Search Fund Deal Sourcing: How Searchers Find Businesses Worth Buying

A search fund has one job before anything else: find a good business to buy. Searchers typically spend most of their search period sourcing, and the difference between a successful search and one that runs out of time usually comes down to how disciplined that sourcing was. This guide covers how searchers and other entrepreneurs through acquisition (ETA) find their deals.

A quick primer on search funds

A traditional search fund is raised by one or two entrepreneurs from a group of investors to cover salaries and expenses while they look for a company to buy and run. When they find one, the same investors usually get the first right to fund the acquisition. The searcher becomes CEO.

There are variations. Self-funded searchers pay their own way during the search and raise equity only for the deal. Sponsored searchers work with a single investor. Some search with partners, some alone. But all of them face the same core challenge: finding a good, reasonably priced business in a limited time.

Common search fund criteria include:

• a stable, profitable business, often with $1 million to $5 million of EBITDA for traditional search funds and less for self-funded searchers,
• recurring or repeat revenue,
• a fragmented industry with room to grow,
• a retiring owner seeking a succession solution,
• a business that doesn't depend on rare technical expertise the searcher can't learn.

Two sourcing approaches

Industry-focused search

The searcher picks a handful of industries, studies them in depth and contacts as many owners as possible in each. This produces better conversations, because the searcher sounds credible and can talk about industry issues. It also helps with lenders and investors, who like seeing a clear thesis.

Opportunistic search

The searcher looks broadly at any business that meets financial and qualitative criteria, often through brokers. It's faster to start but can feel scattered, and owners and brokers may see the searcher as less committed.

Most successful searchers combine the two: a few thesis industries for proactive outreach, plus broker coverage for opportunistic deals.

Choosing industries to target

A good search industry usually has:

• Many small, owner-operated businesses, so there are plenty of targets.
• Recurring revenue, such as service contracts or subscriptions.
• Low customer concentration.
• Modest capital needs.
• Steady demand that doesn't swing wildly with the economy.
• An ageing owner base facing succession questions.

Examples often discussed in search circles include B2B services such as testing and inspection, specialised maintenance, niche software, outsourced business services and certain healthcare services. Don't just copy popular theses, though. Crowded industries mean higher prices and more competition for the same owners.

Building the target list

The mechanics are similar to any proprietary deal flow program:

1. Pull every company in the industry and geography from trade associations, licence databases, online directories and data platforms.
2. Estimate size using employee counts, locations and fleet size or other industry-specific clues.
3. Remove obvious misfits, such as companies already owned by private equity or too small.
4. Find the owner's name and contact details.
5. Prioritise by fit and likely succession timing.

Many searchers hire interns or research assistants to help with list building and initial calls. If you do, invest time in training them on how to speak to owners. First impressions matter.

Broker and intermediary coverage

Smaller businesses are often sold through business brokers, while larger ones use M&A advisers. Searchers should build relationships with intermediaries who handle businesses in their size range.

How to stand out with brokers:

• Explain your capital clearly. Brokers want buyers who can close. Show that you have committed investors or financing lined up.
• Be specific about what you want. A one-page summary of your criteria helps brokers think of you when the right listing comes up.
• Respond quickly and honestly. Don't string brokers along.
• Stay in touch. A short check-in every few weeks keeps you top of mind.

Expect brokered deals to be more competitive and often priced higher. They're still a valuable source, especially early in a search.

Calling owners

Many searchers find that phone outreach produces far more meaningful conversations than email. It's uncomfortable at first. It gets easier with practice.

A simple structure for a first call:

1. Introduce yourself in one sentence and say why you're calling this company specifically.
2. Explain who you are: an individual looking to buy and run one business long-term, backed by investors.
3. Reassure: you're not a broker, and you're not assuming they want to sell.
4. Ask a question about the business to start a conversation.
5. If there's interest, propose a follow-up meeting.

The searcher's personal story often resonates with owners. Many owners prefer to sell to an individual who will run the company and look after the team rather than to a large firm. Lean into that.

Pipeline metrics that matter

Searchers who track their funnel know whether they're on pace. A typical funnel:

Review weekly. If you're making plenty of contacts but getting few conversations, work on your message or channel. If you're having conversations but few owners share financials, work on building trust before asking.

Evaluating opportunities quickly

A searcher sees many businesses and needs to say no to most of them quickly. A simple screening checklist helps:

• Is it in my size range?
• Is revenue recurring or repeat?
• Is customer concentration acceptable?
• Are margins stable over several years?
• Will the business survive the owner leaving?
• Can I finance it at a price the owner might accept?

For valuation basics, see our guide on valuing a small business using EBITDA multiples. When you're ready to make an offer, our LOI guide covers the key terms.

Common search mistakes

• Spending too long on industry research and not enough on outreach.
• Falling in love with the first decent deal and overlooking red flags.
• Underestimating owner dependence. If customers buy because of the owner personally, a transition is risky.
• Ignoring the quality of earnings. Adjusted EBITDA presented by sellers often needs scrutiny. See our quality of earnings guide.
• Not involving investors early. Investors have seen many deals and can save you from mistakes.
• Letting the pipeline dry up during diligence. Many LOIs fall through. Keep sourcing while you work on a deal.

Using tools and outside help

Searchers use a mix of free and paid tools: CRMs to track outreach, data platforms for company lists and contact details, and email tools for follow-up. Some use outsourced research to build target lists so they can spend their own time on calls and meetings. Whatever you use, the principle is the same: automate the list-building, personalise the outreach.

If you'd like a verified target list built for your search criteria, get in touch.

A sample weekly sourcing routine

Search is a numbers game played over many months. Searchers who protect time for sourcing every week tend to find deals faster. A routine many searchers adapt:

Track weekly activity targets: for example, a set number of new owners contacted, calls made and conversations held. Activity targets keep momentum through the weeks when nothing seems to be happening.