Searcher Profiles - Who Are You?

Big Deal Small Business, Issue #105

Searcher Profiles - Who Are You?

Big Deal Small Business, Issue #105

Search and ETA is a choose-your-own adventure. It’s not one-size-fits-all.

I am often asked variations of the same questions from prospective/early searchers. I write this blog in order to answer these common questions at scale.

But the longer I’ve been in the community, the more I’ve come to appreciate how different each person’s journey is. Your journey is informed by your incoming context and your goals for the journey. The way those two elements fit together will fundamentally change the answers to common questions search ask — there’s no one universal answer.

For example — how big of a business should I buy?

I wrote about this topic almost exactly 3 years ago — Deal Size. Even back then, I try to differentiate the answer by buyer type, pros & cons of each deal size, etc. My intuition told me even back then that there’s no definitive answer for the “right” size of business to target.

This is a constant issue in answering search-related questions — should I do a traditional search or self-funded search? Again, I wrote a post over 3 years ago that lays out the pros & cons of each, highlighting that there’s no clear answer.

This came to a head recently when talking to multiple prospective searchers who have 7+ figures liquid — for them, being an independent sponsor from day one could be a far more attractive risk-reward pathway.

But for one prospective searcher I spoke to, he wants to be “in the seat” — so for him, he’s okay taking the PG risk of a smaller self-funded search deal. It better fits his professional goals and the type of owner he wants to be.

For another prospective searcher, it was eye-opening to realize he could just go after a bigger company, not be the day one manager, not sign a PG, and own 20% of a bigger pie instead of 80% of a smaller, riskier pie.

So if you’re a prospective or current searcher — you have to answer the question: Who are you?

Similarly, if you’re a current business owner — what kind of business owner are you trying to be?

If you’re an investor or lender — what kind of searcher and business owner do you want to back?

The search world is replete with resources, guides, and advice — one of the coolest parts of our community is the willingness of participants to give back. But you need to synthesize all that information and calibrate it to YOUR goals, which are far more specific than any advice that’s publicly-available.

To that end, I want to lay out some Searcher Profile types and Owner Profile types — I cover the Searcher Profiles this post, and will cover Owner Profiles in the next post.

To be clear, these are meant to be a bit tongue-in-cheek. The profiles are caricatures and your personal experience & motivations will be far more nuanced. But hopefully you should be able to see a bit of yourself in one (or maybe two) of them. Clarity around your identity as a searcher will help you understand the lessons more experienced folks share freely.

Enough preamble — let’s dive into the profiles!

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Recovering Ex-Finance Bro

Prior Job: Middle Market PE Associate or young VP.

Question on Day One of Learning About ETA: Bro, did you know you can buy SMBs for 3x, put together a few of them, then sell them for 6x?

Age: 26-32 (anyone past 32 likely has too much unvested carry to leave)

Description: The recovering ex-finance bro knows she doesn’t want to grind 80 hours a week into her 40s (and yes, women can be finance bros too, it’s a gender-neutral term).

You’ve followed the train tracks of life from a strong high school GPA & SAT scores, to a solid undergrad degree, to a bulge bracket investment banking junior summer internship, to a full-time offer, to two grinding years of IB, to on-cycle PE recruiting, to [Insert Natural Feature] [Insert Geologic Feature] Capital Partners, a truly differentiated allocator of capital (according to the headhunter, at least).

You’ve now been a PE associate for 6 months. You picked your head up out of an Excel model, looked around the bullpen, and though to to yourself, “Wait, is this what PE is?” — followed shortly by “Can I do this for the next 15 years to make partner?”

You look at LinkedIn and see peers going back to business school. They begin announcing traditional search funds — you reach out to do an intro call — and next thing you know, you’re elbow-deep in HBR’s Guide to Buying a Small Business and listening to Acquiring Minds and Think Like an Owner podcast episodes at 1.3x speed.

Burning Questions: Can I actually jump off the low-risk PE pathway to wealth, and jump onto the higher-risk SMB path? Can I find an Owner Profile that will feel fulfilling to me?

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Impatient CEOs

Prior Job: Top 5 Business School (and some form of consulting or corporate strategy role before that)

Question on Day One of Learning About ETA: So you’re saying the seller never used any marketing?

Age: 28-38

Description: The impatient CEO has been around incompetent corporate lackeys their whole career. You’re underwhelmed by the talent you’ve seen at your client companies and have often thought “I could do this better.”

You decide you need an MBA to launch the next phase of your career and steepen your professional trajectory — you catch the ETA bug when an alum comes back to give a a talk about their $2 million EBITDA search deal that’s now throwing off $7 million of EBITDA. You join the ETA club.

You realize that you can skip so many rungs on the corporate ladder — you don’t have to hit poorly-defined KPIs and wait for quarterly reviews to move up. But you also don’t want to just be a glorified general manager of a small business. You want to be a CEO, managing other executives, and driving an organization forward from the top.

Burning Questions: Can I buy a business that sufficiently sophisticated that I actually want to be CEO, but is sufficiently unsophisticated that I can actually grow and improve it?

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Middle Manager For Life

Prior Job: Some kind of P&L ownership at a Fortune 500 company, experience managing more than 10 people, maybe have bounced around a couple different divisions.

Question on Day One of Learning About ETA: Have you seen searchers put a GM in the business on day one?

Age: 34-45

Description: The Middle Manager for Life is exhausted. You’ve played the corporate game, but it’s draining. You’ve moved through the ranks, stacking up positive performance reviews quarter after quarter, but it’s been a grind. You make more than $200K/year, but the path to make more than $400K is cloudy at best — you’ll have to beat out of lot of peers. The pyramid above you is looking a lot skinnier, and your life isn’t getting cheaper.

You’re an avid consumer of all things business content. You listen to Invest Like The Best, along with the search-focused podcasts. You’ve dabbled in real estate, you may even own a couple investment properties, but the idea of buying 6-cap multifamily condos is too boring.

Your life fixed costs are too high to be a full-time searcher with no salary. You reach out to Brydon Group and similar search groups, looking for more structured programs.

You want to introduce a step function growth moment in your otherwise linear career path. You’re excited to take on some risk and take control of your destiny, but you also have a family and kids, so need to be careful. You’re not sure if you can actually sign a PG for millions of dollars.

Each time you sign an NDA, you’re shocked at the chaos inside small businesses. You’re not sure you want to be HR, Tech Support, and Janitor all at once. But you know you can’t keep doing what you’re doing either.

Burning Questions: Can I actually sign the PG? Can I leave behind the cushy corporate gig and putting my family’s financial well-being on the line?

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Lifestyle Searcher

Prior Job: Project Manager at Big Tech Co

Question on Day One of Learning About ETA: There has to be more to life than this job, right?

Age: 28-35

Description: The Lifestyle Searcher has made a comfortable salary for several years now, enjoying the benefits of Big Tech, all while being vaguely bored. You’ve bought every piece of backpacking gear you could, and you live for your 5-day backpacking trips on the AT. You and your partner are considering taking up pickleball.

You know how to get enough work done remotely while being on a road trip up the California coast such that no one questions where you are.

But you’re searching for more meaning — a lifestyle that feels more integrated between work & play, one that feels more fulfilling. You want to build legacy and be prouder of your contributions.

But you’re also not sure you can step off the comfortable Big Tech career ladder, especially with a couple years of in-the-money stock options waiting to vest. But you also know you’ll be pissed at yourself if in twenty years, you never actually took a swing at something *more* — it’s just unclear what *more* should be.

Burning Questions: Is being a small business owner actually the day-to-day life I want to lead?

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Adrenaline Junkie

Prior Job: High Performer in Fortune 500 (alternatively, former military with an impressive service record)

Question on Day One of Learning About ETA: What do I need to know before I bet on myself?

Age: 26-48

Description: The Adrenaline Junkie works hard and smart to glide through clunky organizations, whether it’s the bureaucracy of a F500 business or the military.

You are intensely curious about what you can achieve. Money is more of a scorecard than a goal in and of itself. You want to push yourself to the edge, and then see if there’s an edge beyond that for you. If you’re self-aware, you know that your ambition can give way to hubris at times — you know your search process needs some guardrails on it to ensure you don’t shoot before you aim.

You were sold on search & SMB ownership from the minute you heard John Wilson’s Owned & Operated podcast. You knew immediately you will buy a business, it’s just a matter of which business and when. You want to move fast and break things; you’re done waiting on sign-off from three layers of hierarchy before you act.

You start signing NDAs and every deal looks interesting. Turnaround? Why not — you can move fast. Undersized business? Why not — you can work four people’s roles until you can afford to hire those four people.

Burning Questions: How do I build sufficient structure around my investment & deal process to ensure I make a good acquisition?

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Conclusion

Searchers — who are you? You may be one or more of these categories, or I may have completely overlooked your background — if so, reply to this email and let me know!

And again — these are meant to be over-simplified caricatures — each person’s experience is far more nuanced than what I’ve outlined above.

As a searcher, you have to match your Searcher Profile to a potential Owner Profile. That has more to do with your hopes & dreams in the business owner seat. Next week, I’ll lay out the Owner Profiles I’ve dreamed up — but to the extent you’ve got any to suggest, I’m all ears!

Thanks,

Guesswork Investing