📖 Self-Funded Search Playbook

TL;DR

Most acquisition content assumes you're raising capital. What if you're not.

You're a self-funded searcher — putting up your own capital, using SBA financing, and buying a business without LPs, board seats, or a two-year clock. According to Stanford's 2025 Search Fund Study, self-funded searchers now represent over 60% of individual acquisitions under $5M. The model works. But the playbook most people follow was designed for traditional funds targeting $10–30M businesses with investor capital.

If you're buying a $1.5–3M business with an SBA loan, you need a different framework. This is that framework — from thesis to close to your first 100 days as owner.

A self-funded search means you're acquiring a business using your own capital for the equity injection — typically 5–10% of the purchase price — combined with SBA financing. No outside investors.

The traditional model is covered in the Search Fund Playbook — raise $400–600K, draw a salary during the search, target larger businesses, and return 3x+ to investors. It's a legitimate path for the right buyer.

But the two models optimize for different things.

Self-funded optimizes for:

Traditional search funds optimize for:

The practical implication: self-funded searchers can buy smaller businesses, hold indefinitely, and keep 100% of the upside. The tradeoff is that you carry the search costs yourself, and the SBA personal guarantee sits entirely on your shoulders.

If you're still deciding between paths, the short version is that acquisition gives you cash flow from day one while startups require 2–3 years of negative cash flow before you know if it works.

This is worth understanding because it directly affects your close rate and the multiples you'll pay.

A 62-year-old HVAC company owner who built his business over 30 years typically cares about three things: getting a fair price, knowing his employees will be treated well, and ensuring the business continues. A self-funded buyer who plans to operate the business day-to-day checks all three boxes in a way that a PE-backed buyer might not.

BizBuySell's Q4 2025 data shows main street businesses traded at a median of 2.44x SDE. Anecdotally, owner-operator buyers consistently report closing below asking price when sellers have competing offers from institutional buyers — not because they bid higher, but because sellers trust them to actually show up on day one. The buyers who lose deals at the LOI stage almost never lose on price. They lose because the seller didn't believe they'd run the business.

Lean into this. Your pitch to a seller isn't "I'll pay more." It's "I'll be here every morning."

The searchers who close are the ones who defined what they're looking for early — and said no to everything else. The searchers who stall are the ones evaluating every deal that crosses their desk.

"Flexible criteria" is usually code for no criteria. And no criteria means every deal looks interesting for two days and then goes nowhere.

Your criteria should answer five questions.

What size? For self-funded SBA acquisitions, the practical range is $750K to $5M in enterprise value. Below $750K, the business is usually too dependent on the owner to sustain a transition. Above $5M, the equity injection requirement ($250–500K+) strains most self-funded buyers.

What cash flow? Target at least $250K in Seller's Discretionary Earnings. Below that, the SBA debt service leaves too thin a margin. At $400K+ SDE, you have enough room to pay yourself, service the debt, and reinvest in the business.

What industry? Industry experience is preferred — by sellers, by lenders, and by the reality of running a business where you need to make decisions on day one. It's not required, but if you don't have it, you need to demonstrate that you can get up to speed quickly and dive deep. That means doing real homework before your first broker call: understanding unit economics, talking to operators, learning the landscape.

What geography? Most self-funded searchers are geographically constrained — you're planning to operate this business, so it needs to be commutable or in a place you'd relocate to. That's actually helpful. Geographic focus makes your broker relationships deeper and your outreach more targeted.

What deal structure? Know your walk-away terms upfront. Maximum multiple. Minimum debt service coverage ratio. Required seller transition period. Having these defined in advance prevents you from rationalizing a bad deal when you're 14 months into a search and tired of looking.

Build a simple screening document with these five questions and apply it to every deal. It prevents you from making emotional decisions when a shiny opportunity shows up in your inbox.

The most common question from self-funded searchers: "How much cash do I actually need?"

Less than most people assume. But not zero — and this is important to be direct about.

Self-funded search requires real capital. Not just the equity injection, but search costs, living expenses during the transition, legal fees, and a post-close operating cushion. Buyers who try to do this with $30K in savings and a prayer end up either never submitting an LOI or closing a deal they can't sustain. If the capital isn't there yet, the right move is to build it — not to force a timeline.

For buyers who do have $75–250K in available capital, the SBA 7(a) program makes the math work. The SBA finances up to 90% of the acquisition, and the 10% equity injection doesn't all have to come from your bank account. The efficient capital stack shows how buyers close $3M deals with $150K in cash.

The 5/5/90 structure. You bring 5% cash. The seller provides a 5% standby note (on full standby for the entire loan term under current SBA rules — no principal or interest payments during that period). The SBA lender finances 90%. On a $2M deal, that's $100K from you instead of $200K.

Roll transaction costs into the loan. The SBA loan can finance working capital (12–18 months), the SBA guarantee fee (3–3.75%), legal fees, your QoE report, and valuation costs. That's $30–75K in expenses you don't have to bring as cash.

Negotiate working capital into the purchase price. This prevents you from needing an additional $50–200K post-close for AR, inventory, and operating cash. The Working Capital Playbook covers the exact LOI language for this.

Same-industry buyers can potentially put 0% down. If you already own a business in the same NAICS code and geographic area, the SBA allows expansion acquisitions with zero equity injection when three specific conditions are met.

Plan for the personal guarantee. Every SBA loan requires one. Your personal assets — house, savings, retirement accounts — are collateral if the business can't service the debt. Structuring the capital stack efficiently reduces how much of your own cash is at risk upfront, but it doesn't eliminate the guarantee exposure. The SBA loan guide covers the full mechanics of how guarantees work and what they actually expose. Most buyers accept this risk — that's changing. EBIT Insurance is launching Personal Guarantee Insurance soon, designed specifically to protect SBA borrowers' personal assets against guarantee claims. Sign up to get notified.

This is where most searches stall. Not because deals don't exist — but because searchers either rely on one channel or cast so wide a net that nothing converts.

Run three sourcing channels simultaneously.

Channel 1: Listed deal flow. Platforms like BizBuySell, Axial, and broker listing sites. The knock on listed deals is that "everyone sees them." True — but most people who see them don't have pre-approved financing, defined criteria, and the ability to submit an LOI within a week. Speed and preparation are the edge here, not exclusivity.

Channel 2: Broker relationships. Boutique M&A brokers in your target geography are the highest-converting source. They control the best flow and send deals to buyers they trust before listing publicly. Build relationships with 10–15 brokers. Send a one-page buyer profile. Follow up monthly with a brief "still looking, here's what I'm seeing" note. When a matching deal hits their desk, you want to be in the first three calls they make.

Channel 3: Direct outreach. Cold outreach to business owners works, but only when it's specific. A message that references the owner's actual business, demonstrates you've done homework on their industry, and explains why you're a credible buyer gets responses. The deal sourcing guide covers the strategies that are converting in 2026 — including why one personalized email consistently outperforms a hundred templated ones.

Here's where AI is changing the economics of a self-funded search. Tools like Claude can run personalized outreach at a level that used to require a 4–5 person deal team — drafting broker follow-ups, analyzing CIMs against your screening criteria in minutes, building financial models on first pass, and synthesizing due diligence documents. A self-funded searcher with an AI workflow now has the analytical throughput of a traditional search fund without the payroll. The searchers who figure this out early are sourcing 3–5x more efficiently than those still doing everything manually.

The pipeline math. For every 100 deals you review at a high level, expect to do deep analysis on 8–12, submit LOIs on 3–5, enter exclusivity on 1–2, and close 1. This pipeline takes 6–18 months to produce a closed deal. That timeline is normal — not a sign you're doing something wrong.

You've found a deal that matches your criteria. The broker's summary looks strong. Now you need to determine what the business is actually worth — which is often different from the asking price.

Start with SDE. For businesses under $5M, Seller's Discretionary Earnings is the primary valuation metric. SDE takes net income and adds back owner compensation, personal expenses run through the business, one-time costs, and non-cash charges to arrive at the true earning power available to a new owner-operator.

The detail that matters: not every add-back is legitimate. A seller claiming $800K in SDE with $200K in aggressive adjustments doesn't have an $800K business. Your SBA lender will normalize those numbers — and often arrives at a lower figure than the broker's CIM presents.

Apply the right multiple. BizBuySell's Q4 2025 data shows a median sale price of 2.44x SDE for main street businesses — but the range runs from 1.5x for owner-dependent service businesses to 4.0x+ for recurring revenue models with management in place.

Use multiple methods. SDE multiples, comparable transactions, discounted cash flow, asset-based, and income capitalization. When three different methods converge on the same range, you have a defensible number — both for your LOI and for your lender's credit memo.

Don't just ask "what is it worth?" — ask "what is it worth to me?" A business at 3.0x SDE might look expensive in isolation. But when your specific SBA terms produce a 30%+ cash-on-cash return in year one, the multiple is less relevant than the return profile. Businesses with strong pricing power and recurring revenue often justify premium multiples because the cash flows are more predictable.

The LOI takes a deal from conversation to transaction. It locks in the key economics and — critically — creates a 60–90 day exclusivity window so you're not competing while you spend money on diligence. The LOI template and walkthrough includes downloadable templates, key terms, and the seller note language SBA lenders want to see.

Once exclusivity is signed, due diligence runs three parallel tracks: financial (tax returns, bank statements, proof-of-cash matching deposits to reported revenue), operational (customer concentration, employee retention, true owner hours), and legal (lease transferability, contract assignability, pending litigation). The Due Diligence Playbook has the full checklist across all three tracks. For deals above $1.5M, invest in a Quality of Earnings report — the $5–15K cost routinely saves buyers six figures through re-traded purchase prices or identified issues that prevent closing on a bad deal.

The diligence holds. The SBA lender issues a commitment letter. The closing process from here typically runs 30–45 days, and three documents control the outcome.

The Asset Purchase Agreement. This governs what you're buying, how the purchase price is allocated, and what recourse you have if something was misrepresented. About 70–80% of SMB deals are structured as asset purchases. The APA guide covers indemnification, escrow, reps and warranties, and the provisions worth slowing a deal for versus the ones you can concede.

The working capital adjustment. More post-closing disputes come from working capital than any other provision. Agree on the peg, measurement methodology, and true-up timeline before you sign the APA — not after.

The SBA loan closing package. Know your rate, DSCR covenants, and personal guarantee scope before the closing table. No surprises here if you've done the work in Step 2.

The wire clears. You own a business.

Here's the number worth memorizing: the median SBA-financed acquisition sees a 10–15% revenue dip in the first 90 days. It's normal. Customers are testing whether the new owner will show up. Employees are deciding whether to stay. Some institutional knowledge walks out the door with the previous owner no matter how good the transition plan was. The dip recovers — but only if you handle the first 100 days correctly.

The full breakdown is in your first 100 days as owner, but here's the condensed framework.

Days 1–30: Listen. Your diligence assumptions were partially wrong — every acquisition reveals things that didn't surface in the data room. Meet every employee individually. Call your top 20 customers. Understand the business as it actually runs before you change anything. The single biggest mistake new owners make is changing something in week two that the previous owner had a very good reason for doing.

Days 31–60: Stabilize. Document the processes that existed only in the former owner's head. Secure key employee relationships — the first departure of a critical team member sets your transition back months. Get your financial reporting to a cadence your SBA lender expects.

Days 61–100: Build. Now you can start improving. The growth levers in most SMB acquisitions are consistent: raise prices (most sellers haven't adjusted in 2–3 years), tighten collections, cut unnecessary expenses, and invest in the marketing the previous owner never prioritized. This is also where AI tools earn their keep as an operator. Use them to build the SOPs the previous owner never documented, analyze your customer data for churn patterns and upsell opportunities, automate the quoting and invoicing processes that eat 10+ hours a week, and run the financial reporting that lets you see problems before they show up in the P&L. A self-funded owner with an AI-augmented operating system can run a business with the analytical rigor of a PE portco — without the overhead.

As a self-funded owner, you have something traditional search fund operators don't — time. No one is pressuring you for a 90-day board update. You can make changes that compound over years, which is where the real returns in small business ownership come from.

Here's a realistic example to put the whole playbook in context.

The deal: A home services business generating $500K in SDE, purchased at 3.0x — $1.5M total.

The structure:

Year 1 economics:

Year 5 (assuming 8% annual growth from pricing + modest operational improvements):

You turned $75K into $1.3M in five years while collecting a $150K+ salary the entire time. No investors. No dilution. No exit pressure.

These aren't hypothetical. Deals like this close every week through SBA financing. The returns come from careful management, leverage, cash flow, and time.

1. Searching 12+ months without submitting an LOI. If you haven't written an LOI after a year, your criteria are too narrow or your risk tolerance needs recalibrating. LOIs are non-binding. Go deep and learn.

2. Budgeting only for the down payment. The equity injection is 40–50% of your total cash need. Legal fees, diligence costs, working capital cushion, and 3–6 months of personal living expenses during transition all add up. Plan for three phases of capital — not just the first wire.

3. Skipping the QoE because the books "look clean." The businesses that present the cleanest financials sometimes have the largest adjustments underneath. A $5–15K QoE report has saved buyers hundreds of thousands in re-traded prices. It's the highest-ROI expense in the process.

4. Not getting SBA pre-approval before sourcing. Talk to 2–3 SBA lenders before you look at a single deal. Know your borrowing capacity and have a pre-qualification letter ready. Good deals move fast — if you need three weeks to start lender conversations, you'll lose to the buyer who already has a commitment in hand.

5. Overpaying because you're tired of searching. Deal fatigue is real. After 15 months, a mediocre deal starts to look acceptable. This is when your screening framework matters most. Trust the criteria you set when you were thinking clearly — not the rationalization you're building when you're exhausted.

Self-funded search is not for everyone, and pretending otherwise doesn't help anyone.

It requires $75–250K in liquid capital you can afford to put at risk. It requires professional experience that genuinely translates to running a business — not just managing a P&L in a corporate context, but making decisions when there's no safety net and the payroll comes from your account. It requires a geographic preference. And it requires the patience to search for 6–18 months without a guaranteed outcome while your savings slowly drain.

If you don't have the capital today, the move isn't to force a deal with creative financing tricks. It's to spend the next 12–24 months building capital and industry knowledge, so when you start searching, you're operating from strength. The SBA program will still be here.

It's also not the right path if you need a salary during the search (consider a traditional search fund), want to acquire above $10M, or prefer passive investment over active management.

But for the buyers who fit — the corporate professionals with savings and transferable skills, the operators ready to own something, the people who'd rather build equity in their own business than someone else's — self-funded search is the most asymmetric path to wealth creation available to individual buyers. The SBA effectively lets you buy a cash-flowing asset with 10:1 leverage, operate it on your own terms, and compound the returns over whatever time horizon you choose.

The deals exist. The financing infrastructure works. The playbook is here.

The risk isn't the personal guarantee, the search timeline, or the competition. The risk is knowing all of this and never starting.

Disclaimer: This guide is for educational purposes only and does not constitute legal, financial, tax, or investment advice. Business acquisitions involve significant risks, and outcomes can vary widely based on individual circumstances. Always consult with qualified professionals including attorneys, CPAs, and financial advisors before making acquisition decisions. The EBIT Community does not guarantee the accuracy of information provided or the success of any acquisition strategy. Past performance and examples do not guarantee future results.