#15 | Reinforcements have Arrived!

It is a great start to the week because reinforcements have arrived.  

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It has been a long 3 months since one of our key employees at ProjectionHub started maternity leave.  The last 3 months have been our busiest 90 days in the history of the company, and we pulled it off without a star player.  So I am quite overjoyed to have Grace back to help us build on the strong momentum.  

Additionally, I started this search to acquire a small business basically right at the time when I was about to get really busy in the day to day of our business.  I am looking forward to the chance to slow down just a bit in the day to day and focus my attention on long term initiatives including finding a complementary small business to acquire. 

I Need to Save More Cash

One thing that has become obvious to me is that acquiring a small business requires a stockpile of cash.  Sure you can get an SBA loan and negotiate a seller note to finance much of the acquisition of the business, but there are still lots of uses of cash in the acquisition process.  Some that I can think of:

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• Legal fees
• SBA loan fees (if applicable)
• Due diligence fees
• Tax accountant fees
• Working capital needs for the business
• Contingency fund in case the acquisition doesn’t go as smoothly as planned
• Funds to invest in growth and new opportunities in the new business post acquisition

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These are all expenses that I need to be prepared to cover out of pocket it seems.  So I think there are a couple of options.  

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1. I save a bunch of cash in preparation for an acquisition
2. I look for investors

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I have a pretty good handle on where you can secure business loans to acquire a business, but I definitely have less experience on the investment side, so I wanted to dig into some data to see where successful acquirers have raised the equity funding they needed to acquire the business.  

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Here is what I found from the Search Investment Group study.  78% of searchers used their personal savings to invest into their acquisition.  This is by far the most common source of equity, with friends and family coming in second at 42%.  

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So one key goal that I have during this search process is to stockpile as much cash as possible to give us the most flexibility and optionality when we finally find a good deal that works for us! 

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