Robert Graham, Jordan Carter·January 10, 2023

The Self Funded Search Model | Robert Graham & Jordan carter

This episode features Robert Graham and Jordan Carter, co-founders of Search Investment Group (SIG), presenting the inaugural SIG Self-Funded Search Study — a 70-page report based on over 270 survey responses from self-funded searchers, the first comprehensive data set of its kind for the self-funded ETA space. Robert Graham is a Harvard MBA and former PE professional who acquired six home care and hospice companies using the self-funded model (current portfolio EBITDA just over $8M). Jordan Carter is a Wharton MBA and former investment banker/PE associate who bought a professional services and software company serving municipalities in July 2020. The episode is primarily a walk-through of the study's key findings rather than a single acquisition story: self-funded search produces strong wealth outcomes (53% of closers had $1M+ net equity proceeds within three years; 10% had $10M+), searchers retain majority equity control (86% keep over 60% common equity), and the optimal sweet spot is targeting $1M-$2.5M EBITDA businesses at 3-4x multiples with 80-90% debt. The guests argue that due diligence costs are far lower than many believe (85% spent under $30k on QoE; 68% under $50k on legal), seller notes are not always necessary, and PE backgrounds can actually hinder searchers by instilling inappropriate selectivity. The episode functions as a data-driven advocacy piece for the self-funded model and a practical resource for anyone considering or actively conducting a self-funded search.

Deal facts

multiple: 3x-4x EBITDA (typical range discussed for self-funded deals)
sde ebitda: Robert Graham's portfolio: ~$8M EBITDA total across 6 acquisitions; Jordan Carter's company: not specified
financing structure: SBA debt (80-90% LTV typical); outside equity raised by 62% of study respondents; seller notes used by ~45% of searchers
notes: Robert Graham: 6 total acquisitions in home care/hospice, started 2019, first 3 companies ~$1M EBITDA, current group just over $8M EBITDA. Jordan Carter: bought a professional services and software company serving cities in July 2020. This episode is primarily about the SIG Self-Funded Search Study (270+ respondents), not a single deal story.

Why this business

Robert Graham pursued home care and hospice after an engineering career, MBA at Harvard Business School, and private equity work on roll-ups. Jordan Carter chose self-funded search over traditional search funds because he wanted autonomy, longevity, majority equity control, and the flexibility to potentially hold the business for life or pass it to his children. Jordan's specific business — professional services and software for cities — was not an industry he had targeted; he remained open to generalist opportunities and found it through his search.

What's working

Self-funded search generates substantial wealth: 53% of searchers who closed deals had net equity proceeds over $1M within 3 years or less; 10% had proceeds of $10M or more
Majority equity retention: 86% of searchers using preferred equity structures kept over 60% common equity ownership
Control: north of 80% of self-funded searchers who closed deals effectively maintained control of the acquired company
Low leverage + low multiple = strong returns even without EBITDA growth: maintaining EBITDA at 80-90% LTV and 3-4x purchase multiple produces excellent equity creation
Targeting $1M-$2.5M EBITDA businesses bought at 3-4x with 80%+ debt creates the most attractive self-funded search outcomes
Post-close seller relationships are positive: approximately 78-80% of searchers reported a positive relationship with the seller post-close
SIG's full-time support program: most searchers in the program closed within 12 months
53% of searchers who acquired businesses did so within 12 months; 83% within 24 months

What's hard

Only 39% of survey respondents had successfully acquired a business — the search is highly competitive and most who start do not close
Average searcher submitted 6.9 LOIs with only 2.4 executed before closing; median time from target discovery to close was 4-6 months
PE background can be a hindrance: private equity training instills excessive selectivity ill-suited to the lower middle market; at PE firms an executed LOI had a >75% close rate, whereas in self-funded search it is far lower
Robert's first deal resulted in a several-hundred-thousand-dollar IRS fine proposed post-close and a lawsuit with the seller — a cautionary tale despite the overall positive seller relationship data
Self-funded searchers often underestimate deal size they can target, defaulting to smaller $200k-$400k SDE businesses due to intimidation, when larger $1M+ EBITDA businesses generate far better risk-adjusted returns
Post-close operational expenses (controller, director of operations, bookkeeper, salary) can compress EBITDA in the near term even when the business is performing well
Self-funded search is a 'black box' with no historical data equivalent to the Stanford traditional search fund study — the SIG report is the first comprehensive attempt to fill this gap

Notable quotes

self-funded surge is a reliable path to making several million dollars and creating true intergenerational wealth it's probably not a reliable path to earning several hundred millions of dollars but it's definitely one where you can create intergeneral relational wealth with relatively high probability compared to other forms of Entrepreneurship

you don't have to knock it out of the park to make great returns that's the truth of the matter these businesses generate good cash flow they pay down debt they pay good distributions because people are buying them at three to four times ebitda and putting on 80 LTV the returns are just through the roof because of the nature of how these businesses are being Acquired

there are Searchers out there that are paying two hundred thousand dollars in legal fees who don't need to be doing that there's also Searchers out there taking horrendous terms from investors and they don't need to be doing that and that's our philosophy at Sig helping the Searcher

none of these companies that we look at and that we support in partnership with our full-time support Searchers none of them would pass the criteria to be able to acquire as a private Equity associate you would be embarrassed to send that on to your partner and yet these are fantastic opportunities