 50 percent of the gain after three years, 75 percent after four, and 100 percent after five. The per-holder cap rose to the greater of $15 million or ten times basis, and the company's gross asset ceiling at issuance rose to $75 million, both indexed for inflation starting inredactedMost search deals fit comfortably inside those limits, and the three-year tier now rewards a shorter hold than almost any search deal runs. What I would tell every searcher: 1. Decide your entity structure at formation, not at closing, and not after. On day one ask your tax advisor and deal counsel whether your structure can issue qualifying stock to you and your investors, and whether the target's actual lines of business pass the qualified trade or business test. Get the answer in writing. 2. Be clear-eyed about distributions versus growth. If you will pay out most of your cash flow every year, a pass-through may be right. If you will reinvest and sell in three to five years, which describes nearly every search deal, the other structure can be worth a great deal. Run the numbers rather than defaulting to whatever the last deal used. 3. Track your dates. The holding period and the exit date both matter, and they will sneak up on you. This is not tax advice and I am not qualified to give it. Have the conversation before you sign your LOI, not after you sell. Part 7: Going-away thoughts If I did it again, I would go self funded longer and try to buy even bigger Easy to say with money in the bank, and I know it. The appeal of search is that you do not need your own capital. If I did it again, I would do a self-funded deal for the largest business I could feasibly buy, closer to an independent sponsor model. Three reasons. The economics, because a percentage of a much larger pie matters. The team, because larger businesses have more capable people and you are not a player-coach. And the partners, because very few good vendors want to work with a tiny business, while a real mid-market company gets serious attention and can hire well. Shop every vendor, including the ones built for searchers Biggest spicy take yet. There is a whole ecosystem of lenders, quality of earnings firms, insurance brokers, lawyers, and service providers built around this community. Many are excellent. They understand the model, they move fast, they know what investors expect, and they will walk a first-time buyer through things they have never done. That has real value. Specialization is not the same as the best price or the best fit. The clearest example was my term loan. One major lender that markets heavily to searchers on this site quoted me about two percentage points above what I eventually closed at. On acquisition debt, over the life of the loan, that is not a rounding error. That lender did nothing wrong. Searchers just do not know to shop it, and I almost did not. Insurance is the same story. I have now spent five years around commercial insurance, and when we quote out coverage bought through providers that focus on this community, we usually typically find savings >30%. Sometimes the coverage is perfectly good and simply priced for convenience. Sometimes it is missing things. Either way, get your insurance quoted again if you bought from someone selling to searchers. None of this means avoid search-focused vendors. It means treat them like any other vendor. Get two or three quotes. Ask your lead investors who they trust. Ask other operators what they pay. Most of us are first-time buyers, and the most expensive habit you can bring into ownership is assuming the first quote is the market. Especially around here. Marry well Entrepreneurship is not for cowards. It is a rollercoaster. You close and you are on top of the world. Then you lose customers and key employees in the first few weeks and you’re convinced you’re going to lose it all. You recover. Things go well. You get excited. Then you prepare to exit, and diligence exposes everything you never got done. You are down again. Then you sell, and you are up. Every one of those swings comes home with you at night. When a key employee quits, you do not leave that at the office. When a buyer's diligence team finds something you missed, you are replaying it at dinner. Your spouse rides every hill with almost no ability to do anything about it. Often they move to where the business is and handle everything at home while you’re getting the praise of being a CEO. I was very fortunate. My wife is an incredible mom with a ton of kids to handle, and she has had an incredible attitude through all of it. That mattered more than anything else on this list. Your spouse will be who they are, in the good times and the bad. Find someone resilient. Marry well. Thank you and two offers A lot of what I got right came from people on this site who shared their stories, and some of the people who saved my deal believed in me before I had earned it. I am deeply grateful to my investors, my team, my board, the old man breakfast crew, and my wife and kids. This journey changed my family's life. I couldn’t be happier I did a search, found such an amazing company, and have been given the opportunity to continue on as it’s CEO. Two ways I would like to pay it back. First, if you have a small, final gap and you need a little more to get the deal across the line, reach out. I am not doing major search investing because I am still running the company (and I rolled too much equity 😉), but people did that for me, and I will always be grateful. Second, I would like to serve on the boards of a couple of search companies. You read Part 5. I got Board work wrong for years, and I have thought hard about why. I have also now been through the full arc: a self-funded search, a funded raise, a near-death close, five years of operating a complex multi-entity business through a shrinking core market, a sale process I would run differently, and the first months of life as a PE-backed CEO. If you are a searcher who wants a director who has made these specific mistakes already, or an investor looking for an operator to put on a board, I would welcome the conversation. You can reach me on LinkedIn at redacted or by email at redacted To quote the great Jim Stein Sharpe: Search On!!!