Where to search from?
Choosing the geographic boundaries of your search has far-reaching implications on your tactics, fundraising, personal expenditures and even the perception of the sellers you may purchase from. Selecting a home base from which to work also has both a personal and professional impact. As in real estate and politics, “location, location, location” is critical to success.
Funded search implies flexibility…for the investor!
When you undertake a funded search, your investors generally expect the searcher to find the best business to acquire, wherever it is located. Setting your net as wide as possible increases the number of prospects to consider, and often abbreviates the process. A nation-wide search allows for deep dives into specific industry niches that will yield the high number of prospects that are so critical to have at the top of the “sourcing funnel”.
The uncertainty about final location can be a source of anxiety for many searchers. Relocation is rarely easy, especially for dual-career couples or families with children who have to pull up stakes. Even those searchers with initial excitement about relocating can be emotionally deflated after the 30th IOI offer or the sixth ”busted” deal after 21 months of searching and being faced with a small rural city far from their homebase.
“Significant others” comment that this was the most stressful part of the search for them. Not having clarity on where they would be settling down was difficult for them, especially when it changed from month to month during the search. One even observed that their marriage vows were “for better or worse, but not for search!” It is best to be aware of these consequences before you start and encourage your partner to seek out experiences from others who have been down this path ahead of them. (See Blog Post – Respecting your significant other).
Funded searchers budget as much as 20% of their “raise” for travel expenses for a national search area. Paul Thomson at Scottish American regularly used discounted airline programs, combined with couch surfing, to minimize his travel and lodging costs.
Self-funded search can be restricting, but may have a silver lining
Self-funded searchers have much more flexibility in their location choice. In fact, the ability to choose your location is one of the most significant motivations to self-fund. It may be that the searcher desires to be located near where their partner has a career commitment to address the challenges of being a “dual career” couple. There may be a high concentration of businesses that fit the searchers target industries. A searcher who has a young family may want to avoid up-rooting children or be closer to supportive family members.
Selecting your “zip-code” allows a new searcher to focus their prospecting efforts and develop stability in their personal lives. There are other benefits for thinking local. Searchers who have roots in the area have more resonance with potential sellers. Owners who are selling their “legacy” to a buyer who will be entrenched in the community can be viewed as a strong benefit of the searcher. Further, the ability to be available to a business owner within a short car ride can make the difference in getting time in front of the seller, building trust and maintaining their interest level.
Searching with a regional focus also helps in developing a network. Sources of financing, professional advisors, and even brokers are more willing to work with someone they deem to be “local” to them, as compared to an outsider from across the country.
But don’t forget the potential downsides of narrowing your geographic search. The process may take longer due to the limited number of prospects, and it may reduce the ultimate size of the deal. You may need to broaden the types of businesses and industries you seek. Ben Kessler at Braxos Capital discovered that when he confined his search to the Milwaukee area, many of the companies he was prospecting were traditional “rust belt” industries with declining market shares and high customer concentration issues. More attractive businesses will require a further geographic reach and a longer commute.
Another location to think about
Running your search process from your home or from a more formal office is a personal choice. While it is a cost savings, a home office may not be conducive to having 3-10 interns coming by every day. There may also be a psychological benefit to have some level of separation from your home and work environment. High speed internet access and superior cell phone coverage are more important than ever before and may not be as available in residential areas.
It is very improbable that a seller would ever visit your “office”, but your address may be under unspoken scrutiny, (especially with the evolution of Google’s satellites). Avoid an address that sends the wrong signal to potential prospects. Consider choosing Boston instead of Cambridge, or San Mateo instead of Palo Alto. If you are stuck with a high-end office location, then disarm it as Andrew Tam at Peak View Partners did – when asked about his 17th floor office along with a killer view in San Francisco, Andrew informed sellers that his $500/mo sublet office was a bargain and a way to be frugal in his search.
One of the more important considerations for the location of your office is its accessibility for your interns, perhaps even nearby undergraduate campuses. While not at top of mind on day one of your search, interns will play a critical role as you scale up. With their headphones, smartphones and laptops, you can cram in quite a few in a small space. However, being close to public transportation or having parking availability will make it easier to attract interns. (See blog post on Searching with Interns).
Many searchers worry about being too close to other searchers. In my experience advising searchers for many years now, I see very little overlap with potential prospects; most searchers take divergent paths and timing. If you search within one of the top 50 metropolitan areas, which covers 2/3 of the US population, there will be plenty prospective sellers to consider, without conflict. For searchers outside the USA, there is even a more remote chance of encountering significant competition.
Location is one of the many decisions that has to be made early on as you start down this path. It can have a significant impact in the longer term, so it is important consider the ramifications of where you chose to search from and where you might end up living once you buy your business.
Feel free to share some of your own best practices or experiences in dealing with these issues in writing a blog comments. I encourage this dialog, allowing all to learn from both my views and the views of others – a virtuous learning cycle. Jump right in! Also, I frequently update individual blog posts, add to the Reference section and Search tips, so visit the www.jimsteinsharpe.comwebsite regularly.