I sat down recently with @redacted‌ who is as involved as you can get in the ETA world. He has experience as a searcher, holdco operator, fund manager, fractional CFO, buy-side sourcing, ETA community advocate, and an educator at the University of Colorado. Adam says the market he’s operating in today is not the market he started in nearly ten years ago. PE money is flowing downstream into deals that used to be searcher territory, pushing multiples up. As interest rates are pushed up, the banks are getting choosier about who they lend to and why. So I asked Adam the question a lot of you are probably asking yourselves: what does it actually take to stay relevant as a buyer and get the broker to pick you? Scars and Stripes Before we get into his advice, it’s worth understanding why Adam’s answer carries weight. He has an extensive history of acquiring companies in both the US and UK. Four of them were done with an actual SBA personal guarantee attached, meaning his personal capital and reputation were on the line. He’s also done different types of deals, including non-bank, on-market, and off-market deals, which he now manages through a holding company. His fund, Prox Search Capital, has allowed him to venture into large self-funded search deals and independent sponsor deals. He’s also got Veracity CFO as a fractional CFO and financial operations firm, which he assured me explicitly of not competing with QoE providers. And then DealBuff is his buy-side sourcing firm, built around the idea that searchers need to run their acquisition search on-market and off-market simultaneously. Just as a cherry on top, Adam is very invested in the ETA community, hosting or attending meetups in Denver, Baltimore, Philly, and teaching acquisitions to MBA students at the University of Colorado. None of that is the point of this article. Hopefully, though, it was enough to show how much work he has put into what he now teaches. The Scar Tissue It should not come as a shocker to hear that acquiring a business is not an easy endeavor. Actually, buying the business can be the easiest part in some ways. It’s what you do afterwards that gets tricky. Adam’s earned his stripes and has the scars to prove it. One of his UK companies had an operator empty the bank accounts. One of his SBA-backed deals had so many supply chain issues and labor shortages that he had to personally cover the loan payments out of pocket for close to two years. Admittedly, he pointed to his own poor decisions compounding some of the problems. And in another case, he had to sue a seller for fraud after the business did not turn out to be anywhere near what was represented at purchase. Adam keeps the physical paperwork of his personal guarantee from one of his SBA loans on his desk. It serves as a reminder of one of his guiding principles as an investor. He told me, “If it’s not good enough for me to sign a personal guarantee, I can’t ask you to sign one so I can invest.” Three Things Searchers Need To Do To Stay Competitive With PE pushing multiples up and banks getting more selective, independent searchers can feel like they have their backs up against the ropes. Adam gave three pieces of advice to help searchers stay competitive in this market. First, your investment thesis has to actually be you. Searchers have the advantage of not being cookie-cutter PE firms with cookie-cutter buy boxes. By being an individual with a story, you can stand out from the crowd. Adam said that “you can’t be competitive if you’ve done concrete work your whole life and you’re trying to buy a CPA firm.” In other words, look to ground your thesis in your experience and network. Not only does this make things more attractive for the broker, you’re also relationship-building in way that should produce future clients, vendors, or peers. People who scattershot across unrelated industries hoping something sticks tend to miss all of that. Second, capitalize the deal to grow it, not just to close it. Many buyers view the purchase price as a fixed number. Once they can clear it, they think they’ll own the business and then the money will start rolling in. In Adam’s experience, most buyers way underfund what happens after close. We’ve written about the dreaded J-curve in the past, which should be expected in nearly every M&A transaction. On top of that, however, are the costs and time associated with implementing all of your strategies. Adam suggests buyers should pre-fund their first 12 months of anticipated CapEx as well as 12–18 months of growth initiatives. Then, they should stack three or four months of extra debt payments on top of that so they can operate debt-free to start out. This will likely sound much more conservative than the latest TikTok video telling you to buy a laundromat for 0$ down. In reality, the working capital calculation you get out of a QoE is a snapshot of what the business needed before debt and before you took over. It does not forecast how you’ll actually run it, especially with all your newfangled growth strategies. Growth is expensive, and you will make mistakes. If you recognize that, you’ll bake it into the agreement before you close. Third, actually operate the business. Time and again, new owners I’ve talked to tell me about how much of an adjustment it actually was owning a business. It’s a very different type of work than searching. I think you can safely say searching is to dating as owning/operating is to marriage. You’ve moved beyond the starry-eyed daydreaming of what could be, and you’re now being tasked with putting in the work to create that reality. Once you buy the business, Adam says you will have to get in the field, selling the product or service yourself. If you can’t sell what you’re buying, he’d argue you shouldn’t buy it in the first place. Beyond the practical value, rolling up your sleeves in this way builds trust and buy-in with the team you’ve inherited, which makes every change you actually want to make afterward land better. Why This Matters Right Now Ultimately, this advice is to tell you to lean into your “disadvantages” In a market where multiples are getting pushed up by well-capitalized PE money. If you’re an independent, individual searcher, then your edge comes from being just that. Make sure that your thesis is actually yours and keep on keeping on. If you’d like to learn more about what a quality of earnings report can do for you and your search, check out our website or book some time with me. qoeprep.com calendly.com/qoeprep redacted