As an acquisition entrepreneur, finding the right business to acquire can be a daunting task. With so many options to choose from, it can be hard to know where to start and what to look for. However, having a well-defined investment thesis can help you narrow down your options and find the businesses that are the best fit for you.
A well-defined investment thesis should include a variety of factors, such as the location, size, and management structure of the business, as well as any potential risks like customer concentration or keyman risk. Additionally, it should take into account your own unfair advantages and risk tolerance, as well as your own personal network and areas of expertise.
When evaluating potential businesses to acquire, it’s important to ask yourself questions like where you have domain expertise, who is in your personal network, and where the people you know live. Additionally, it’s worth considering whether you or anyone you know has an existing business in the space, or whether your family or friends have any businesses that you could take advantage of.
In addition to these considerations, there are also several must-haves that should be included in your investment thesis. These include:
- The company is big enough to support becoming management-run
- The company is big enough to support any hiccups within the first year of acquiring the business
- The seller is willing to stick around for a period of time, ensuring a positive transition
- The business falls within your own risk tolerance
- The gross margins are above a certain amount that you’ve decided based on your research
- The business has an existing and positive company culture
- The seller is willing to share all of the company’s records
Additionally, there are also a few nice-to-haves that can be included in your investment thesis, such as:
- The company is more than 10 years old
- There are a specific number of employees
- The company has a specific EBITDA margin
- The company has some marketing sophistication
- The seasonality of the business
- The SDE is growing or declining
By taking the time to create a well-defined investment thesis that includes all of these factors, you’ll be able to narrow down your options and find the businesses that are the best fit for you. This will help you avoid wasting time and resources on businesses that are unlikely to be successful, and increase your chances of finding a business that you can successfully acquire and grow.
At Twelve31, we understand the importance of having a well-defined investment thesis when it comes to finding the right business to acquire. Our team of experts have years of experience in the acquisition field and can help you navigate the process from start to finish. From identifying potential businesses to evaluating the financials and management team, we’ll work with you to find the best fit for your investment thesis. We use our expertise and research to identify the best businesses that match your investment thesis and increase your chances of success.
Let us help you take your acquisition game to the next level. Contact us today to see how we can assist you in your business acquisition journey. With our help, you’ll be able to find the right business to acquire and set yourself up for long-term success.
