Reflecting upon the first three months of my self-funded search, I’m excited at how much I’ve learned and how happy I am that I’ve chosen this path following an MBA. It feels like an appropriate time to share some of my lessons learned in the hope that it helps those early in the process or considering search. I also acknowledge that I am a new entrant to the ETA world and welcome constructive feedback!
For background, I’m a solo self-funded searcher who went from the Army to Wharton's MBA program and graduated in May###-###-#### I’m starting my search with zero private acquisition experience, a little B2B sales experience from my MBA summer internship (thank you Ben Murray and Adam Barker), and a relatively high tolerance for pain.
Reps are Everything
My first broker phone call was awkward, my first proprietary email campaign performed poorly, my first owner call was an hour of my life I’ll never get back, and my first brokered IOI didn’t even generate a response. But, after three months of repetition, these skills are starting to develop. My offers are being accepted, I’m making meaningful connections with owners, and I feel confident that closing a deal will happen within my timeline. Searching is hard and necessitates proficiency in marketing, sales, finance, negotiation, technology, recruiting, accounting, and basic law. Nobody launches a search with each of these skills, and it takes numerous repetitions (and failure) to develop them. The good news is that there are thousands of brokers and millions of business owners! An awkward email, phone call, or under (or over) market IOI is not a big deal- just learn from it, and in the words of the immortal Jay-Z... “on to the next one.”
Proprietary outreach works (with caveats)!
With proprietary outreach, it is very easy to waste time with companies that are outside of your acquisition criteria, don’t have realistic valuation expectations, or aren’t serious about selling. But after speaking with hundreds of owners, there is definitely a market for directly sourced entrepreneurial acquisitions and a tightly disciplined proprietary outreach process can bear fruit!
What do I mean by tightly disciplined? Mostly, this means getting to “no” as fast as possible. Finding deal-killers like size, margins, customer concentration, motivation to sell, and valuation expectations in the first conversation is crucial for time management.
My general process is outlined below with SaaS products used in parenthesis
1) 4 step email campaign (Uplead, Hubspot, and Klenty)
2) 15-minute phone intro/filtering phone call (Calendly)
3) Signed NDA/ receive last three years of tax returns (Pandadoc)
4) Send IOI and begin negotiations towards and LOI
I can’t do any better than Nick Haska on the searcher/broker relationship-
Again, the more brokers you speak with, and the more IOIs you send, the more you will learn about the functioning of the market and the more competitive you will become amongst the other buyers.
If you are struggling with broker outreach early on, Axial is a great place to start. Even if you don’t stay with the platform for long, you’ll be able to generate brokered deal-flow and learn about the active brokers and small investment banks that service your geography and industry.
The most important aspect of a “tech stack” is your budget
Shout out to Steve Ressler for the most valuable piece of advice regarding the tech stack, “the key is getting going, and optimizing its usage.” I spent months pre-launch planning and evaluating SaaS products for my tech stack, and it was a poor use of time. The possible combinations of SaaS products are almost limitless, and it’s easy to fall into a time-intensive search for an over-optimized technical solution. After wasting months comparing products, I’m convinced the differences between these SaaS products are mostly aesthetic and you can build a great deal-flow process on any of the popular platforms.
With that being said, I’ve written a blurb on each of the services I use--
G2: This is a great place to start when hunting for a solution. You can easily compare SaaS products and read reviews about specific use-cases. I’ve found it my first stop when researching a service.
Uplead (a referral link ... self-funded searchers need lattes too!): Think Zoominfo without the yearly commitment- you can find business owner email & mobile phone numbers from filters that include industry, size, location, and some other characteristics. Bounce rates typically are below 2-3%. I started proprietary list building on Data Axle and ultimately moved to Uplead because of the massive amounts of time saved. It’s pricey at $0.60-$0.35 per lead depending on the subscription, but it has proven to save hours per week. A mentor told me that I would pay for proprietary leads in either time or money, and I've chosen money.
Pandadoc: Very similar to Docusign, with a nice Hubspot integration. I mostly use it for proprietary NDA signatures. (Prices range from free to $50/month)
Klenty: Klenty is a simple email automation software that integrates nicely with Pipedrive, Hubspot, and some other CRMs. I like the simplicity of it, but also the simplicity can be limiting if you are looking for fancy multi-channel outreach features. I’ve found the customer support chat useful when I run into questions or issues about the software, and would generally recommend it if you are looking for a basic solution.
Hubspot vs Pipedrive: I started with Pipedrive and ultimately moved to Hubspot for the pricing. Pipedrive is great, but as I onboarded interns, the price became unbearable with each seat costing a minimum of $15/user/month and $60/user/month with the “Professional” features. If Pipedrive incorporated a freemium model similar to Hubspot, I would have stayed with it. With Hubspot’s free version, I have almost all of the functionality I need and can have unlimited free accounts for my interns. Again, you can build a great deal-flow process on any platform so avoid my mistake and keep your budget in mind!
A Support Structure is Crucial
Searching, especially alone, is isolating and comes with emotional ups and downs. Developing a support structure has been crucial to keeping me on the path towards an acquisition. Finding a few friends in the ETA community to keep me pointed in the right direction and to listen to my tribulations has allowed me to both keep situational awareness in the market and avert the loneliness that naturally comes with working alone in my guest bedroom. I’ve found Searchfunder, my fellow MBA classmates, and the Bunker Labs ETA CEO Circle great sources of community.
https://jimsteinsharpe.com/ -- Jim Sharpe’s website is a gold mine of searcher wisdom. He writes about everything from pre-search considerations to life as an ETA CEO.
https://www.youtube.com/c/AswathDamodaranonValuation -- Damodaran is an OG of valuation, and I’m astonished that his NYU valuations course is available on youtube for free. This course would specifically be useful for searchers with a limited financial background. His lecture on private company valuation (Session 19 or 20 depending on the semester) does a great job of de-mystifying EBITDA add-backs.
https://www.searchfunder.com/post/examples-of-self-funded-searcher-websites -- Great post with many examples of searcher websites
https://www.squarespace.com/ -- Simple website builder
https://workspace.google.com/ -- A simple way to set up a business email address for you and your team
https://domains.google/ -- Look for available domain names
https://www.internships.com/ -- A simple way to find interns
Again, I hope this helps anyone thinking about launching a search or in the very early stages of launching.
The best way to reach me is at --@----.com