The First 3 Months of Building a Private Equity Fund
Hey there entrepreneurs,
Welcome to the Better Business Brief, where I share takeaways from:
- running a business I’m building to sell for millions
- my consulting with business owners building to sell for millions
- tips and tricks you can use to do the same
The last 3 months have been a wild ride. To catch you up, I formed a partnership with 3 other entrepreneurs in town with me and we’ve been working on building a private equity fund from scratch.
So today, in less than 5 minutes, I’ll give you:
🗺️ What the Plan is
😮💨 Some of the Challenges
💡 Lessons I’m Learning
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I have posted a breakdown of my day on social media every single day about building this for over 90 days now.
So what’s our plan? At the moment, it’s pretty simple:
- Raise $50 million from a combination of high net worth individuals and institutional investors
- Use that money to acquire companies as we go
- Grow those companies and combine them together however it makes sense as we go
- Sell the package of companies towards the end of 5 years
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In order to make sure that we do this efficiently and effectively, some of our rules are:
- Keep the previous owner on with some minority equity so they can help us steer the ship right
- Keep an element of seller financing in all deals so we don’t have to constrain cash as we buy
- Look for companies with obvious changes we can make that will drive growth fast
- Look for owners we like and would enjoy collaborating with
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Now the real stuff - this is hard sometimes. This is a VERY LONG game. Although we have a very exact plan of what the business is supposed to be over the next 5 or so years, it is often challenging to remove myself from the day to day of things and remind myself to take that 5-10 year long view.
Something I’m reminded of again and again is that it can be dangerous as an entrepreneur to take a technician point of view and get caught up in the day to day too much. Building this has challenged my tendency to want to do that more than other things I’ve done in the past, but that challenge is what growth is all about.
From both sides, this is all about building deep relationships on both sides - investors and company acquisitions. It takes a while to build the trust that unlocks making these big moves, so it takes a lot of consistency of making sure to keep in touch with people regularly, making sure to lead with providing value, and not letting the small roadblocks feel like big things.
Another challenge is that it is really difficult to do all parts of this well. That’s why having partners has been so key. There are parts of all of this that don’t come naturally to me, don’t fit my strong suit, or that I don’t have the experience or network for. But the power of a collective 4 experienced entrepreneurs coming together is another thing entirely. We complement each other’s strengths and round out a network and a set of experiences that is truly deadly as a combination.
Now, there have been some lessons from these challenges:
One huge lesson I’ve learned is that the shorter and to the point you can be with your pitch or with how you say what you do, the better. One of my partners comes from the world of wealth management for over 20 years, and the other day, he was going over our pitch deck with me. He had me cut it down by 35% because I was being too long-winded, wordy, and over complicated. The issue with doing something like that is that you often only get one first impression to pitch someone, and if you cannot capture their attention for that time, you will likely lose the opportunity to work with them.
Another thing I’ve noticed is that referrals and inbound leads are hands down better than any kind of cold approach if you can make them happen. At the moment, of my two strongest business acquisition prospects, one found me on TikTok and the other was referred to me by a local friend. There is an inherent higher level of trust in either one of these scenarios that helps you get past the initial jitters of meeting someone new that is considering doing serious business with you. My takeaway from this has been that building a serious personal brand both on social media and locally in your area are two of the absolute highest leverage things you can possibly do for your business.
To round out my thoughts so far, I am excited for the next few months and what they’ll bring. I expect big things, but I am going in with patience and poise knowing that we are playing a long game.
If you found this interesting, I recently put out a video of a full day in the life working on building this where we go very in depth on the plan and the team. Here it is if you want to check it out: https://youtu.be/gMWWcZeuTBg
Be great. Keeping growing and aspiring. And as always: I hope you got something from this.
If you did, share it with a friend who may too, as this is the best way for me to grow it and make this better.
They can even sign up here :)
Happy value-building to all of you!
See you next time for Better Business Brief,
-Brody
