Your Trusted Search Deal Team

January 19, 2025 | Issue #112

Big Deal Small Business: Your Trusted Search Deal Team

January 19, 2025 | Issue #112

This is a newsletter written by Kaustubh Deo // Guesswork Investing about acquiring & operating small businesses. If you are a new reader / new searcher, please start here.

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This is a list of deal team providers I recommend you use when buying a small business.

One of the most common questions I get from new searchers is: Who should I use as my acquisition deal team? Today, I’m sharing exactly who you should use.

Picking the right partners can be the difference between closing a deal and not. It can also be the difference between avoiding a bad deal and getting stuck in a bad deal for several years.

Here’s the challenge with small business acquisitions — the deal sizes are frankly too small for many top-notch vendors.

During my time in private equity, I worked on deals where our legal fees alone exceeded the entire purchase price of my small business.

As a result, you end up with two types of vendors who serve small business:

• The ones who simply couldn’t cut it at the larger end of the market, so are forced to work at the smaller end.

• The ones with a sincere passion for this end of the market, who have built a specialty service offering based on search/small business transactions. The focus + passion leads to higher efficiency & better outcomes for clients.

Differentiating between the two types can be challenging without going through deal reps or getting to know the service providers personally.

I’ve now been in & around the search world for over five years, starting as an investor in a friend’s self-funded search deal in November 2019. Since then, I acquired three business myself (one platform + two add-ons) and invested in three other self-funded search deals.

Over the past five years, I’ve looked at 150+ small business deals — 130+ during my own search process, at least 10-20 potential investment deals, and another 10 or so add-on acquisition opportunities.

I say all this to say — I’ve got the reps in small business acquisitions and investing, allowing me to work with a number of the providers in this space. Being in the community, I get to interact directly with providers through mutual connections or when I speak at events like SMBash and SMBootcamp.

Long story short — I feel confident in the vendors I recommend to you below. These are vendors that can bring large deal skills & competence, but love working at the small business end of the market.

Important disclosure: I have set up affiliate relationships with some of these vendors for myself to monetize this free side of this newsletter. The free side is more focused on searchers, who are reasonably more money-conscious. The paywalled side of my newsletter called Guesswork Unveiled is for operators, who hopefully have more funds to invest in bettering their businesses.

This monetization model keeps all search-related info easily accessible to all searchers. The vendors are also offering a variety of reader perks to provide cost savings on your deal, so please be sure to tell them you found them through my blog.

Enough preamble, let’s dive in.

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Your Trusted Search Deal Team

Further down I’ve written summaries about each vendor, including how & when to contact them, and the reader perks associated with each one.

But here’s the list:

• SBA Lender: Live Oak Bank (Lisa Forrest, Sarah Andrews)

• Lawyer: Barlow & Williams (Bill Barlow & James David Williams)

• Insurance: Oberle Risk Strategies (August Felker)

• Quality of Earnings: Hollywell Partners (Mike Jerman)

• Outsourced Finance & Bookkeeping: System Six (Chris Williams)

• Buyside Advisory: SMBootcamp (Sam Rosati, Chandler Reed)

Please read below to learn 1) when & how to reach out to each vendor, and 2) how to receive reader-specific benefits with vendors offering them.

Note: If you do reach out to a vendor, please email me at admin(at)guessworkinvesting(dot)com so I can track referrals, and make sure to tell the vendor you came from this newsletter so they know to give you your reader perk.

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Why should you use this Trusted Search Deal Team?

Let’s talk about why you should use this team.

When it comes to the search phase of Entrepreneurship through Acquisition (“ETA”), success can feel like a binary measure. You either close a deal, or you don’t.

But there are actually two, sometimes conflicting, conditions to be met in the search phase:

• Close a deal

• Buy a business that sets you up for success in the operating phase of ETA

Said differently — you would rather not buy any business at all than buy a business that you can’t successfully operate.

In selecting vendors to help you on a deal, you need folks who keep both these conditions in mind — they know how to get deals done, but they also know pitfalls to look out for.

Think about it like this:

• Lawyer A is your dad’s second cousin, who primarily focuses on divorces, but is helping you out on your search deal as a favor. He sees no issues in section 3.1(a) of the purchase agreement.

• Lawyer B has done real estate and business transactions, so they seem like a safe pick. Lawyer B sees the seller’s edits to Section 3.1(a) and realizes it creates a risk for you. She flags it for you as a potential risk and tells you to fight it.

If you have Lawyer A, you’ll probably close the deal, but you may have taken more risk than you intended.

If you have Lawyer B, you may lose the deal because you don’t know how much risk you should or shouldn’t take, so you just fight tooth & nail and the seller walks away.

Enter Lawyer C — she sees the issue in Section 3.1(a) as well, but she also has the context that the risk rarely manifests in real life. She flags the risk for you, but also explains the likelihood of the risk coming to fruition, and the resulting consequences.

In the negotiation over the legal docs, if you have Lawyer C, you are now armed with which legal points you need to fight for, and which you can give on. It makes you a better, fairer negotiator, which increases the odds you close a deal.

The folks I am recommending to you are the “Lawyer C” for their given practice area.

They know how to get deals done, and they know when to walk away from deals. You want both skillsets on your team.

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Detailed Descriptions

SBA Lender: Live Oak

Lisa Forrest & Sarah Andrews run Live Oak’s search fund lending practice.

They openly state that they have tighter lending standards than many SBA lenders — that’s a feature, not a bug. Remember, you have two goals: 1) close a deal, but 2) avoid a bad deal.

When you raise an SBA 7(a) loan, you will be tempted to optimize for interest rate. But a 0.50% difference in interest rate won’t be what breaks your deal — a lender who doesn’t close is what breaks your deal. I’ve been through a bad SBA loan process that fell apart at the 11th hour — it’s not fun.

So yes, still go get multiple term sheets before committing to one lender. Live Oak’s rates will generally be middle of the fairway to cheaper end, but you may get a cheaper term sheet elsewhere. And if Live Oak says no, but you still like the deal, don’t lose hope — reach out to me and I can help you find other, more aggressive lenders.

But in my opinion, if Live Oak issues you a term sheet, they are the highest likelihood to close, and their underwriting process provides signal that you are not stumbling into a bad deal.

In addition, the Live Oak search team (Lisa & Sarah) are two of the most helpful resources in the search community — freely giving their time & resources, through multiple deal iterations, to guide searchers to the finish line.

Hint: Ask them for their equity worksheet to understand how the 20% equity thresholds work with SBA personal guarantees — it’s such a good tool.

How to Contact: Email Lisa and Sarah — Lisa(dot)Forrest(at)LiveOak(dot)bank, Sarah(dot)Andrews(at)LiveOak(dot)bank. Please cc me using admin(at)guessworkinvesting(dot)com — that will allow us to track referrals.

When to Contact: Unlike most lenders, Live Oak is open to talking to you early in your search, before you have a deal under LOI — so if you’re serious about searching, that’s the moment to reach out to them. They spend countless (unpaid) hours coaching searchers through the pre-LOI process to ensure the LOI you submit is actually workable per SBA & Live Oak standards.

Reader Perk: $250 off business appraisal cost (a required part of any SBA loan approval process, generally costing you ~$3K per deal)

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Lawyer: Barlow & Williams

Both members of this team have elite pedigree — they met at Harvard Law and spent several years working at big law firms. But they’ve now jumped into small business world and make sure every deal is a priority.

In fact, they don’t have any associates — you’re guaranteed to work directly with the principal lawyers. That’s a big deal.

Barlow & Williams represent sellers on a regular basis, so they understand the issues that matter on both sides of any transaction. They’ve also represented investors in search and sponsor deals, so they know the details of what investors expect and care about.

They operate on a flat fee basis in their M&A practice, so you know the all-in legal costs for your transaction before you start. Their payment terms are designed with searchers in mind.

How to Contact: Email at info(at)barlowwilliams(dot)law or schedule a meeting at their Calendly.

When to Contact: When you are getting ready to submit your first LOI — Barlow & Williams will build an LOI for you based on their experience helping searchers buy businesses. Then they’ll guide you through the whole deal process all the way to close.

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Insurance: Oberle Risk Strategies

Oberle’s CEO August Felker is a two-time searcher-turned-operator — Oberle is his second time at it. He knows how to do SMB / search deals.

His team will guide you through insurance due diligence — this means examining your target company’s insurance policies, looking for gaps in coverage, searching for better alternatives, etc.

Most importantly, they make sure your new policy is ready to go the day of closing, including managing insurance paperwork with your lender (crucial to close on time).

This is all rolled into the cost of your insurance policy by the way — you never get a bill.

From the pre-close process to post-close, their team has a strong reputation for quality work & incredible service — this can be particularly hard to figure out about insurance brokers before signing up with them, so a referral is crucial here.

Oberle was my company’s insurance broker, and we had the bad luck of needing to file a couple claims, so I’m able to confirm all of the above. Their team was great to work with during the claims process, which isn’t fun for anyone.

We eventually switched to a more tree care-specific insurance broker, but I still recommend Oberle to any new searchers, which is the strongest vote of confidence I can put behind a vendor.

How to Contact: Please reach out using this contact form

When to Contact: Typically a couple weeks to 30 days into your post-LOI diligence — clear the first few weeks of diligence around the big known risks, and then get Oberle rolling on the insurance front.

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Quality of Earnings: Hollywell Partners

Hollywell Partners, led by Mike Jerman, provides Quality of Earnings assessments (QoEs) that are tailored to self-funded search deals — $500K to $5M in revenue (I’m sure they could go larger, but that’s the range I personally know them for).

Mike’s team is efficient, does some real testing of the numbers, and produces pragmatic answers, not just pretty reports. On the most recent deal I used them for, I had a preliminary read within 48 hours of providing financials. I’ve now used his team for three deals — my original acquisition, and both add-on acquisitions.

It’s not the perfect final version that you can send to your investors, but it’s the version that allows you to make quick decisions as you negotiate an LOI — they can always come back around and make a pretty version for your lender/investor, but getting you the important answers quickly is HUGE.

Their pricing is very reasonable for searchers — and by the way, if you don’t need the pretty report, just ask them for the core procedures and the workbook.

How to Contact: Email Mike Jerman at mikejerman(at)hollywellpartners(dot)com and info(at)hollywellpartners(dot)com. Don’t forget to mention this newsletter to get your reader perk — see below.

When to Contact: If you are a day or two away from getting your LOI signed (or immediately after your LOI is signed).

Reader Perk: Receive $500 off your Quality of Earnings final invoice after closing.

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Outsourced Finance & Bookkeeping: System Six

The vast majority of small businesses I looked at were run by a couple — the owner, and the owner’s spouse, who is quietly keeping the train on the tracks.

That spouse is often doing everything from bookkeeping to tax filings to loan & bill payments to payroll processing to more.

If you don’t have a strong accounting skillset, you will likely want to outsource this from the day of closing (honestly, even if you can do accounting, this is likely a task to delegate).

CEO Chris Williams (another former searcher turned operator) and his team at System Six are accustomed to working with searchers. They’ll start with a discovery session where they dig into your target company’s accounting files to figure out what’s going on.

They’ll provide you a clear idea of how they can fix the accounting (it’ll likely need fixing), and then an ongoing cost to maintain your books, as well as other key finance & accounting functions such as payroll processing, bill-pay, customer invoicing, and more.

Chris is a personal friend and part of my “search cohort” (folks who bought businesses around the same time as me), so I feel confident recommending him & his team as a high-integrity, high-quality service provider.

How to Contact: Email Chris at chris(at)systemsix(dot)com

When to Contact: When you are in the home stretch of your deal closing and are beginning to plan out the post-closing transition process.

Reader Perk: 5% or $1,500 off first year’s accounting bill, whichever is lower.

Buyside Advisory: SMBootcamp

If you are newer to the world of private company acquisitions, SMBootcamp is for you.

If you vaguely understand you need all the vendors listed above, but are not exactly sure why…start with SMBootcamp.

Led by Sam Rosati (one of my investors) and Chandler Reed, it is an in-person bootcamp designed to flip you from “search-curious” to “search-committed” (or, turn you away from search — honestly, it’s likely worth your time & money to learn that ASAP as well).

I’ve enjoyed being a speaker at a few of their events — the lineup of mentors & advisors they bring to each event is truly impressive.

They’ve been the launching pad for many successful searchers-turned-operators now, and their program has only become more robust over time.

How to Contact: You can learn more about the Bootcamp here, and make sure to mention you found them through my newsletter to ensure you get the $350 reader discount.

When to Contact: If you are early in your search, unsure about searching, debating between traditional vs self-funded search.

Reader Perk: $350 off registration fees to one of their live events.

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Conclusion

That was a long one. There’s a ton of info above. Bookmark it for when you need it.

I feel strongly that if you put this team on your side and match it with your own determination & grit to find a good deal, you’ll close a successful ETA deal.

It still won’t be easy — closing deals is brutal work. But don’t make it harder than it needs to be — work with folks who are vetted, trusted, and proven.

Reach out if you have any questions or need personal intros due to unusual situations — happy to facilitate. When you do reach out to vendors, make sure to mention this newsletter so you get your reader perks too (and honestly, so that I get credit as a lead source for them)!

For thoughts or feedback, just hit reply to this email or post/DM me on Twitter.

Thanks,

Kaustubh Deo // Guesswork Investing