Consulting as a gateway

searcher profile

March 25, 2021

by a searcher from Western Washington University in Seattle, WA, USA

My partner and I have started to engage potential targets with the opportunity to consult with them, which could potentially lead to a purchase later. I would be curious to hear from other searchers, if this approach has produced better engagement and results. Up to this point our search has focused on some type of an equity event.

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commentor profile
Reply by an investor
from The University of Chicago in Chicago, IL, USA
In the banking world, it's all about retainers and success fees. In there however are bankers and more typically, brokers, who will undertake a sell-side assignment with no retainer stream. All they want is exclusivity (key) and a shot at the success fee. It's all based on their confidence in being able to make a deal. While this is a debate in itself, bankers / brokers who are willing to do this often sell companies that are "not for sale" or [more typically] sell companies for owners who simply won't pay a 4/5 digit monthly retainer. Possibly, some blend of this could work for your consulting concept (which is a good idea) - i.e. some discounted consulting as a means of getting your foot in the door (a no-charge assessment?). Overall, anything you can do to develop a relationship and trust with the owner / decision maker is a win.
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Reply by an investor
from Massachusetts Institute of Technology in Washington, DC, USA
I haven't heard of someone doing this before in the search fund world. But FWIW, this is something many many people end up doing in the software world -- "I'll do freelance development / consulting work to help pay the bills while I build my *real* company on the side" -- and this doesn't really seem to ever work.

Inevitably the consulting work is urgent and takes up more time than you expect, while the (arguably more important) work of building -- in your case finding/acquiring -- a new business takes a back seat.

Not entirely analogous, but I'd be nervous of getting complacent with the consulting work (or the potential seller would) and a deal would never materialize.
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