Don’t Steal My Baby:  3 Requests from a Transitioning Founder

From a business owner’s perspective, search funds have a bad reputation. And, perhaps rightfully so. Just when things are primed to take off, the search funder knocks on the door. The offer is made, and the founder is left with an impossible decision.

How can I put a price on the business I’ve worked so hard to establish? If I take the money, what would I do next? Would the cash infusion be enough so that I can still plan for retirement (without downscaling my lifestyle)? Is the noncompete clause going to limit my future earnings? Is my personal identity too closely linked to the business to simply walk away? Does the search fund even understand my business, or are they simply after another deal? If they don’t understand my business, is it destined to fail without me?

These questions (and many others) leave founders feeling jaded about the entire process. If you’re involved in a search fund, consider these three tips for reducing friction with business owners like me.

1. Acknowledge that My Business Is Not a Commodity

Unlike common stock, my business is not a commodity. Sure, I have an earnings forecast and closely monitor my EBITDA. Sometimes I even daydream of being a top executive on an earnings call. Despite all this, my business is much more than a set of ratios.

For twenty years, I’ve been the first employee to arrive and the last person to leave. When others took time off, I kept my nose to the grindstone and closed more deals. I’ve missed out on parties, social events, vacations, and even family time. All for what? A healthy profit margin and a balanced set of books? I think not.

No, my motivation goes well beyond the desire to make a profit. Of course, profit is necessary and important; however, it’s not what keeps me motivated. Here are a few aspects of my business that truly keep me engaged:

  • Seeing the brand that I created from scratch become #1 in its niche
  • Helping customers realize their dreams
  • Fostering a sense of community with my staff
  • Developing new strategies, products, and business models
  • Creating new efficiencies and opportunities
  • Figuring out ways to get out of the “day-to-day” operations of my business

Before a search funder can approach me in good faith, he or she needs to understand this perspective. Otherwise, it would be impossible to have a productive conversation.

2. Take a Walk in My Shoes (Before You Prepare Your Deal Sheet)

My day begins at 5:00 am. Although I’m the CEO, I’m not afraid to do the dirty work. I open the doors, turn on the lights, make the coffee, and review the sales pipeline – all before the first employee arrives. I rarely sit down for lunch, and I’m usually the last person to leave the office. On weekends, I still wake up early and stop by the office. I’m constantly texting, calling, instant messaging, and emailing my staff, offshore team members, clients, and industry partners. The world never stops, and neither do I.

So, when your introduction involves a five-paragraph email about your search fund, don’t be surprised if it I dismiss it entirely. At the moment I’m 100% focused on growing my business. Your email, while interesting, makes my head spin just thinking about it.

A better approach would be to call me on a Friday afternoon, as things start to settle down for the week. Invite me to have coffee in a week or two on a Saturday morning. Monday through Friday, I don’t have the capacity to think outside the box. However, on Saturday, I’m more likely to be open to your ideas.

When we meet, start off by introducing yourself but spend most of the time asking me questions. Convince me you’ve done your homework and care about my business. As I’ve mentioned, sure money is important. However, I want to know that my baby is in good hands. This is your first (and perhaps only) chance to sell me.

3. Deal Me Into the Party

After we’ve established a rapport, the work has just begin. From my perspective, I’m interested in a deal that preserves my upside. Simply selling out doesn’t work for me. Ideally, I’d like to see a more gradual exit strategy – something that allows me to stay involved without working 80 hours a week.

From your perspective, what could be better than having me stick around to help? Sure, the argument could be made that I’d get in the way. But in reality, who knows my business better than me? If you had to go out and hire a consultant to gain industry, competitor, pricing, and market knowledge, who in the world would be a better fit?

You’re right, I’m the only answer that makes sense. I’m happy to stick around – if you make me the right offer.

Remember, It’s My Baby

I’m happy to get to know you. I’m even happy to hear what you have to offer my business and me as a founder. Just remember, my business is my baby.

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About Jeff Meltzer

Jeff Meltzer

Jeff Meltzer is an entrepreneur and founder of ReverseSearchFund.com, which helps small business owners connect with search fund opportunities. With over twenty years of running a successful business in Southern California, Jeff recently decided to start ReverseSearchFund.com as an educational resource for fellow entrepreneurs who may find value from a “reverse” approach to search funds. Connect with Jeff on Linkedin