What to Expect While Searching

What to Expect While Searching

The path of searching is an experience full of surprises, disappointments and lessons. Throughout the process, there are many highs and lows. While the goal of finding a seller to turn his or her legacy over to you is at the forefront of your mind, there is very little in your prior experience that has prepared you for all of the elements of the process. 26% of searchers fail to find a business and you want to be in the 74% category; but, potential failure is always at the back of your mind.

Searching is a full time job to which you devote 150% of your physical and mental energy. The good news is that it is not a “career”. There are only a very few serial searchers so this process may occur just once in your life – you will be thankful for that, once it is behind you and you are running a company. There is a finite end point; you either run out of time or you find a business to buy.

The basic assumptions about yourself and your objectives for the search will be regularly tested along the way. Thinking over again why you are doing this and if this is the right time will haunt you as you face challenges and roadblocks. There will be lots of “distractions” that may divert you along the way. Here are some of them:

1) Options will present themselves

Prepare yourself mentally to say “no” to the job opportunities that come along and may pull you away from your search. Old employers, executive recruiters, colleagues at other firms, and start-up opportunities may offer a position or title that might look very attractive. During one of the many low points in your search, it might be tempting to explore that “dream job”. Understanding that these offers may come along will help you deflect them.

Even more alluring are the opportunities that come from prospective sellers. More than a couple will see you as a “source of funds” for their business or sideline venture. For others, you may be the answer to their retirement dream and more than one will offer you a share in profits, even some equity to “earn in”, while they slowly step away from the business. Having someone else run their business for them seems very attractive. After all, you found them, like their business and find it interesting enough to purchase, so why not just let you take over running it! On the surface, there is no capital to raise, you can pick up the CEO title, gain experience running a business and have an opportunity to learn their business. Moreover, this reduces your risk.

The biggest issue is control. If you decide to partner with a potential seller you will have lost it! While a few of these do work out, most end in disappointment. Your effort has contributed to the business success and it is now worth more than you started; extracting that value from the seller after the fact is now much harder. More importantly, your “sweat equity” is very difficult to recover. Just say no!

2) It is not only about you

No matter how hard you try to explain it, most will not understand what you are doing. They see that you don’t have a job and are unemployed. Many are worried about your physical and mental health.

Your search will test relationships with those close to you. Your partner will see a side of you that they have perhaps not experienced before. They will try to protect you from the pain of losing a deal, being stood up by a prospect, being disappointed by an intermediary, the “lull” during major holidays, refused a loan by the 13th banker in a row and needing to conjure up the mental energy to start your search up again after the 2nd deal falls apart. At least one searcher lost their fiancée in the process. Others have said their spouses had married them for “better, for worse, but not for search!”

Parents and family members, although perhaps a little more distant, also struggle with your professional path and the level of uncertainty that you have taken on – no job, no location, no business and no time for them. They are struggle with what they tell their own friends about what you are doing.

Of course, they think you are better than average, so never expect you to be still searching in your 18th month and pause awkwardly when you remind them about it. They also struggle with the excitement you have about your current “deal” and seem to pause when you remind them that the “last one” they remember most vividly was a dozen owners ago!

Regularly communicating your progress does seem to help a little. But don’t go overboard; too many details and “hurts of the day” may be difficult for others to regularly hear. Spend time speaking to your mirror or replaying some conversation while you are alone, driving the car. Consider writing some notes for your upcoming quarterly communications report. Don’t become too self-absorptive, keep focused on the future.

3) Losing a deal

One of the more devastating setbacks in your search comes after you have a signed LOI and the deal falls apart. The seller changes their mind, for reasoning that is not always clear, you discover some major discrepancies in the financial statements during due diligence, the ongoing financial results in the business seem to be deteriorating, a large lawsuit hits the sellers business, shareholders can’t agree on the exit, a significant account is lost, key employees leave to setup a competitive business, or a myriad of other reasons.

By this point, you have determined where you will park your car, the location of your office, what your first day speech will be to employees and where you will be focusing your time in the first 100 days – all for naught! And, more significantly, while you knew this might happen, you have not kept up as actively on developing your deal pipeline so there is a huge hole to dig out of to get your out-reach prospecting started up again. You will feel devastated!

And, this will happen multiple times! In my experience, searchers average about 25 IOI’s and 2-3 LOI’s per search, and one I know has had 9 “busted deals”.

4) Lies, lies and more lies

It will be difficult to ascertain the truth as you go along the search path. Sellers may tell you that your price is too low and have you bidding against yourself. However, they may just not want to sell their business to you because you are too young and have no experience in their business. Giving you unrealistic value expectation for their business may be easier for them than telling you they just don’t want to sell to you.

The negotiation and even the due diligence process may be filled with half-truths, misinformation and inaccurate information. The seller and broker have been doing this for years and despite what you would like, want to engage in some back and forth negotiations to be sure they get the “best outcome” in terms or price and structure.

They are in an ideal position since they have all the information you need and know that they have what you want so badly! Most business owners have been on both sides of this with their own customers and suppliers, so be prepared for “hard ball” techniques; it is just part of the process. But, as I have heard from more than one searcher, “Can’t we just get to their bottom-line, and skip the protracted and painful negotiating process”?

The feeling of exhaustion and being emotionally drained will lessen slightly with each round of IOI’s, but no deal will be easy. In fact, many searchers who have acquired their business point back to these negotiations as very useful skill development in their new position running the business.

I would like to offer two potential solutions that many searchers have found helpful.

Finding places to turn

One of the most valuable sources of support are those searchers in your own “cohort” of searchers, those 12 months ahead you and also searchers who have successfully purchased a business. Select a few from each category and work at consistently reaching out, supporting, listening and sharing – buddy up! It is very easy to get so focused in the process that these relationships are neglected. Just learning that others are experiencing the same thoughts, doubts and frustrations will help. Just because you are searching with a partner, does not mean you should not be reaching out – all healthy relationships thrive with some level outside contact. Sam Altman, founder of Y Combinator, addresses founder depression by urging you to reach out to others for support in one of his blog posts.

Building in “healthy distractions” can keep your from becoming too obsessive. Making time for exercise, every day, no matter what, will at least insure that you body does not fail you! Indeed, one searcher contracted pneumonia within a month of closing the deal and attributes it to not focusing on their own health during the search. Be sure to take breaks on weekends – do volunteer work, plan trips, travel. Indeed, the there will always be something more that you can do on your search. IT CAN WAIT! Enroll your interns and get them to remind you when you are not taking care of yourself…and them.

This is a lonely endeavor. Both the search and running your own business will test your ability to cope with the potential of failure. The “mantle of ownership” is not a light burden. Find people who will listen, care and be “cheerleaders for you”. Professional help is an excellent option to help you learn more about yourself during these tough times.

Time for second thoughts

Despite knowing the challenges and your ultimate goal, it does make sense to reflect on how you are doing. Time is your most precious commodity, and taking time each quarter to examine the “reality” of what it is like running your own business and how you feel about it is important. As the search progresses, you will have hundreds of opportunities to put yourself in the shoes of an entrepreneur Mike and Linda Katz, who purchased Molded Dimensions in 2001, call it “trying on the coat”. You will get to see up close how each owner deals with growth, human resource issues, customers, vendors, risk and the rewards.

While the search process itself is endurable, you always want to check back on your assumptions about why you are doing this…you may be running the same business for a few years to more than a decade; how does it feel at each reflection point? Remember, you are doing this for yourself, not for someone else or others expectations of you. Searching for and running a small or medium size enterprise may not be right for you.

Keep your eyes open, your search will feel like a roller coaster ride…enjoy the highs and prepare yourself for the lows. Take care of yourself. I remember clearly from my own search that it does feel better after you stop hitting your head against the wall during the search and are running your business. Those were the days when I had hair that could stand on end!

Search on!

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!

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  1. Adam Barker on December 30, 2014 at 11:12 am

    Thanks Jim! A very timely and helpful article. I’d also add dealing with the December slowdown (or just a general frustration at not being able to set your own pace on deals) high up the list. But then again this is something you also experience working for someone else, and it can be much, much worse. For searchers time is money, and for adrenaline junkies like myself there is nothing worse than a slow-down.

    I would also caution over-thinking the search too much. It is easy to let your mind run astray at this time of year or when you have setbacks. If you expected delays and setbacks then this shouldn’t put you down (you expected them). You just need to have workarounds and be more emotionally detached about life. For me this is can after can of Monster Energy and systematizing more of your day so you can at least see that your behavior is right even if the bottom of the funnel is showing little activity.

  2. Ben Murray on December 31, 2014 at 9:29 am


    This blog posting is very well timed. The Christmas period brings a lot of these challenges to the surface, as deal flow slows down, and the number of inquiries from friends/relatives increases. Having people to speak to who understand the experience of searching is invaluable – just to hear that all of these frustrations are common to searching and not some special pain that only you have had to deal with.

  3. Ayo Phillips on January 1, 2015 at 6:27 pm

    As a future searcher, I find myself engrossed in understanding the mechanics of searching and maybe not enough time embracing the mental and emotional aspects of the endeavor. This post serves as a reality check. Thanks Jim

    • Jim Stein Sharpe on January 1, 2015 at 9:51 pm

      Ayo, indeed, the details of the search and more importantly the day-to-day of running a business that follows after are the focus of many searchers who start down this path. The challenges are not just the execution of the tasks along the way, but being able to face the non-business issues that are raised in the process. Start-up founders face similar hurdles; but have the option to pivot as the customers/market dictates. Searchers get only one shot with the business they buy. Thanks for the commentary.

  4. Tyler on January 5, 2015 at 7:03 am

    Jim, this is a great post. I found myself thinking about the physical location of my search activities while reading through these comments. As a searcher, I spend most of my week between 3 different locations: my apartment, my shared office space, and the climbing gym.

    Accessing each of these locations requires no more than a 5 minute bike ride. One of the main benefits of the office is psychological. It’s a place where I keep the stress of searching. It may seem negligible, but it’s really quite important for me as home feels like a less stressful environment. Sure I still do loads of work at home, but I try to keep most of my stress at the office. This helps me preserve that feeling of relief when I walk in the door after an emotionally challenging day.

    As a side note, I find the comments regarding exercise absolutely critical. Having a gym so close (and decent running routes all over Cambridge) is a real asset to me.

    • Jim Stein Sharpe on January 6, 2015 at 12:35 pm

      Tyler, sounds like you have some good techniques to reduce the stress. It is pretty easy to get sucked into your day while searchin and not take care of yourself. You seem to have good balance. Search on!

  5. Artus on August 29, 2023 at 10:56 pm

    Great post, thanks. I feel your advice in the last two parts actually apply to any type of Entrepreneur. I find keeping in touch with people who are sources of energy and who are outside your day to day network is key to recharge your “emotional battery”. This may include an afternoon with a friend who is doing something totally different, doing volunteer work for a couple of hours or doing a challenging physical activity with buddies.

    • Jim Stein Sharpe on August 29, 2023 at 10:57 pm

      Ben, I had not intentionally timed it to coincide with the New Year, but as you point out it is very applicable when things slow down, as the inevitably do, during the cycle flow of your search. Having a partner, like you do with Adam, can make these times a lot easier on both of you. I wonder if there are other ways searchers cope with this emotional roller coaster ride?

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Random Quote

45-“Strategic partners” are very important to the business searchers.You want to rely on some trusted providers to support your business, you can’t do everything yourself!(See Blog Post-Strategic Partnerships)

42-Start early on legal documents, they often delay closings while under LOIBoth the searcher and the seller are plowing new ground and it takes a while to comprehend the meaning of all of the legal details .(See Blog Post-Getting to closing)

63 Searchers make promises they can meet to build trust with sellers. It is important to provide incremental opportunities to show that you can be counted on to deliver.(See Blog Post-Building Trust with Sellers)

34 Searchers who get access to employees before closing are more likely to close. Once the seller begins to confide in their employees about the sale of the business and introducing you as the “new owner”, they are more likely to proceed to finalize the transaction than to change their mind at the last minute.(See Blog Post-Getting to Close)

07-You are not a PE firm, don’t act like one!
Potential sellers resonate with your taking over their legacy, a PE firm is simply adding to their portfolio. Make sure your website looks personal and non-intimidating.

04-Fight Seller Fatigue in Due Diligence!
Sellers get worn out in this process. It is highly emotional for them, probably their first time at relinquishing their “baby” to someone else. During LOI stage, make it a practice to communicate with them, in person or by phone, every 2 days.

53-Holding monthly “all-hands” meetings indicates your transparency. Trust employees with what is going on with the business and they will trust you more .(See Blog Post-Communicating with Employees)

06-Use metrics to drive decisions
Track what is most important for your search – getting in front of prospective sellers to make offers to buy their business. Track the number prospects, IOI’s, LOI’s and set goals for yourself! If you measure it, you can improve it.

22-When in conflicts arise, remind professional advisors they work for you.
Inevitably, you will disagree with some advice you are getting. After checking multiple sources, do what feels right to you and move forward. You will have to “live” with your own choices, not the professionals!(See Blog Post-Professional Support)

18-Every day that goes by during Due Diligence raises the chance that you won’t close!
Time is of the essence when it comes to moving from a signed LOI to closing on your business. Seller fatigue sets in as the closing date gets extended and the seller constantly re-evaluates their motivation to sell. Only you can push the process along.(See Blog Post-Due Diligence)

44-Plan ahead, give thought to the small details of how you present yourself as the new owner. The first introduction to the employees of the business has a huge impact so you want every word to be rehearsed!(See Blog Post-Taking over the business)

50-Don’t expect immediate “loyalty”, the previous owner earned it, it takes time. You will need to earn the trust of your employees by your actions, not your words. (See Blog Post-Seller Tranisition)

35-Searcher CEO’s need to be prepared to walk away from volume orders if margins will decline. It takes a forward thinking CEO to seek out higher margin, value added opportunities to grow profits, not revenue.(See Blog Post-Wearing the sales hat)

09-Learn from others – read case histories
Over 40 case histories have been written about funded and self funded searchers in a variety of industries and historical settings. Each have great “lessons learned” and are worth the $10 cost to read them. Searchers are learners!

39-The business seller is “hiring” you to run their business. The owner trusts you enough to turnover the “legacy” of their business to you. (See Blog Post-Searcher Profile)

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