Skin in the Game

There has been an interesting trend over the past few years where searchers are becoming a larger and larger portion of the buyer pool. I personally like working with searchers as most are well educated and enthusiastic. The major challenge though is most searchers don't have a lot of capital to invest. They either rely on outside investors, lender financing, or even seller financing.

The number one issue that my buyers bring up are that searchers don't have enough skin in the game. I don't know that there are a lot of ways around this, but if a searcher is cash-poor, the seller will have serious concerns - even if the searcher is being backed by other investors.

I would strongly suggest that you are upfront with the advisor and seller when, as a searcher, you won't be bringing a lot of your own cash to the deal. Make sure it's clear that there is a "team" doing the acquisition and be prepared for the seller wanting to get to know the "money" as much as the seller will want to get to know the searcher.

If a seller interacts only with the searcher and then later learns that the searcher is bringing little or no money to the deal, it could kill the deal right there. You are better off telling the seller up front how it is being financed.