Context: Career switcher (military) with a bias to return to Texas, but want to go the search fund/EtA route out of the MBA program.
Does school matter beyond a certain point for this?
I say this as I have a strong bias for McCombs.
It seems like it would be heavily network and fit driven and less ranking/prestige driven beyond top 25 or so.
What say the monkeys?
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it's doable but fundraising becomes more challenging if you're not at one of the main ETA schools (hbs, stanford, booth, wharton, CBS, kellogg) as most of the current and past searchers attended one of those programs.
What does ETA mean?
ETA= Entrepreneurship through acquisition.
Makes sense.
I'love have to think on this one a bit more.
Thanks for the response.
I've bought and sold several businesses over the last few decades. Let me tell you that ETA is not what business schools seem to be telling students it is!
Most of the professors teaching these courses have never bought or sold a business in their entire lives!
Some facts they won't teach you (probably because they don't know themselves):
Finding deals is a lot, lot more difficult than you think. You'll have to kiss a thousand frogs before you find your prince / princess.
Most of the small businesses out there are owned by people who have completely unrealistic price aspirations. This isn't helped by the likes of business brokers who provide "free" valuations and have an incentive to inflate vendors' expectations.
If you do want to cut through the clutter of online marketplaces (and/or get to what they call "pocket listings" in the US) you'll need to employ a buy-side broker ... and they cost money. Lots of money. In the UK they charge by the month (with no guarantee of finding you the right business).
Dealing with owners of smaller businesses can be a right pain and very frustrating because they lack the deal experience / expertise and oft times won't use an adviser ... or use the cheapest one they can find.
You have competition. Mega competition. There are thousands of fresh MBAs out there who've set up search funds and are desperately looking for businesses to buy ... and getting nowhere. They set up identikit sites, with fancy names like XX Capital Partners or YY Investment Group or ZZ Private Equity, and draw up a criteria list that is often copied from other sites. See this example in Google, or this one. Many of these investment companies have been around for years and have never managed to buy a single business. I know of at least 200 such "firms".
You'll be competing against some really crazy people - students of the various courses around that claim to teach the techniques of buying an established profitable business "with no cash down" i.e. the courses claim "it doesn't matter if you're a complete pauper, we'll teach you how you can get your hands on a fantastic business and hundreds of thousands in annual profit ... without you having to invest a single penny of your own money". There are more than a few thousand people out there who've taken these courses and doing some silly things in the market - poisoning the well so to speak. They've made so many "cold" approaches to business owners with their "we want to buy your business" pitch that many small business owners are now deeply suspicious of anybody who claims to be interested in buying their business.
This is all the kind of stuff they don't seem to be teaching in business school. Many business brokers in the UK are sick to the back teeth of Insead and other business schools setting homework or projects requiring students to go out and find a real world business for sale. The smart intermediaries now have numerous filters to weed out these students and fresh graduates and wannabe ETA entrepreneurs. I won't say too much about how they weed them out but the filters work pretty well. You'll be up against those filters if you approach traditional M&A boutiques, corporate finance firms and business brokers. And that will further frustrate your attempts to find a target to acquire.
Can't disagree with you on any of that. I will absolutely drop you a note. Thanks for making yourself available.
I just checked a running total of OMs, NDAs, and financials I've looked at and we are at 142 businesses. The vast majority from biz/buy/sell. This is while I was still on active duty. Reading OMs and Financials almost became a spectator sport on my down time.
Of those 142 I put an LOI on 1.
On that one, the owner wouldn't get to where I needed him to make it work.
Most businesses on biz buy sell are garbage.
There has to be a better way to meet the very small search fund demand.
The whole process seems so massively inefficient.
Yesterday I spoke to a H/W grad that is 3.5 years into looking. How he has managed to keep backing for that long is a mystery.
Network seems to be the source for most of these guys that have made it work.
Some tips I am happy to share in public:
Get the hell away from the theory and the professors and the other academic "experts". Find someone at the coal face - an entrepreneur who has actually bought and sold businesses with his/her own money. Partner with them ... or at least work for them for a bit.
Ignore the words of wisdom from the likes of Richard Branson, Jeff Bezos etc. While I have huge respect for these people, they don't operate in the same universe as you and I. Instead, read writers like Richard Parker (Diomo Corp), Ted Leverette (PoC), David Barnett etc. They know how to play the game at the lower end of the market (sub $10m acquisitions). Much of their stuff is available for free!
Get one or two small transactions under your belt so you can show other business owners that you have the ability to take a business over and grow it.
Get evidence of your finances - letter from bank / accountant / solicitor etc. Be prepared to disclose that at an early stage. It adds reassurance. Unfortunately, investors are often too afraid of disclosing their net worth or their liquidity because they suspect, strangely!, that the price will go up if the vendor knows how much of money they've got.
BizBuySell is just one MLS. There are numerous others, here's a list. Some of them offer an option where they charge you a small fee to keep your buyer details on file and send you those opportunities that meet your mandate. But you should see all of these sites as large scrapyards. You may find a good business in there but it ain't easy.
Be smart. Think out of the box. Do things differently. One method I used in the early days that gave me a huge advantage over my competitors was creating bots to trawl all the sites at #5 above and algos to sort all the data collected to filter out the rubbish. I used to process in excess of 1000 new business opportunities every day ... and that was before I even had breakfast! You need to find / create your own competitive advantage.
To give context, I’m currently at a top MBA program and took a class on search funds. Our instructors for the course have each done 1-3 search funds themselves, and the guests they bring in each class run the gamut of place in the search fund process (search, operation, post-exit). In my opinion, you should read the info including the search fund primer and search fund studies of Stanford’s business school (GSB). It has the most comprehensive data you’ll find on search funds (that I’ve been exposed to, at least) and is written by heavy-hitters in the search fund space, including Irv Grousbeck, the guy who is given credit for coming up with the search fund model. https://www.gsb.stanford.edu/faculty-research/centers-initiatives/ces/r… Feel free to reach out if you have questions! I think search funds are an awesome way to get into entrepreneurship.
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