How much such self funded searchers have set aside (on average)?

August 18, 2020

by a searcher from Western University in Toronto, ON, Canada

Looking to initiate a self funded search but not sure how much personal capital should be allocated to this endeavour.

Any insights or data on this?

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Reply by an investor
from Western Washington University in Key West, FL 33040, USA

Depends. Are you married? Do you have kids? How far are you willing to cut your personal expenses? I was homeless and lived on friends' couches, floors, and guest beds for a year. I worked odd jobs like driving Uber and became a part-time fly fishing guide to minimize my burn. And I wracked up some credit card debt. Search isn't glamorous. Running a service-oriented small business isn't very glamorous. The bulk of your employees are probably going to be people you aren't used to dealing with on a day-to-day basis. I think it's healthy to slash your lifestyle during the search phase as it prepares you for a lean first year or two of business while you focus on paying back your investors and deleveraging. It also will help motivate you and you will know what you're working towards. Your future employees will also be looking for clues on what kind of lifestyle you are living. Modest living will go a lot further in building credibility and getting people to buy into your mission than showing up to work in a fancy vehicle. Again, search isn't glamorous.

Reply by a searcher
in Phoenix, AZ, USA

For the search or the purchase? One of the survey’s on here posed that question and I think the most common answer was $400k-$500k, which I assume was for the purchase.

Search cost seems to vary, particularly if you are including covering personal expenses. Other considerations are direct sourcing vs broker outreach, national vs local, potential broken deal costs, etc.

The HBR Guide (book) To Buying a Small Business had a pretty good breakdown of those items, I would be curious on others thoughts as I’m also at an early stage.

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