What are the best sectors and niches for the Searchfund model?
August 13, 2024
by a searcher from IE Business School in Mexico City, CDMX, Mexico
Does anyone have a paper with the best sectors and subsectors for the SF model?
August 13, 2024
by a searcher from IE Business School in Mexico City, CDMX, Mexico
Does anyone have a paper with the best sectors and subsectors for the SF model?
from Harvard University in Toronto, ON, Canada
from University of Akron in Charlotte, NC, USA
With that being said, the first thing I would advise is to understand that the acquisition process is just the tool to acquire the asset. It's not the true means to wealth building. Operating and scaling the business is. And, this is the hard part. Acquiring relatively easy. Operating and scaling the business hard.
Thus, the sector/niche selection comes down to what I like to call "Business Viscosity". What I mean by this is that you focus on sectors where the operation and scalability is as easy/frictionless as possible. One big factor for operational viscosity (higher the better meaning it flows easier) would revolve around the labor. The harder the labor is to manage, obtain, retain, etc the lower the viscosity. For example, restaurants would be one of the worst because you're dealing with low-skilled, low-paid, high turnover, hard to schedule and very transient workforce. On top of that, the restaurant business is open all the time which means more opportunity for issues. This can be applied to home services where the labor needs to be licensed. It is very difficult to find licensed technicians in today's market. Talk to an HVAC company. Or ask a Auto Repair owner. Can't find help.
For scalability, if you have high FFE or real estate needs, going to be hard to scale.
In the end, as a Search Fund, your Acquisition, Operations, and Growth Strategy should be very strategic and planned. It should be created to give you the best opportunity for success and wealth building. Not left up to your interests.