Ramen and roommates
When I finished b-school and started raising my search fund, I was sitting on a pile of debt. Most sane people in my situation would have taken a steady, high-paying job at a bank, consulting firm, or Fortune 500. However, these were not options for me. Though I will admit to being briefly dragged into the consulting circus, no firm was interested in speaking with me, a rejection for which I am now supremely grateful. With rudimentary finance skills, I was certainly not a candidate for a traditional banking job. And no other corporate job really appealed to me. So I was stuck with entrepreneurship, the only path that really made sense and excited me.
Unfortunately entrepreneurship doesn’t pay much, at least in the early years. However, I had a few things going for me:
My superhuman wife was able to land a good job quickly and hold down the fort. As she recently reminded me, she has always been my first investor.
I had no kids yet, just two dogs and a cat.
My worst case scenario wasn’t so bad. I was reasonably confident that with the expensive degree I had just obtained and my bulldog-like qualities, I could find a normal job if necessary. (But let me be clear: I really didn’t want a normal job.)
I had decided to raise a traditional search fund, from which I could earn a modest income once the fund was raised.
Just before my MBA I had landed a job teaching GMAT in preparation for a hypothetical post-MBA entrepreneurial endeavor. During b-school I taught on weekends, and I continued after graduation until I finished raising my search capital, which took me about six months. The job paid a decent hourly rate, so I could at least contribute to paying the bills.
If any of these pieces of the puzzle were missing, my entrepreneurial journey would have been significantly more difficult, and possibly quite brief. That said, I have seen other searchers work magic with limited resources.
One searcher I know launched his search while working through a messy divorce abroad. He had limited savings, some debt from his MBA, and a foreign fiancée without a work permit or study visa. His search lasted well beyond the 2-year mark, and all the while he struggled to pay rent, his legal fees, and his partner’s living expenses on a searcher’s salary. It wasn’t pretty or enjoyable, and each broken deal hit this searcher hard - I could tell, despite the fact that he managed to wear a smile throughout the agony.
This story has a happy ending. The searcher ended up acquiring a businesses, the divorce was finally settled, he married his fiancée, and she began a full-time degree program in their new hometown.
Another searcher I know launched his search after an earlier entrepreneurial endeavor didn’t turn out as planned, and he was laden with substantial student debt. Throughout the search he lived apart from his wife in order to be closer to his partner and investors, and he borrowed money from his investors to visit his wife every other week. He roomed with some college kids during the search and ate cheap. In the end, he too bought a business and is happily living with his wife again.
People often ask why a searcher is paid to search, and one of the answers is that paying these amazing entrepreneurs is sometimes the difference between being able to place them into CEO roles at the great businesses that we invest in, and losing them to the corporate rat race. There are other great reasons as well, but this is an important one that people are sometimes ashamed to discuss. Let it be known that I, for one, needed some income in order to make my ETA journey feasible, and I was far from alone in that need.
Whether debt, family, or other factors, our personal obligations affect many of our decisions, including whether and how to search for a business to buy, but you can rest assured that you are not alone in needing to compromise. That said, I have yet to meet an entrepreneur who actually subsists on instant noodles.
Action Items
Speak with enough searchers until you find one or two who began the search with life circumstances similar to your own. Ask them to recount their emotional journey and how it affected those around them. Ask them how they managed their finances throughout the process.
If you’ve never created a personal budget before, there’s no time like the present. The Stanford Search Fund study has some data on searcher compensation (which is frankly pretty healthy). Use it to sketch out a budget for yourself during the search, and then tempt yourself with your potential lifestyle upgrade once you buy a business… and then again when you hit your IRR targets.
