The Hidden Cost of a Self-Funded Search

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by a professional-advisory from University of California, Berkeley
in Dallas, TX, USA

2h ago

The Hidden Cost of a Self-Funded Search

Do you count your search time as part of your investment? Example: 2-year search $150k annual forgone compensation $100k search expenses That's effectively a $400k investment before closing a deal. Do you model the value of your time in your expected IRR/equity creation? Is your time a real line item in your acquisition economics? I'm interested in seeing how differently operators, self-funded searchers, and traditional search fund participants approach this question.

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reply by a professional 1h ago
from Southern Methodist University in Dallas, TX, USA

Search time cost is definitely real. I have heard searchers equate it to b-school. In both cases ~2years of forgone comps, plus debt/search expense. The hope is that long-run payout will justify it. With self-funded and traditional search, you are raising against the clock. But I wish more people gave this more thought

reply by a professional 23m ago
in San Jose, CA, USA

Yes, and the part that gets missed: that $400k of time and cash you burned getting to close shapes what you can do after close, not just your entry IRR. The searchers I see struggle most aren't the ones who paid up a bit on the multiple. They're the ones who got to close tapped out, financially and personally, right when the business needs energy and a little investment to actually create value. So model the time cost, sure, but keep a real reserve for year one too. The deal isn't done at close, that's where the work starts. How are people here thinking about a post-close reserve, separate from working capital?