Buying a small business can feel a lot like dating. Without knowing what you’re looking for, you might waste months on bad matches, ignore red flags, or worse—end up with something that looks great on paper but is completely wrong for you in real life.
That’s where an investment thesis comes in. Think of it as your “business dating profile.” It spells out exactly what kind of company you want to acquire and why. Done right, it saves you time, heartbreak, and potentially a lot of money.
Picture walking onto a used car lot and saying, “I’ll buy anything that runs.” That’s essentially what business buyers do when they start shopping without a thesis. You’ll end up wasting time looking at businesses that don’t fit your goals—or worse, making an offer on something that does not suit your skills, lifestyle, or financing capacity.
Choosing an industry is like picking a neighborhood—you’ll be living there for a while. Your background and interests matter, but so do the fundamentals: Is the industry growing? Is it stable? If it’s so trendy that your friends are all talking about it at brunch, chances are the prices are inflated.
You wouldn’t buy a house without knowing your budget. Same goes for a business.
Define:
If you’re going to be hands-on, don’t buy a business three states away unless you also enjoy frequent flyer status. Local economies and demographics matter, but so does your daily commute.
Know how you want to pay for it before you shop. Will you use an SBA loan, seller financing, investor capital, or your own cash? Your lender will want clear answers, not wishful thinking. (Hint: “I’ll figure it out later” is not a financing strategy.)
This is the “why.” Why this type of business? Maybe it has recurring revenue, maybe it’s in a fragmented industry that’s ripe for consolidation, or maybe you see opportunities to add value with your skillset. Also, look at the bigger picture. What is your desired endgame? How does this fit into your overall life plan? If your answer is just “because it makes money,” go back to step one.
Being too broad: “I’ll buy any business that makes money” is like saying “I’ll date anyone with a pulse.” Not a great filter.
Ignoring lifestyle fit: Don’t buy a bar if you want to be in bed by 9 PM.
Overestimating yourself: Just because you watched Shark Tank doesn’t mean you’re ready to run a biotech lab.
Forgetting financing realities: Champagne taste with a beer budget doesn’t work in acquisitions.
Once you’ve nailed the basics, write it out. Keep it short and clear, like an elevator pitch:
“I’m seeking to acquire a service-based business in the Southeast with $500K–$1.5M in SDE, recurring revenue, and a strong management team in place. My background in logistics positions me to grow through operational efficiency.”
Boom. Simple, focused, and far better than “I’ll know it when I see it.”
This thesis becomes your filter. It helps you (and your advisors) quickly say “yes” or “no” to opportunities without second-guessing. When you share it with brokers, lenders, or investors, you’ll stand out as a serious buyer who knows exactly what they’re looking for.
Your thesis is not static. As you review more deals and gain experience, refine it. Maybe you realize you’re comfortable with a slightly larger size, or you discover an adjacent industry that fits your skill set. The thesis should evolve with your learning while still keeping you disciplined and focused.
An investment thesis won’t guarantee you the perfect business, but it will keep you from wasting time on bad fits and dead ends. It’s your compass, your North Star, and your reality check all in one.