For Self funded - what are the safest companies to buy?

October 27, 2023

by a searcher from Georgetown University - The McDonough School of Business in Washington, DC, USA

For Self funded - what are the safest types of companies to buy? (industry, EBITDA etc.). I'm a bit concerned about the personal risk factor with an SBA loan.

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Reply by a searcher
from University of South Australia in Adelaide SA, Australia

As other commenters have said, there are a lot of variables to your question. If it is a self-funded acquisition where your risk appetite is very low, I would recommend you first stay away from ETA. Second, I would pursue external equity and debt funding. Smaller firms carry greater risk of failure due to risks associated with cash flow, key personnel and the absence of transferable assets and contemporary management practices. You are buying a job is the truism. The fixed costs associated with diligence are harder to justify for a small acquisition, especially given you should expect to have one or two broken deals. before closing. If you are prioritising your equity share or find external fundraising unpalatable or difficult, and are fixated on acquisition and are willing to work in the business, then I would recommend first looking at franchises. Most of the them are very low quality, have a hard cap on your growth and earning potential and suit operational and line-manager types, but quality franchises have a comparatively high floor and franchisors are generally incentivised to mitigate your risk, if you are willing to do the work.

Reply by a searcher
from University of Virginia in Richmond, VA, USA

This is sorta like asking “Who is the best person to marry?” The answer is different for each person and context. One searcher may find a company or industry a terrible fit while another may find it perfect. The question assumes cookie cutter searcher/CEOs and that’s not remotely true.

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