Our 23rd episode of Private Market Insights is dedicated to the seemingly daunting task of starting your first small business search. With an abundance of information and plenty of conflicting advice, pinpointing the most effective strategies and resources for launching your search can be overwhelming. Chandler Reed, an SMB owner, and an important figure in mentoring emerging searchers through his role at SMBootcamp, joins us to discuss the process, offering practical guidance and insights.
Chandler shares his first-hand knowledge, addressing key tactical questions and highlighting the most reliable resources for beginning searchers. This episode is especially useful if you are considering or are currently embarking on a business search, as Chandler’s insights shed light on the crucial steps to take, the pitfalls to avoid, and how to effectively sift through the myriad of available resources.
For an in-depth exploration of beginning your business search with confidence and expert advice from Chandler Reed, be sure to watch the entire conversation here:
There Are No Easy Searches
At the beginning of the conversation, Chandler emphasizes an essential point: while owning and operating an SMB can lead to professional empowerment and flexibility, your search and early operating process need to be a priority if you’re going to be successful. Acquiring a business requires deep commitment, and first-time buyers will likely struggle if they take a passive approach.
Despite having access to excellent tools and resources, the process is inherently time-consuming and demands a high level of organization from the searcher. It’s not just about leveraging technology but also about investing time in building strong relationships. Engaging with brokers, exploring multiple deals, and consistently following up are crucial steps in identifying the right business opportunity; all of these best practices take considerable time. Some searchers are not able to complete an acquisition until they make adjustments to prioritize this process, including more drastic steps such as leaving an unfulfilling job or reshuffling personal commitments.
Searchers must also be prepared for setbacks and disappointments, developing the resilience to recover and move forward. Chandler emphasizes the importance of having a solid financial foundation, recommending a year and a half of savings to cover living expenses for those planning to quit their jobs to focus on the search. For those intending to work while searching, the day-to-day financial requirements are considerably less, but planning is still crucial. Chandler believes in leveling the playing field for beginners through practical, low-cost strategies like using public resources such as libraries, creating a simple website, and maximizing your time with tools such as Private Market Labs.
Seek Authentic Personal Connections
Chandler emphasizes the importance of personal branding and the ability to sell oneself as a competent and trustworthy individual capable of taking over a business. This is useful across various facets of the process, whether it’s convincing investors of your capabilities, assuring sellers that you can further their legacies, or demonstrating your seriousness to business brokers and lenders.
Chandler’s secret to overcoming the inherent awkwardness of self-promotion is to lean into authenticity, which not only eases the discomfort of selling oneself but also aligns with the desires of sellers. Your goal should not be to impress with jargon or an inflated portrayal of yourself but to connect on a human level: sharing personal stories, interests, and even family photos can bridge the gap between a formal business transaction and a meaningful relationship founded on trust. Some sellers have even chosen buyers they personally connect with over those with higher offers.
“Find a great deal that is financeable, there’s a great story to it and you’re the right operator for it. You will have no shortage of people that want to give you money.”
Where to Learn How to Search In 2024
Chandler points to Twitter (or X) as an indispensable resource for anyone searching for a business to acquire. The platform hosts a wealth of insights from a community of experienced operators, successful searchers, and service providers sharing their experiences and advice freely. Beyond the quick and somewhat “clickbait-y” exchanges on social media, Chandler recommends diving into long-form content. In addition to the Private Market Insights podcast, he recommends the Acquiring Minds podcast, hosted by Will Smith, for its coverage of various search processes, deal types, and operator backgrounds. Chandler also emphasizes the importance of platforms like Searchfunder, which provides a more curated experience compared to the wide-open nature of social media. In addition to these digital resources, Chandler mentions the value of books and other podcasts in the field, advising searchers to adopt a sponge-like approach to absorb as much knowledge as possible.
However, he cautions that while consuming content is beneficial, it must be coupled with action. The true value of these resources is realized when knowledge is applied to the search process, moving beyond passive learning to active searching and acquisition efforts.
Rethinking the “Buying a Job” Misconception
Chandler addresses a prevalent viewpoint in the SMB acquisition space: the negative view of “buying a job.” He argues that purchasing a smaller business, even if it initially means taking on an operating role, should not be dismissed out of hand. Sometimes, working as the CEO in your new acquisition brings you closer to the inner workings of the organization and can make you a more successful executive in the future, especially for people without this kind of experience on their resumes.
“I didn’t just buy myself a job. I bought myself 10 jobs! But I wanted that challenge, and I wanted that education. I was excited for that opportunity, and I think a lot of people should get more excited about it.”
Chandlerembraced the challenge of becoming a new business owner, and this approach allowed him to gain valuable experience and lay the groundwork for future opportunities to delegate responsibilities, streamline processes, or even exit the business in the future. Aspiring entrepreneurs should view the acquisition of a small business not as an end but as a dynamic beginning to a rewarding career path.
However, Chandler cautions against the lure of “shiny object syndrome,” a common pitfall for many entrepreneurs who venture too quickly into uncharted territories without solidifying their base operations. Maintaining a balance between seizing new opportunities and ensuring the strength of the initial acquisition ensures sustainable growth and prevents the dilution of efforts and resources.
How to Search while Leveraging Industry Experience
Chandler considers personal experience within a specific industry as a key strategy to identify and capitalize on unique value opportunities. His own journey involved taking a calculated risk on a turnaround business in an area where he already had some adjacent familiarity. That allowed Chandler to see the potential in revitalizing the business and ensured he had the requisite industry knowledge to execute on his vision.
Aspiring business buyers can maximize their prospects by prioritizing opportunities within industries where they have existing knowledge. This insider perspective can be a significant advantage in identifying underleveraged assets, understanding the market’s intricacies, and implementing effective turnaround strategies. Moreover, familiarity with the industry can enhance a buyer’s credibility in negotiations with sellers, brokers, and other stakeholders, showing their capacity to add value.
The Future of SMB Acquisition in 2024
Chandler forecasts a vibrant future for the SMB acquisition space, characterized by an influx of new entrants and fueled by innovative technology. Advancements like Private Market Labs and other emerging technologies make the landscape more accessible and efficient. Chandler also points out a significant cultural shift within the SMB acquisition space as we head into 2024, marked by greater searcher diversity beyond the traditional business school graduates that dominated the industry in the past.
Chandler’s optimism extends to the broader American economy, emphasizing the critical role of small businesses as its backbone. Despite the challenges posed by rising interest rates in recent years, the demand for SMBs remains robust, underscoring the sector’s resilience and the enduring appeal of owning and operating small businesses. Chandler anticipates a year marked by creative deal-making and innovative financing solutions, catering to the needs of businesses that may not fit traditional lending criteria. He believes this adaptability could prove to be an essential strategy for navigating changing economic conditions.