No items found.

#10 | Where Do Buyers Actually Find Businesses to Acquire?

March 26, 2024
#10 | Where Do Buyers Actually Find Businesses to Acquire?

Last week I came across a study that I think I will just keep reverting back to over and over again because it was a gold mine of data and insights.  You can check it out here:

Search Investment Group 2023 Self-Funded Search Study

In the survey they worked with a couple hundred people looking to acquire a business and over 100 of them were successful in acquiring a business during the time covered by the study.  So it has a ton of real data from searchers looking to buy a business.  

Today I wanted to highlight how successful buyers actually found their acquisition.  

My philosophy has been to avoid businesses listed for sale and to avoid business brokers because I figured that means there will be more competition from other buyers + there will be broker fees which ultimately just increases the price the seller will have to charge in order to pay for the broker fee.  For a business the size I am looking for (less than $1 million purchase price) the broker fee will probably be 10% or more.  

After searching part time for the last few months here is what I am thinking:

  1. I still think trying to buy an unlisted business is a good idea, but it might take a decade!  I think I could reach out to a bunch of businesses that I would like to buy someday, and maybe the owner would be open to selling eventually, but that might be years down the road.  I still think it is worth planting those seeds because I think the best deals will probably come from unlisted businesses where I can build a long term relationship with the seller over a period of time until they are ready to sell.  
  2. If I really want to buy a business in 2025 I am probably going to need to open my search to businesses listed for sale and I am probably going to need to work with a business broker.  It would be really lucky if one of the unlisted businesses I am pursuing actually sold to me in the next 18 months. 

The data from this survey was helpful to see and clarify my thinking. 

How 100+ Searchers Found a Business to Buy

So based on this survey, you can see how successful searchers actually found a business to buy. 

Now they use some fancy sounding language here so let me translate

Transaction Intermediary - this means a business broker or business listing site like BizBuySell.  This means over 50% of these businesses were listed for sale. 

Proprietary Outreach - This is what I have been doing.  Basically just looking for creative ways to find potential businesses to buy, building a list, and then reaching out to them over email.  This is hard work, but it does work sometimes given that 25% of acquisitions used this approach.

Personal Network - There is definitely some upside to having a large personal / professional network on LinkedIn or Twitter. 

Other Intermediary - Not exactly sure what this means, but basically some other type of broker or business listing service. 

If you are going with the Proprietary Outreach path, I thought this stat was useful as well.  You can see that cold email is still the dominant approach here:

I think my takeaway is that I need to start some process for looking for businesses on business listing sites or through brokers as well if I want to increase my odds of closing a deal in 2025.  

I am curious, how are you trying to find a business to acquire? 

Until next week,

Adam

Recent Emails

June 4, 2024

#18 | Buying a Business, then Hiring an Operator Copy

How do you determine the right amount to invest if you are buying a portion of a business or partnering with other owners?

May 28, 2024

#17 | Buying a Business, then Hiring an Operator

Any examples out there from business owners who have been able to replace themselves in the day to day before reaching that level of profitability? 

May 21, 2024

#16 | Buy vs. Build - What Should I do?

I would love your feedback, how do you think I should focus my time?