Acquiring Minds The Argument for Self-Funded Search
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Nov 15, 2021 Jordan Carter and Robert Graham argue for self-funded search over traditional search funds or the 'buy small' approach. They discuss the benefits of self-funded search, including buying larger businesses and turning $200k into $4M+. They also highlight the financial aspects of self-funded search and the use of Biz Buy Sell and broker outreach. Additionally, they talk about assistance and support during the pre-LOI stage, geographic flexibility, and the low success rate of traditional searchers.
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Traditional Search Fund Model
- Traditional search funds typically involve raising $300k-$500k to fund a two-year search with a salary and deal expenses.
- Ownership is usually split into thirds with investors, leaving the searcher about 22% equity post-acquisition.
Self-Funded Search Scale
- A self-funded searcher uses personal capital to fund their search full-time, targeting businesses with $750k-$900k cash flow.
- These targets are usually $3m-$8m companies, larger than typical biz-buy-sell deals but smaller than traditional search fund targets.
Ownership Control Differences
- Traditional search funders rarely own majority control, often resembling CEOs with equity upside but subject to investor decisions.
- Self-funded searchers can maintain majority control and truly own their companies, suiting entrepreneurial mindsets.