As an aspiring entrepreneur, you stand at the precipice of a life-changing journey – the acquisition of a business that will not only provide you with financial rewards but also the opportunity to make a lasting impact on your community. At Acquira, we understand the magnitude of this undertaking and the questions that inevitably arise: How likely am I to succeed? What challenges will I face along the way? How can I ensure the best possible outcome?
Our answer is that your success is directly proportional to your dedication and the quality of support you receive. And while this remains true, we’d like to share some data with you to support that statement. We've separated the journey into 4 key milestones, and then shown our data to support your likelihood to hit each milestone, the average time to complete it, and the monetary cost you're likely to pay. We've done this for both our Accelerator and Accelerator+ programs, as well as estimating how you do if you go it alone (primarily from third party surveys with self searchers).
But first, a quick description of each program:
Acquira’s Accelerator Program is a transformative journey designed to equip you with the skills and knowledge needed to acquire a thriving, cash-flowing business in under 12 months.
Our Accelerator+ Program is a premium service that ensures you will find a deal. It requires less oversight on your part because the Acquira team sources and vets the business before presenting it to the Investment Committee on your behalf. You're notified when businesses that that meet your Investment Thesis criteria are ready to issue LOIs on.
Note: Due to overwhelming demand, the Accelerator+ program is currently only available to existing Accelerator customers as an upgrade.
Whichever program you choose, we track our AEs’ success through a series of milestones. These are:
- Training-to-Investment Committee (IC) Presentation
- Investment Committee-to-LOI (Letter Of Intent)
- LOI-to-Final Investment Decision (FID)
- FID-to-Close
Milestone 1: Training to Investment Committee #
Acquira’s Investment Committee – which we refer to as “the IC” – is a critical stage in the Accelerator Program. It’s often how we are able to identify which Acquisition Entrepreneurs are serious about the business buying process. It also presents one of the best practical learning opportunities AEs will encounter on their journey.
We have seen that people who reach our Investment Committee are more likely to issue an LOI. This is why we put so much importance on reaching the IC.
Our numbers show that 58% of Accelerator clients get to the Investment Committee.
Overall, the biggest challenges that AEs face during this milestone are time management and changing their mindset to search in a more systematic and scaled way. Our training teaches you how to do this, and our coaches act as accountability partners to make sure you hit this critical milestone.
Investment Thesis #
An investment thesis is a set of rules that defines what you will and won’t invest in. It includes things like:
- Where is the business located? Are you willing to relocate for the right business? If so where? If not, are you limited to a 2-3 hour drive from where you live currently? Are you willing to take a 1 hour direct flight? Based on the questions above, if the geographical limits highly constraining you will likely need to be more flexible with the answers to the following questions.
- How much money do you have to put towards a down payment and how will you finance the business? Will you need external equity? Our training and ecosystem can help if you need more equity, and it can also teach creative deal structures that will allow you to do larger businesses.
- How profitable is the business, post-cashflow? What kind of salary does it need to replace if you quit your own job?
- What industries are you looking to buy in? What are your unfair advantages? We recommend you focus on advantages you have first, then advantages that Acquira has, as all the playbooks we've built can be directly applied. Finally, you may need to be more industry-agnostic, if your geography is severely limited.
- Is it management-run or ownership-run?
- Are there any risks to the business, like customer concentration or key person risk?
- How high is your own risk tolerance? Are you willing to structure around these risks?
A properly defined thesis can help you evaluate potential investments and quickly disqualify bad deals, effectively removing emotion from the equation.
One issue we have seen repeatedly around this portion of the journey is that some Acquisition Entrepreneurs are trepidatious about bringing a deal to the IC if it isn’t what they consider a perfect deal. But practice makes perfect.
The more deals you bring, the easier the process becomes each time. You learn how to disqualify deals faster, and it will ultimately help you find the perfect business for you.
Those who attend the IC shouldn’t be too concerned if they’re told it’s not a deal worth pursuing. This is how they learn.
Associated Costs #
The biggest cost associated with this stage is the price of the Accelerator, which costs $9,500 as of March 2024. If you’re doing it on your own without Acquira, this stage would hypothetically cost nothing.
With Acquira, this process takes an average of 60 days. Without Acquira, this process will usually take closer to four months simply because you don’t have the structure that Acquira’s training provides, you don’t have any accountability, and you don’t have the support. Acquira has a team of Virtual Assistants (VAs) that can help with many of the steps in this part of the process.
You also don’t know how to deal with brokers, and you don’t have Acquira’s name to lean on. Nearly every business broker in the United States is familiar with Acquira, so by working with us, you’re now a “qualified buyer.”
Chance of Success #
Accelerator: 58%
Reason: We help you craft your investment thesis, provide training, support, and, most importantly, accountability.
Without Acquira: Under 20%
Reason: There is a lot of busy work. Without structure, many people do not create a workable investment thesis and framework for evaluating the intrinsic value of businesses. They don't make it far into any deal and give up.
Timeline #
Accelerator: 2-3 months
Without Acquira: 4 months+
Milestone 2: Investment Committee-to-LOI #
The more successful an AE becomes at IC presentations, the more likely they will reach an LOI. And the proof is in the presentations, so to speak.
Our target is that 50 percent of those who reach the IC have an LOI accepted within three months of the presentation.
The biggest challenge in pursuing this milestone is simply having your LOI rejected. This can demoralize many AEs, but it is a normal part of the business buying journey.
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The Accelerator+ Option If you participate in the Accelerator+, the Acquira team will present deals to the Investment Committee on your behalf. You will be notified when a deal has passed the committee and is ready to be negotiated. |
Associated Costs #
If you’re going through this phase without Acquira, you can expect to pay a legal retainer of $5,000, and incur your first billable hours crafting the LOI. The actual cost of issuing an LOI is relatively low. However, lawyers for either side of the deal will use this as an opportunity to negotiate, driving up the cost.
Working with Acquira, you will not incur the cost of the LOI. We also help with negotiating the terms of the deal and provide support through this part of the process, which is something an attorney won’t typically do unless you are paying them to do so. On average, because we’re involved in the process, we can get better terms, including more seller financing and lower rates.
With the Accelerator+ option, the cost of this stage in the journey is covered under your initial payment.
It’s common for Acquira to negotiate an additional 5% of the purchase price to be paid through seller financing, and the interest on that is 3% lower than average because most people just go with the SBA rate. If we're looking at a $3 million company, at a discounted rate of around three percentage points and almost double the term length, that saves the buyer about $6,000 yearly.
Chance of Success #
Accelerator: 50%
Accelerator+: 100%
Without Acquira: <30%
Timeline #
Accelerator: 2-4 months
Accelerator+: 1-2 months
Without Acquira: 4-6 months
Milestone 3: LOI-to-Final Investment Decision (FID) #
Once the buyer has their LOI accepted, they will begin working toward their Final Investment Decision (FID).
Taking on ownership of a business is no easy task. There are so many moving parts that you need to consider, and your investment will benefit if you break it down as you would any project. Just because you've come this far in your deal, this doesn’t mean your commitment should be final. There is still time to consider.
During this time, the buyer should conduct a final SWOT analysis to assess the company’s strengths, weaknesses, opportunities, and threats it is facing.
The buyer must also form their acquiring entity, ranging from C-Corporations to Pass-Through Entities like S-Corporations. During this phase, it’s generally expected that buyers will start preliminary work on the people and culture systems that will sustain the company.
This is all in preparation for the buyer’s first site visit. Pre-LOI diligence can only reveal so much of a company’s overall health. When you’re this close to signing the closing documents, it's imperative to visit the location. Through this, you’ll be able to get a feel for the company culture, better judge how the business is performing, and truly assess how transparent the owner has been with their disclosure up to that point.
A site visit will give you an idea of the physical state of the assets, including the business’s fleet if it has one. If you are planning an expansion, here is where you’ll be able to see whether the current premises can accommodate it.
It will also provide an opportunity to conduct one-on-ones with current key staff. While many business owners are hesitant to offer this, we will coach you on how to make it happen, as it is a necessity.
At that point, you will also carry out a Quality of Earnings (QoE) analysis. It is particularly important to evaluate QoE if you are purchasing a small owner-operated business because the owner may not have used an accounting professional.
QoE is used to determine whether the historical financial statements used to determine the business valuation are reasonably representative of the current financial situation of the business.
The biggest challenge during this phase will usually be getting a true feel for the company’s culture. This can be done through one-on-ones, but only if the business seller is agreeable. Though, if you take the Accelerator+ route, an Acquira Integrator will accompany you on a site visit in order to help you assess the company's culture and operations.
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The Accelerator+ During this stage of the journey, you and an Acquira Success Coach will review the financial results of the due diligence process. Then an Acquira Integrator will visit the business with you. A Success Coach will also guide you through the non-financial diligence portion of the search – things like operations, culture, and marketing. At the end of the diligence process, you will make a Final Investment Decision on whether you want to proceed with the deal or not. |
Associated Costs #
The cost of working with Acquira during this stage will be associated with QoE analysis and success coaching fees. If you’re using our services, this will cost $20,000 for QoE and $12,500 for the M&A Advisor. We will actually visit the business with you to make sure the company will make a good acquisition and ensure that it meets your investment criteria. This totals $27,500 out of pocket. Again though, if it takes two tries, we will cover the cost for you – you simply pay us back when your deal closes out of your closing cost fees. Under the Accelerator+ model, all of your costs will be included in a single $37,500 payment.
Without Acquira, you will incur the cost of the site visit. You're also going to want a professional opinion before making a multi-million dollar investment, and this would be in the form of an M&A Advisor. Expect to pay an M&A Advisor $500 to $1000 an hour or 1-2% of the purchase price as a success fee (or some combination of the above). A conservative estimate would be $25,000 in M&A advisory fees in this phase.
The chance of success and cost for LOI-to-FID will partially depend on luck. Sometimes the QoE and site visit uncover things that will kill the deal. This happens fairly often. With Acquira, your out-of-pocket costs don't go up when that happens. This makes doing deal number two much more likely. Deal number one might actually be less likely to happen with Acquira, but that is a good thing. Since we actually go to the business, we can see issues that you may know exist and advise you not to close the deal.
Chances of Success #
Accelerator: 70%
Reason: We can guarantee you have better counsel, and financial diligence, which increases your odds.
Accelerator+: 100%
Reason: If at any point a deal falls through, the Accelerator+ program will begin the search again at no extra cost.
Without Acquira: 60%
Reason: Your counsel likely isn’t as good at working through this section. If you find something during the diligence phase that impacts your offer, you’ll need to renegotiate the price. If the seller doesn’t accept this new offer and your counsel isn’t adept enough to deal with them, the deal can fall through.
Timeline #
With Acquira: 60 days
Without Acquira: 60 days
Milestone 4: FID-to-Close #
Here your main costs are an M&A advisor and legal fees. This is when you will finalize your funding sources. For most business buyers, this will include an SBA loan but may also include seller financing, an equity investment, or a loan from a commercial bank.
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The Accelerator+ If you take the Accelerator+ path, you will pay a fee of $37,500 to Acquira, which will cover all of your advisor and legal fees. Your Success Coach will provide support in order to identify potential financing alternatives, including strategies to negotiate and secure financing and reviewing business plans and financial models for lenders and investors. Your Success Coach will also review all key documents between you and the seller. |
After you’ve talked to the lenders, the lawyers, and the CPAs and collected all of the information and data, you’ll have to make a final decision on what lender you will use. Once you’ve decided on what lender you’ll go with, you’ll need to ensure that you’re pre-approved for a loan.
At that point, your legal counsel will begin drawing up the Asset Purchase Agreement, bill of sale, employment agreements, seller financing agreements, and other closing documents.
Once the APA is signed, you are now the business owner, and it’s time to look toward growth!
There are many challenges during this stage, especially those trying times when you need to pore over important legal and financial documents. Your time will also be doubled if you’re doing this on your own. With Acquira, it can take about three months to work your way from FID to Close. Without Acquira, expect it to take about six months.
Associated Costs #
Without Acquira, in this phase, you should expect to pay around $5,000 in banking fees, $25,000 for legal fees, and $25,000 for M&A advisory fees, and an additional $375,000 in interest because you got worse rates. Of course, that last fee will be spread out over the term of the loan. So if it's a ten-year loan, that increases your total costs in the first year by $37,500.
With Acquira, the cost of your financing will be lower because of our relationship with banks. Our training also encourages you to shop around for different lenders. This will likely result in you putting 25-30% less of your cash down and result in 1.5 points less in interest. A significant saving.
With Acquira's Accelerator+ option, your fee of $37,500 will cover all of your advisor and legal fees.
Chances of Success #
Accelerator with Coaching: 80%
Accelerator+: 80%
Without Acquira: 40%
Reason: The SBA acceptance rate is only 25% at large banks and 49% at small banks.
Note: Acquira’s SBA acceptance rate is 100%. We've never lost a deal we got under LOI due to being unable finance it.
Timeline #
With Acquira's Coaching: 3 months
Without Acquira: 6 months
The Final Tally #
While calculating an exact tally of costs is impossible, these numbers have proven to be more or less accurate and largely indicate what an average business acquisition looks like.
Covering The Costs Of Your Acquisition #
As we see, numerous supporting costs go into an acquisition, everything from Quality of Earnings analysis to post-acquisition growth initiatives. The Accelerator+ itself can be considered a supporting cost of an acquisition. Fortunately, there are ways to help cover these expenses depending on the type of loan you receive. One option is to have the business pay you back after you take possession. Or, you can cover these costs in terms of an SBA loan.
Generally, the SBA loan's Use of Proceeds section outlines how the funds can be used and includes specific requirements for spending the loan funds. This section can be broken down into two categories: allowable and prohibited.
Allowable uses for an SBA loan include: #
- Business acquisition: Using the loan funds to purchase an existing business, including intangible assets like goodwill, trademarks, and patents.
- Working capital: Funding the day-to-day operations of the business, including salaries, rent, utilities, and other expenses.
- Refinancing existing debt: Paying off high-interest debt with lower-interest SBA loan funds.
- Purchase of inventory: Using the loan to purchase inventory needed to operate the business.
- Purchase of equipment: Using the loan to purchase equipment needed to operate the business.
- Insurance: The SBA also allows you to roll your SBA insurance costs into the loan.
Conclusion #
Through the Accelerator, you pay $9,500 in order to have, statistically speaking, a 58% chance of bringing a deal to the Investment Commitee. This is entirely dependent on your own effort. If you feel you can't put in the approximately 20 hours of learning and analysis it takes to get to an IC, this is likely not the path for you. This typically takes people 2 months.
Once a deal is under LOI, most people choose to pay $12,500 to Acquira for our optional transaction advisory services, plus an additional $20,000-25,000 to a third party QoE professional. The transaction advisory fee covers support throughout the diligence process as well as a physical site visit and interview of the seller and staff by yourself and an Acquira integrator. In approximately 30% of cases, this process reveals something that encourages the AE to pull out and abandon the non-binding LOI. Acquira helps cover this risk by covering the up-front cost of a second QoE and M&A advisory and integrator visit for the next deal (just pay us out of the businesses' profits once it closes). This diligence period prior to making the final investment decision takes on average 2-3 months.
The final phase includes legal fees (typically $25,000) and optional coaching paid to Acquira around the financing and legal agreements ($12,500). This combines to an additional $37,500. This totals $84,500 in closing costs, which can be put towards the SBA equity injection requirement. This final phase typically takes 4-6 months.
Through the Accelerator+, you pay $75,000 to get a deal to past IC and to LOI. We typically take 3-4 months to get there, unless you investment thesis is highly limited in which case it can take longer.
Once a deal is under LOI, it is exactly the same as the Accelerator above, with the same services, totalling $150,000, which can be put towards the SBA equity injection requirement. You are effectively paying a $65,500 in advance in order to save yourself the 200+ hours involved with finding a deal, vetting it, and negotiating an LOI. You are also paying to greatly increase your odds of success, and accelerate your path to entrepreneurship by at least 3 months.
The Final Math #
The average business we help purchase with AEs makes $1 million in EBITDA and sells for $3.5 million, including working capital. Typically 10-15% of this is seller financed. There are supporting costs of $150,000 for the Accelerator+ or $84,500 for the Accelerator and typically another $100,000 in growth related costs such as a new website, a new hire, or change management fees. This create a total project cost of $3.75 million.
The SBA typically requires a 10% equity injection of the total project cost, in this case $375,000. If you dotted all your i's and crossed all your t's along the way, the $150,000 you paid to Acquira goes towards this equity injection requirement, leaving you with or $225,000 in cash required at closing. If you don't have this cash at hand, Acquira Capital is one potential source, and can cover the entirety of this amount. Within the training we also provide several other sources. This table illustrates the above:
So for $375,000, you would own 100% of a business that is clearing over $400,000 of free cash flow per year after debt service. In addition, the business is paying your salary as its General Manager (typically around $150,000/yr). You can pay a premium for our Accelerator+ service to ensure you close a deal faster and with less work required from you so you can concentrate on your plans for helping the business grow and succeed.
If you choose to work with Acquira Capital, your down payment could be as low as 2% of the Total Project Cost (the equity fund can cover up to 80% of the downpayment), or $75,000 in this example. In this case, you'd be giving up around 20% of the economics of the business, but by working directly with Acquira post-acquisition, we aim to grow the total pie far more than 20%.