Pack your bags: when the search fund entrepreneur should travel
I recently traveled to Melbourne and Sydney to meet with investors, vendors, and aspiring searchers. About a 7 1/2 - hour flight from my home in Singapore, these cities are not next door, and the journey was therefore an investment of both time and money.
The meetings I had on this trip, and the outcome of those meetings, made the investment more than worthwhile. However, like any good investment, the high ROI wasn’t a result of pure luck but of careful planning, prioritization, and resource allocation. I would not have made the investment had the probability of achieving a satisfactory ROI been low or uncertain.
Alright, let’s not beat this analogy to death. You get the idea. Traveling willy-nilly is a bad idea, but traveling is certainly important at times. Most search fund investors and entrepreneurs will agree with this statement, but there is considerable disagreement on where to set that bar.
At least one investor I know of says that the ability to travel at a moment’s notice is one of a searcher’s most powerful competitive advantages. I don’t disagree with this statement. As a searcher, your unique approach to acquisition and to the relationship developed with the seller, that differentiated “I’m an entrepreneur who wants to step into your shoes and run your business” messaging, is a powerful advantage over traditional buyers, and in-person meetings can certainly help to deliver that message and develop a relationship with the seller.
However, I believe this statement deserves some context. Some searchers infer that they should therefore travel as often and as quickly as possible, which is almost certainly the wrong approach.
You’ve heard me say before that time is the searcher’s most valuable resource, and unfortunately, travel consumes that resource very quickly. Especially when air travel is required, the time spent planning, rescheduling, packing, waiting, flying, checking in, getting the car, driving… that time quickly flies out the window. And while theoretically the searcher should be able to work in the Uber, at the airport, on the plane, and in the hotel, being productive in those environments is easier said than done. Your work time is frequently interrupted, you don’t have your normal tools and team around you, wifi can be troublesome, you’re tired, you’re distracted, and you may even have motion sickness or jet lag. Taking calls from the car, airport, airplane, or hotel is often impossible or impractical, and your team is likely to be significantly less productive in your absence. Finally, it’s difficult to achieve the flow that you routinely get into in your normal work environment.
If your search period is 730 days, and you work 5 days/week, that leaves you with 521 working days if you work on holidays and take no break. Under these assumptions, each 3-day business trip (2 days to travel and 1 day to meet) is about 0.6% of your search time, and a 2-day trip is about 0.4% of your search time. This is time subtracted from your daily search operations.
Traveling does have value, sometimes huge value. Prior to my Australia trip I had spoken several times over video call with most of the people I met on the trip. (Video calls are generally superior to phone calls as a way to get to know somebody, but they will never outcompete the in-person, face-to-face meeting. Also, retirement-age business owners are unlikely to be comfortable communicating with you via video call.) One of the people I met during my trip came across as much more mature and sophisticated in person than over video call. Another was far more relatable, less ego-centric, than over video. In addition, I believe everyone’s comfort with and confidence in me grew through these in-person meetings, and as a result people were more eager to support my efforts and introduce me to their network than in prior conversations.
However, and this is important to note, so far I travel to meet less than 5% of the prospective searchers with whom I speak over video, and I have had 3-4 thorough conversations with each of these people beforehand. Before I travel, I am already comfortable with the prospect, and I believe the probability of a successful outcome is sufficiently high. We have already established a relationship and are therefore ready to use the in-person meeting to both build upon that relationship and make progress toward a shared goal.
Roughly speaking, a searcher’s travel rate should be in the same ballpark. Of course, if traveling means a 2-hour drive, then the bar is lower than it would be for a 7-hour flight. If the seller is in your town, the bar is lower still. However, even then, it’s far preferable to at least have a preliminary call to qualify before investing time in an in-person meeting. While it’s fairly easy to exit a phone call in 15-20 minutes, it can be difficult to exit a meal or a coffee in under 90 minutes. Add the time required to get there and back, and you’ve sunk a few hours of your day into the meeting. If you haven’t done some preliminary qualification, those hours could easily be lost with nothing to show for the time invested.
The last caveat I’ll mention is that the local culture may have an effect on the required frequency of travel. Some cultures are less willing to have a meaningful conversation on the phone than in person, and searchers in those cultures may need to spend more face time. However, even then, it will be important for searchers to find a workaround. If every conversation requires an in-person meeting, then the searcher will see far fewer opportunities, which on average will likely lead to lower quality deals. Higher volume of outreach may be the solution to surface more sellers who are interested enough to have a preliminary conversation over the phone.
A searcher’s ability to travel and develop relationships face-to-face is indeed a valuable tool, but it’s a tool that should be used sparingly.
Action Items
Create a checklist of pre-requisites for travel. In general, before getting on a plane you want to have at least seen some high-level financial statements and spoken with the seller about your intentions and a potential fit.
Audit your travel history. In the past year or two, how much time have you spent planning for travel and traveling? What was the return on time invested for each trip? In aggregate? What can you do to increase that ROI?
