Big Deal Small Business: I Quit My Job
August 24, 2021 | Issue #37
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I Quit My Job
This was a long time coming. For the past ~12 months I have been “searching on the side” — basically 50-60 hours/week at my day job in private equity, then another 10-15 hours/week on the search process.
That set up only worked because of COVID-related WFH — that 10-15 hours/week on search were not from 7-10pm each night, they were interspersed throughout my workday when I had time.
Importantly, I felt I was still highly effective at my day job despite the search process taking up material time. My reviews at work were strong and we ended up signing a multi-billion dollar transaction over the past 12 months, so I didn’t feel like the “double life” was an ethical compromise. When a specific deal heated up and my PE job turned into 80+ hours/week, I dialed down my search activity accordingly.
But with the imminent return to the office, the dual-role was no longer feasible. The unexpected call from a broker would require me scrambling to find an empty conference room. The 30 minutes of CIM review would have to happen in the evenings as I can’t “hide” my screens effectively enough.
Managing a search process is basically 1) loading a high volume of deals into the top of your funnel, and 2) efficiently pushing deals through your funnel. It’s a process game that you win by moving the ball forward each & every day. Leaving it to a couple hours in the evening doesn’t work — it requires short but consistent actions throughout the day.
So the decision to leave my job is almost 100% driven by the requirement to return to the office (though partially driven by some imminent changes in my role at work that would have made search even harder).
I believe I could have gotten a deal done while keeping that job if WFH was continuing. I had a deal on the 1-yard line that died when the Seller got cold feet, and I don’t think that deal would have been salvaged if I didn’t have a day job.
In any case, I’m still in my notice period and it will be a slower than usual transition out given I don’t have a new job I’m going to, but I’m looking forward to being a full-time searcher in the near future!
Would I Recommend Searching On The Side?
The short answer is yes, at least to start.
The long answer: I am really happy with the choice to learn about SMB and search while having a paycheck. I’m an experienced M&A professional, but SMB acquisitions are a totally different ball game.
I view the first couple months as having two primary goals: 1) Blocking & Tackling and 2) Figuring Out What You Want
Note: I included a bunch of links below to prior newsletter posts as I chronicled lots of this stuff as I went through it myself, so hopefully that can accelerate your process.
1) Blocking & Tackling:
Reading all the literature, watching the videos, listening to the podcasts
Creating a simple website, setting up your email, creating an LLC, setting up a CRM, etc.
Learning to handle brokers, getting on their email lists, etc.
Learning the steps of an SMB deal (IOIs, LOIs, SBA debt, etc.)
2) Figuring out What You Want:
Reviewing the first ~5 CIMs, the first broker calls, the first owner calls, etc.
Building initial criteria for what you’re looking for, such as size, geography, etc.
Deciding if you’re going to raise a search fund or go self-funded and your ideal equity deal structure
Both buckets are important steps to launching your search, but both are also very easy to do while you have a job.
You can do all of that for a few hundred dollars in a couple months. After 3 months, do some serious self-reflection as to whether or not you really want to do this.
If after all that, you still thinking searching is the right path for you, I’d have no qualms burning the boats & jumping in full-time. I obviously waited more like 12 months rather than just 3 months, but that was due to 1) a solid WFH set-up and 2) my compensation structure (very bonus-heavy).
Upcoming Changes to my Search Process
Flipping to full-time search allows me to get on the front foot in terms of search. This manifests itself in a couple tangible & intangible ways.
Over the last 12 months, I have mentally reserved my bandwidth for a new PE deal that I could get staffed on at a moment’s notice. As a result, I have never pushed myself in search as hard as I could have — there is a real psychological benefit of knowing that a random deal sprint isn’t coming out of the blue anymore.
More tangibly, I can now leverage my full network in my search process. My soon-to-be former bosses are very intelligent, very experienced dealmakers — I look forward to running deals by them. They do not mince words when reviewing bad / marginal PE deals, and I’m sure they’ll do the same for my SMB deals.
I will have the time & mental capacity to become more proactive in industry work. My plan is to still focus on the broker channel rather than proprietary search, but I’d like to become more targeted in that approach.
If I see a broker deal in a new sector / niche that I like, I can now spend the time to learn that industry and then look for other targets in that space even if the first deal I saw doesn’t fit. I can also more openly reach out to industry experts to try and get their advice.
Lastly, I’m hoping to have more conversations with fellow searchers, current operators, and prospective investors. The search / SMB community is a great place with a diversity of approaches & investment theses, so I plan to keep exploring new ways to think about SMB acquisitions.
Note: One thing that won’t change is that I’m planning to stay anonymous on public social media and this newsletter. Keeping my public writing reasonably divorced from my PE life has ongoing benefits. That said, I love meeting people directly in an off-anon setting (Zoom/call/drink/dinner), so please do feel free to reach out to connect!
Conclusion
Exciting times ahead! As a side note, if you have any tips on being unemployed in a responsible manner (like buying healthcare insurance, for example), I’m actively soliciting any & all thoughts.
In the meantime, hopefully this move kickstarts my search into the next gear and I get a deal under contract in the next few months.
As always, I’m all ears to hear your thoughts & feedback. Hit reply to this email or find me on Twitter.
Thanks,
Guesswork Investing
P.S. I’d always appreciate introductions to potential acquisition targets or brokers (primarily targeting $750K-$1.5M+ of SDE or EBITDA, ideally located in the Northeast, West Coast, or Colorado).