Finding your competitive advantage

What makes you different from other searchers?

I find the title of this week’s article slightly misleading since I don’t view the search process as “competitive” in a traditional sense. A better way for me to describe it is that searching is about finding the right fit for you and a business owner who wants to sell their company. When searchers focus their time exclusively on competing against other buyers to win a deal in auction processes, they lose sight of what differentiates us from the classic buyout shop or strategic competitor. In doing so, they fail to listen to the owner’s needs. Similarly, if we aim to buy a business in a niche market with little connection to our previous experiences, we’ll struggle to convince a business owner that we are the optimal buyer. These add to this notion of intense competition that I know many searchers feel during the search phase.

There’s a comment I frequently hear, which is that searchers are often competing to win deals against other searchers. In fact, I’ve looked at one deal where the owner mentioned that other searchers were also looking at acquiring the business. Sometimes it feels like we are not only competing with private equity firms, family offices, strategics, and the decision for an owner not to sell but also those of our own breed. I acknowledge this “competition” exists; however, it seems to be a rare case during the search phase and not something searchers or prospective ones should dread. If another searcher is looking at the same business you are, take it as a sign that you are likely searching in the right pond.

But I’d like to present a different perspective on competition in the search fund ecosystem and how it can help us find the right business for us. We can do just that by focusing on our core competencies and genuinely understanding ourselves. Once we know those competencies, we must march forward and apply them to our search in an authentic way that will then resonate with business owners. The combination of deep introspection and listening to owners’ needs will lead you down the path to success – that’s certainly something I am betting on in my search.

Dissecting yourself

It’s unfair to you, your investors, business owners, or their respective employees if you buy a business with a poor personal fit. Obviously, any economic return will be hindered by a lack of enthusiasm and passion for operating said business. Poor personal fit may also lead to resentment that will eventually infiltrate your company culture, which is neither fair to the owner you bought the business from nor the employees. 

Learning the self involves deep work and takes lots of time (and often difficult decisions) to lay out what is meaningful to your life, professionally and personally. I’ll assume many pursuing the acquisition entrepreneur career path may experience similar reflections, but there is value to learning yourself with regards to differentiating yourself and your search fund. I will explain how you can leverage nuggets from your professional and personal experiences to guide the industries you pursue, the approach you take with owners, and the style of investment you’re best suited to make.

Professional experiences

Connecting with owners is much easier when they can easily understand why you are reaching out to acquire their business. One of the best ways to communicate your fit is through professional experiences. As we all have different paths that shape our careers, we must leverage those experiences in the businesses we target and our early messaging to owners. I have found success in utilizing both industry and functional examples in my positioning. It can also influence the investment thesis you look to pursue with your search fund, especially as growth-oriented and time-duration strategies become more prominent in the search fund ecosystem.

From an industry standpoint, start with the industries you’ve worked in thus far as a starting point. If you worked in a consumer-facing industry like me (such as consumer and retail) and are looking to buy a B2B business, leverage your time in those industries to come up with software or services that the sector purchased from customers. Even if you come from a financial services background where you were providing particular services to clients (i.e., investment banking or consulting), your experience can be the starting point for your broader industry focus areas. Maybe this is where you leverage your professional financial services or investing background to pursue a long-term holdco or roll-up strategy in a vertical ripe for industry consolidation. While there’s no right or wrong answer, the industry you previously worked in can guide you to find the right path.

If you come from an operating background, your functional skills can prove valuable as you look to position yourself. Luckily, I have built many functional skills, from business development to operations management. Working within five different functional areas enabled me to find new industry ideas once I dissected that experience more closely. As I picked up skills such as cross-functional leadership, data analytics/visualization, product strategy, workforce planning, and inventory management, I could leverage these in creative ways to develop appropriate theses where I had more credibility than the average searcher because of those experiences. At the same time, I could not use these experiences to focus my search on M&A-driven theses, as that’s not where my skillset is like other searchers.

My advice is to focus on how any functional and industry experiences can better help you build your core thesis and articulate your vision to owners, starting with the industries and functions you know best. Then, shift your focus to more foundational concepts or skills where your experience might be valuable. For example, suppose I am focused on workforce management software companies because of my professional background. In that case, I could explore software solutions in healthcare that touch people within organizations, either employees or patients, for the next space to look at. When assessing individual opportunities, my background will prioritize businesses with organic growth opportunities over inorganic ones, and that may differ for other searchers. Get creative even though it may feel like you are stretching at times – many businesses have more commonalities at their core than we think.

Personal

Your personal story can be just as an effective tactic to communicate your potential fit for a business. Where your functional and industry experiences will guide your business model and industry focus areas, your personal stories should help showcase your character and broader leadership potential. There may be examples of extracurricular activities or personal stories guiding your next industry focus area, but I would not lean on that for too much inspiration. It will be more challenging to convince a business owner you are the right operator for their business solely on passion.

Many searchers I have gotten to know come from families with deep entrepreneurial blood. Those experiences in and around the family business can be great anecdotes to utilize when positioning yourself through your website, brochures, social media presence, and opening pitch during intro calls. Others had a strong entrepreneurial spirit at a young age, starting their own business selling odd items or providing a service. For me, that was mowing the lawn for the local neighborhood during my summers off with a close friend.

Other personal experiences can help articulate specific attributes about yourself that may be challenging to demonstrate with little context or history. However, people tend to casually throw out words such as collaborative, hardworking, integrity, leadership, driven, and so forth without providing sufficient detail as to why that is (myself included). We hold highly subjective ideals, and just describing them alone will be ineffective. Just think about how different our two political parties view what these values mean to them. If you plan to highlight specific values as part of your story, focus on those most important to you and what you have done that could effectively highlight those values from past experiences. From there, it all comes down to storytelling. What experiences have shaped who you are, and why do they mean so much to you? Are there stories that you can craft that best articulate those experiences?

My advice on the personal side is to reflect on the most important and impactful experiences and activities from your background and understand how those have shaped you into the person you are today. I won’t advise you on how to do that, as we all take different approaches here and have varying degrees of self-understanding. 

For example, I continuously reflect on my basketball career and blue-collar background to better understand what values are most important to me and why. Those reflections have evolved into my eight principles posted directly on the White Cedar website: communication, curiosity, diversity, efficiency, focus, innovation, integrity, and teamwork. As mentioned earlier, it isn’t easy to convey these values at first glance, but publicly stating them helps hold me accountable and build credibility with others through that transparency.

Once you have laid out those more essential experiences and how they have shaped you, I recommend crafting a handful of stories to demonstrate these lessons. These should be engrained into your memory so they become automatic when you need to highlight a certain attribute about yourself. It may help to write these down, whatever works best for you. These stories will improve and evolve as you see what resonates with others, but they will go a long way in demonstrating to others what you value and believe to be most important.

Being your authentic self

During the search phase, it can feel as if we are constantly selling ourselves, whether to investors and owners or family members and friends who are unsure exactly what we are doing. Dissecting your professional and personal experiences gives us more clarity around our motivations and where we are uniquely positioned to search. Each of our messages will land differently with each business owner, but only those from a place of authenticity will endure the test of time. 

Being honest does not mean pouring our hearts out during the first owner call. We can still be just as strategic with our communication. Once we do the hard work of better understanding ourselves and how our experiences can shape the direction of our search, we do not need to worry about competition and instead shift our focus towards finding the best fit for us as entrepreneurs. Only then can we lead with honesty, transparency, open-mindedness, and humility, not aggression, envy, and narcissism. Only then can we listen to the needs of business owners and worry less about proving our worth.