How to select industry focus during your search

I'm in a similar situation, so I'll share my insights on what I've learned so far and my thought process. Starting with an opportunistic approach rather than an industry-specific approach to searching is quite common. Initially, it helps to explore as many deals as possible to understand the types of industries and companies that align well with your skills, experience, and interests. Over time, for a successful search, it's crucial to shift towards an industry-based approach, gradually narrowing down to 1-3 industry areas you find most appealing. To identify an appealing industry, my initial thought process is similar to what ^Searchfunder member‌ already mentioned: For the most interesting sub-industries pair objective metrics (e.g., growth, margins, industry fragmentation, etc.) with more subjective metrics (e.g., interest, potential to leverage prior experience, business model complexity, etc.). As you evaluate more prospects, it’s normal to cycle through industries if you have a solid thesis backing your decision. I've seen some searchers start with one industry in mind and end up acquiring a business in another. It's all part of the journey, as long as you can support your shifts with a strong rationale. Ultimately, you'll need to demonstrate deep understanding and credibility to sellers, brokers, banks, and the SBA to seriously consider your interest. For those keen on incorporating a quantitative approach and have the time or resources (think interns), you might want to check out Exhibit 3 and 4 in this IESE document, which sheds light on the author's industry analysis technique: https://www.iese.edu/media/research/pdfs/OP-0269-E.pdf. Also, the Stanford Search Fund Primer offers practical guidance for selecting an industry.

One thing I did during my search was go and talk to and attend various industry focused conferences or networking events in a specific geography I was looking in. That way I got a really good feel for the industry, got a feel for the sense of community/competitiveness within that industry and also made invaluable contacts along the way, Many trade/industry associations will let you attend one or two events (or you can see if you can go as someone's guest) before you have to commit to membership.