Military to Search Fund
November 27, 2018
by a searcher from Ohio State University in Virginia Beach, VA, USA
I am active military, transitioning roughly June 2019, considering search funds as a next career. Looking to learn about the various paths towards ETA (self-funded vs traditional / small vs large / etc...) and how those fit with my desired life-design. Would love to connect with current and past searchers (and investors) who would be interested in letting me pick their brain on the process and help hone in on exactly which path to pursue.
from University of Virginia in St. Louis, MO, USA
1. Startups are extremely risky. Most fail despite qualifications, funding, whatever. I firmly believe that buying is generally a smarter move. "New" is hard. Some people thrive on that, some don't.
2. Every business / industry can be broken down into some simple formulas, metrics, whatever that will tell you whether what you're looking for is a good deal or not.
3. You can't outsmart the rest of the world, it's too big. If an industry is sinking, think long and hard before getting into it.
4. The Harvard book, "Buying a Small Business", and Deibel's "Buy Then Build" are good places to start. I'm not such a fan of the Stanford Search Fund Primer, but it does contain good info.
5. Most military guys have an extremely strong sense of obligation to others. Business is more like gambling in some respects. Put your money down and take your chances. If you do not think you will be OK telling an investor that you've lost their money, don't take their money. Think carefully whether you will be able to fire employees. I can't tell you how many startups I've counseled who just can't walk away because of perceived obligations that are not, in fact, real.
6. Lot's of former military officers are terrified of not having a government check every two weeks. They'll defy death flying jets through the mountains at 200 ft in the middle of the night without a second thought. But take away that regular check and they shake in their boots. In my mind, this is a kind of slavery. But you have to think hard about how you will really feel about that.
7. Time is the ultimate limited resource. I wasted years in endeavors that I had little faith in. If it's not working get out and use your time in a better way.
I don't know your education or experience so this may be wrong. But my advice is to buy something fairly small, set a definite timeline for exit, get experience running it and chalk up a win. You would be surprised at how well you can do financially when you own the whole thing. Plus, smaller businesses don't sell at high multiples making it easier to win. Move up the food chain, if you want to, after getting some management experience.
from Campbell University in Emerald Isle, NC 28594, USA
I share this information in light of Patrick's comment above, "smaller businesses don't sell at high multiples making it easier to win. Move up the food chain, if you want to, after getting some management experience." This has definitely been the case for me. And I'm grateful for all the shared information from the search fund community!
Now wrapping up my 4th year of ownership, and an average of 25 employees, I'm free of all debt incurred in the purchase (frugal, frugal, frugal...), I was able to increase revenues by 30%, and am now in a significantly better financial position than I was 4 years prior with a much better appreciation and experience in managing employees.
But it took a well thought out plan, initiative, and patience. I mentioned it took me almost two years to find a company; during this time I was able to gain valuable insight and experience involving all of the fundamental components of a traditional search (but on a smaller scale). Now, I'm looking to "scale up" and get involved in a new search in the near future.