While there is a wealth of materials, books, articles, experts and opinion leaders covering entrepreneurial start-ups, not much information exists about searching for and buying your own company on the path to being an entrepreneur. However, thorough research is essential; as with any endeavor, the more you know about it, the better you will be at it.
You will have to dig deep to answer the two major questions that all searchers have to resolve for themselves: is running an SME (small or medium size enterprise) right for you, and is now the right time? Answers to these questions can be found in the classroom, through experience, through conversations, through independent research, and through self-reflection.
Learning from the classroom
Many MBA programs offer electives (short courses) that focus on the search process. Stanford offers a course entitled Entrepreneurial Acquisition, which was created by Professor Irv Grosbeck a few decades ago. The current course, two weeks in length, includes six three-hour classes and provides for case discussions, class visitors and lectures. In 2014 it was taught by Professors David Dodson and Peter Kelly, both with direct experienced in searching and investing. The materials on the Stanford GSB website are particularly useful and are the result of much of Stanford’s dedicated coursework on search. http://www.gsb.stanford.edu/ces/resources/search_funds.html
Harvard also has a 2nd year elective “field” course led by Professors Rick Ruback and Royce Yudkoff entitled Entrepreneurship through Acquisition. The course comprises fourteen two-hour sessions and exposes students to investors, brokers, attorneys, accountants and searchers in an effort to prepare students for their own searches.
INSEAD offers a course led by Timothy Bovard to supplement his very popular course simulating the first 100 days of running a business. IE Business School offers a new course by Blake Winchell entitled Entrepreneurial Acquisition. A variety of other MBA programs cover the search process either in their finance or entrepreneurial courses.
Learning by doing
First-hand experience is generally the best teacher. Compared to “book” learning, immersion in a search or in an SME allows you to “wear the coat” of the searcher/operator to see how it fits on you.
Searchers have increasingly used interns over the past 5-10 years, opening up a great opportunity for a potential searcher to see in-person the challenges and techniques of the process. Two “stints” with different searchers as a “productive” intern can provide valuable insight into processes and challenges. This may entail some “couch surfing” during a holiday week, but is well worthwhile.
Max Sadler at Inman Square says, “I learned more about search in eight weeks with two searchers than I did in two years of business school. Seeing it first-hand really helped me make an educated decision. Interns played a key role in my search; I learned how to manage interns by being one myself.” Reach out, be flexible, and more importantly find ways to be helpful. And remember to “give backward” when someone approaches you to learn the “ropes” when you are searching.
Exposure to how an SME runs is perhaps even more important than understanding the search process. SMEs are different from start-ups, often strapped for cash, limited in their HR policies, and include many generalists and some erratic founders. It is sometimes hard to imagine the contrasts between a professional IB/PE/consulting firm and an SME without immersing yourself in one. Find an SME to work at for weeks, evenings or weekends. Get a sense of how decisions are made, how lack of resources are compensated for and the challenge/boredom that you find within it.
It is not necessary to work for a prior searcher; any SME will be helpful in helping you determine whether this career path is right for you. The search model yields businesses that you may be running for as many as 20+ years. Could you see yourself in that role for that long? The biggest complaint I hear from searchers who are operating is “how long everything takes.” Success in search is about running a business as a CEO not about searching, and with each passing year, doing ‘deals’ becomes much less important. Look for opportunities on job boards, with relatives, contacts who know SME operators, and alumni from your graduate school. Avoid a start-up with its own set of challenges; the learning is not the same as you would get at an SME.
2nd order learning from others
Not surprisingly, I believe that “case histories” that provide just enough information to make a few decisions or to observe what challenges the protagonist is facing. Dozens of cases on searchers have been written over the years, ranging from funded to self-funded, solo and partners, staged during the search process and/or after it is over.
Case histories demonstrate that all searches are different and there is no formula. However, you will get to see how each searcher dealt with a variety of issues from running out of funds, to experiencing huge declines in profits right after purchasing, to dealing with big surprises about owners and the inevitable HR issues that searchers face once they own the business.
These case histories represent a relatively insignificant monetary investment in understanding how real searchers, some disguised to protect the innocent, cope with what comes their way. Again it is a “once removed” opportunity to imagine your own reaction and action taken when confronted with similar issues. Many of these published cases are available on my blog site under reference materials: http://wp.me/P5dvbm-23
Listening to others
Another way to learn about search is through direct contact, either by phone or in person, with individuals engaged in the community. Beyond current searchers, this might also include searchers who are running their businesses, investors, brokers who have transacted with searchers and perhaps even some lenders.
Be sensitive about their time. Plan ahead with your questions to be efficient. Learn about them first. Push back on their assumptions and opinions. Never leave a meeting without asking who else they recommend you speak with.
If possible, have your significant other reach out to their searcher counterpart. First-hand understanding will help him or her better support your own search.
Search is a significant commitment and requires some in-depth investigation and understanding, and a large variety of resources exist to research before you search. The more you understand the process, the better decisions you will be able to make if and when you set down this path.
I encourage comments from readers and dialog about the topics which allows others to see the commentary and learn both from my views and the views of others; a virtuous learning cycle. Jump right in! If you have a link you think should be added to the Reference list, create a comment and I will consider adding it.