Geographically-Constrained? Why It Matters
3 Excellent Reasons to Limit Your Search
In today’s email:
Geographic Constraints in Search
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To Be Constrained or Not To Be Constrained…
When I launched my first self-funded search in 2021, I was searching nationally with a partner.
The plan? I would be based out of San Diego, CA and my partner would physically locate to operate the business post-acquisition.
It was a good fit for us because I was geographically constrained but she wasn’t.
However, after 12 months of searching, my partner decided to take a consulting role with a leading firm and I decided to continue searching solo.
But now I was only looking at opportunities in Southern California. That limited my options, but it was non-negotiable for me.
Are You Geographically Constrained?
Self-funded searchers have a lot of decisions to make:
Who to hire for their deal team (legal, QofE, Broker, etc…)
Industry Focus
Financing Sources (SBA, investors, friends & family)
But there’s one decision that drives them all. Are you searching broadly (national/international) or are you geographically constrained?
It’s the one decision that will have the greatest impact on your quality of life.
3 (Excellent) Reasons to Constrain Your Search
Family Considerations
I was in the US Air Force on active duty for 10 years. I served in 3 duty locations (one of them in Europe), deployed to a combat zone twice, and went on multiple short trips for training, conferences, etc.
I was never able to choose where home was or how long I could stay there.
When you spend a decade being told where to live, you learn the value of choosing where ‘home’ is.
Therefore, my wife and I decided that ‘when this whole military thing was over’, San Diego would be our home.
And now it is.
I don’t mind traveling for work, but I decided from the beginning that I wouldn’t move for a job. And that’s the thing about ‘deciding” - it cuts you off from all other possibilities.
A close friend of mine lives just outside Boston, MA.
He hates it. He hates the cold weather, the ‘bad’ drivers, and the housing. But his wife and all of her family live there so they’re never moving away.
I always remind him how blessed he is that he has family close. They take the kids every Saturday and they’re always doing fun stuff together.
I haven’t lived near family since high school. Proximity matters.
I don’t know what your family situation is, but don’t discount where you want to call ‘home’.
There are some things that IRR can’t fix.
Lifestyle
The whole point of searching for a business to buy, is to actually buy one. Sounds obvisous, right?
But what’s not immediately obvious is that you’re choosing an owner-operator career when you buy. That means you’ll be intimately involved in the business for a LONG time.
Yes; you want to build your business to the point where you have day-to-day management in place and you’re mitigating key-man risk.
Work on the business, not in the business - right?
That takes time. It doesn’t just happen overnight. And the odds are good that you’ll own this business for many years to come.
So when you’re reviewing a CIM, it’s important to decide if this is a location you (and your family) actually want to live for the next couple of decades.
You are a product of your environment.
City, suburb, or countryside?
Warm, cold, or ‘seasonal’ climate?
Outdoor activities? Schools? Politics?
East Coast? West Coast? Midwest? Southwest? They’re all VERY different.
San Diego is home for me. What’s yours?
Local Network Leverage
Searching locally has the obvious disadvantage of less deal flow. But, it also means you can dive WAY deeper than the average searcher.
When you search locally, you have a unique ability to tap into your existing network of brokers, lenders, service providers, and investors.
People like doing business with people they know, like, and trust. If you’re searching in the Midwest and you’re a diehard Chicago Bears fan, you’ll meet other Bears fans and rival fans. It’s a connection that can get your foot in the door faster than it would for outsiders.
For instance, I’m a veteran and it’s way easier for me to build rapport with another veteran than with a non-veteran. Because we’re in the same club.
When you search locally you have the ability to join more ‘clubs’: The Chamber of Commerce, your School Board, Community Service Centers.
The more networks you’re a part of, the greater your leverage. These are additional circles that national searchers don’t have time to dive deep into.
National searchers aren’t going to join the Cleveland, Ohio Chamber of Commerce- much less attend the monthly meetings.
Geographically-constrained searchers have advantages. Don’t squander them by staying home and surfing Biz Buy Sell.
The Drawbacks
There are a few obvious ( and a few not-so-obvious) draw backs with a constrained search.
Less deal flow. Obvious - there are fewer businesses in South Florida than in the rest of the US.
Better valuations. Less obvious - There could be less competition in your region. Not everyone wants to move to Buffalo, NY.
Operational fit. Less Obvious - Some regions may fit your ‘buy box’ better than others. For instance, if you’re looking for government contracting businesses while avoiding Washington, DC, Virginia, San Diego, central Ohio, and other major federal locations, you’re going to have a bad time…
So What’s Right for You?
Only you know the answer to that. But I HIGHLY recommend that you consider how a geographically-constrained search might impact you.
For better or for worse.
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Until Next Week,
-Jed
Are you geographically constrained?