In The Trenches

This episode is brought to you by ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Oberle Risk Strategies⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: Insurance Broker and Insurance Due Diligence Provider for Search Funds and Other Small-to-Medium-Sized Businesses⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ [https://oberle-risk.com/in-the-trenches/]     * This episode is brought to you by ⁠⁠⁠Boulay, the industry standard for Quality of Earnings, tax, and audit services, serving search fund entrepreneurs for 20+ years⁠⁠⁠ [https://boulaygroup.com/trenches/] * Today’s episode is all about Hiring, and we’ve managed to secure one of the world’s foremost experts on the subject. Randy Street is the Vice Chairman of ⁠ghSMART⁠ [https://ghsmart.com/], a global consulting firm that helps CEOs, boards, and investors build valuable companies specifically through hiring and developing world class leadership teams. Alonside ghSMART’s chairman and founder, Geoff Smart, Randy also co-authored ⁠Who: The A Method for Hiring⁠ [https://www.amazon.com/gp/product/0345504194/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0345504194&linkCode=as2&tag=inthetrench03-20&linkId=bd0ebdce3c602566500efc7db2923295], a book that I view as being required reading for all entrepreneurs and CEOs running SMBs. The very specific hiring method that they detail within this book ("Topgrading") changed the way that I made all of my hires across my entire company. In our discussion today, we discuss how to evaluate people & teams that you haven’t personally hired, post-hire considerations, lessons from 30+ years of working with CEOs and management teams, compensation, and how to identify and address conflicts within leadership teams.

This episode is brought to you by ⁠⁠Boulay, the industry standard for Quality of Earnings, tax, and audit services, serving search fund entrepreneurs for 20+ years⁠⁠ [https://boulaygroup.com/trenches/] * This episode is brought to you by ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Oberle Risk Strategies⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: Insurance Broker and Insurance Due Diligence Provider for Search Funds and Other Small-to-Medium-Sized Businesses⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ [https://oberle-risk.com/in-the-trenches/]     *     Across all known search funds since the inception of the model in the 1980s, ~63% of funds have gone on to acquire a company. However, since 2014, the acquisition rate has decreased, hovering around ~57% over the past 10 years. Today I'm joined by three of the most experienced and respected investors within the search fund ecosystem to discuss A) Why the acquisition rate among search funds has fallen over the past 10 years; and B) Whether the rate of acquisition is likely to fall further in the years to come. Joining me today are Jim Edmunds (Search Fund Partners), Badge Stone (WSC), and Kent Weaver (Granite Point Partners). Today's episode revolves around the testing of 8 hypotheses, submitted to us via a survey of 1,000+ searchers & CEOs. Those hypotheses include: Encroachment: PE moving further down market? Capacity: Investors with too many searchers in their portfolios? Competition: Too many search funds in the market? Dilution of Talent/Commitment: Too many part-time searchers? Valuation Expectations: Sellers no longer willing to transact at palatable multiples? Cost of Capital: Search funds have a higher cost of capital relative to other buyers? Searcher Fatigue: Sellers and intermediaries becoming disillusioned with the value proposition of search funds? Email: Deliverability challenges too much to overcome? Please enjoy!

This episode is brought to you by⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Oberle Risk Strategies⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: Insurance Broker and Insurance Due Diligence Provider for Search Funds and Other Small-to-Medium-Sized Businesses⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ [https://oberle-risk.com/in-the-trenches/]     * This episode is brought to you by⁠⁠Boulay, the industry standard for Quality of Earnings, tax, and audit services, serving search fund entrepreneurs for 20+ years⁠⁠ [https://boulaygroup.com/trenches/] *Raam Jani is one of the most experienced lawyers in the Search Fund ecosystem, and within the small business M&A ecosystem more broadly. In our discussion today, we cover some mechanics (including when one should begin the legal diligence process, how to avoid overwhelming sellers with too many information requests, and how he deals with situations where his legal counterpart is less experienced in matters of M&A). We cover frequent stumbling blocks within the M&A process (including how to evaluate the true extent of the key person risk that resides within any given seller, what areas of the purchase agreement tend to be most contentious, and why he advocates for rep & warranty insurance). And finally we conclude with some general market observations, including whether he thinks the lower middle market is as inefficient as it was 5-10 years ago.

This episode is brought to you by ⁠Boulay, the industry standard for Quality of Earnings, tax, and audit services, serving search fund entrepreneurs for 20+ years⁠ [https://boulaygroup.com/trenches/] * This episode is brought to you by ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Oberle Risk Strategies⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: Insurance Broker and Insurance Due Diligence Provider for Search Funds and Other Small-to-Medium-Sized Businesses⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ [https://oberle-risk.com/in-the-trenches/]     *     As an American searcher, are you aware that you might be able to receive $10M+ of your exit proceeds completely free of federal tax? As a Canadian searcher, are you aware that you might be able to receive $1M+ of your exit proceeds completely free of federal tax? If you’re not, then you might want to give this episode a listen. We split today’s episode into two parts: The first half will focus on US searchers and investors, and will explore the QSBS program (aka Section 1202) offered by the US federal government. The second half (starting at the 47 minute mark) will focus on Canadian searchers and investors, and will focus on the CCPC program and the lifetime capital gains exemption offered by the Canadian federal government. Both programs have the potential to be incredibly lucrative for searchers and investors alike, though both remain unfamiliar to many. I hope this episode plays a small role in changing that. Timestamps - USA: 0:00 - 47:00 - Canada: 47:00 - 1:11:00

This episode is brought to you by ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Oberle Risk Strategies⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠: Insurance Broker and Insurance Due Diligence Provider for Search Funds and Other Small-to-Medium-Sized Businesses⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ [https://oberle-risk.com/in-the-trenches/]     * This episode is brought to you by ⁠Boulay, the industry standard for Quality of Earnings, tax, and audit services, serving search fund entrepreneurs for 20+ years⁠ [https://boulaygroup.com/trenches/] * Dr. Daniel Crosby is a behavioral finance expert, the Chief Behavioral Officer at Orion Advisor Solutions, a Clinical Psychologist, and a New York Times best-selling author. In our wide-ranging discussion today, we discuss meaning, purpose, fear of the unknown, when to continue vs. when to persist, why we tend to ignore simple solutions to complex problems, why pessimism sounds more intelligent than optimism, how to use our money to buy back time, and how to spend our money in ways that will maximize happiness and contentment.