I've written about this before, but it bears repeating because I keep seeing searchers make the same mistake: not putting enough cash on the balance sheet at close. In the Excel model, extra cash slightly reduces your return - but here are a few reasons why this can be the difference between surviving and failing. For one, lines of credit can't be counted on - during the Great Recession, I watched business owners have their credit lines reduced or eliminated overnight with no warning. For another, raising capital post-close is often impossible precisely when you need it most. Need more examples to be convinced? One of the searchers I invested in personally before the fund bought a manufacturing business and put $500K of extra cash on the balance sheet at close. He ended up needing every bit of it - the sales pipeline had quietly stalled in the final stages of the deal while the seller was focused on closing rather than selling. Without that cushion, it could have been fatal. Another searcher had high winds drop trees on his property and cause significant damage shortly after close. Another lost his two biggest customers within months of taking over, despite both being on long-term, normally renewing contracts. Everything goes bump in the night right after close. Cash is the only way to survive those bumps. Partner Perspective: Caleb Basile, QoE Prep: What Variance Analysis Actually Reveals Last weekend I ran an ultramarathon - with pneumonia, as it turned out. The inhaler wasn't doing much. But somewhere around mile 24, running slightly downhill through a quiet meadow, I remembered why I do it. The thing about ultrarunning is that nobody cares about pace. Every mile is different, and a snapshot of how you feel at mile 18 tells you almost nothing about the race as a whole. The real story only emerges when you see how things change over time. Business financials work the same way. A single period's P&L can look great or terrible for reasons that have nothing to do with the underlying health of the business. The real story is one of ups and downs - and rooting out those nuances is exactly what variance analysis is designed to do. We track every P&L line item month over month, quarter over quarter, and year over year, both in dollar terms and as a percentage of revenue. In a healthy business, most line items behave predictably. Whenever that pattern breaks, it's worth asking why. A few patterns show up again and again. Marketing expenses often drop sharply in the quarter or two before a business goes to market. Sellers are frequently coached to cut discretionary spending to boost margins before a sale. On paper, adjusted EBITDA looks great. But a buyer acquiring a business with a gutted marketing budget is likely walking into a J-curve they never saw coming. That inflated EBITDA needs to be normalized, and the cost of rebuilding the pipeline needs to be factored into the deal. Staffing costs sometimes shrink as a percentage of revenue in the year before a sale. Sometimes that's a genuine efficiency gain. Sometimes it means employees are underpaid, overworked, or owed delayed bonuses. A buyer can inherit turnover and morale problems that were invisible on a normalized P&L. Rent is another common adjustment, especially when the owner also owns the building. We've seen rent set well below market, quietly subsidizing profitability, and we've seen it set above market, functioning as a personal income stream. Either way, a buyer needs to know what the business looks like at fair market rent from day one. Variance analysis is just one tool we use to find the real story behind the numbers. If you're considering an acquisition and want to understand what your target's financials are actually telling you, schedule a call with me. Plus: • Already bought a business and looking for the right people to bring in to help you succeed? We put together a post-acquisition deal team guide of recommended partners, ranging from legal to accounting to culture building. Check it out HERE - and let us know if you have other folks you’d recommend from experience! • Yale University and Chicago Booth are collaborating on an ETA Search Sentiment Study, tracking the emotional well-being, resilience, and progress of searchers who started or plan to start their search inredactedand they're looking for participants across all search models and backgrounds. If that's you, fill out the survey here. • Here is a list of 35 non-SBA debt providers who look at deals as low as $2m of EBITDA. Each attended the McGuire Woods Independent Sponsor conference last year and shared in their preferences that they were: 1) open to backing first-time buyers/sponsors and 2) open to backing one-person buyers/sponsors. • Great tips from ETA Broker Jackie Ossin Hirsch on how to show up authentically - and effectively - when meeting a seller over Zoom.redacted