A search fund is an investment vehicle used to raise capital to support specific operators in search of a business to acquire. Search fund accounting involves the financing, recordkeeping, and due diligence that goes along with this process. More importantly, post-acquisition, newly minted entrepreneurs often rely on seasoned accounting executives to guide them through their early stages of business ownership. With comprehensive fractional accounting services, you can get the help you need when you need it without paying for a full-time resource.
Ravix Group provides search fund accounting and post-acquisition accounting support for entrepreneurs who need to focus their energy on first locating the right company for their skill sets, and then on managing it well. Learn more about how search fund accounting works and how a fractional CFO with his team of startup accountants can assist entrepreneurs and investors during search and after.
What Is A Search Fund?
The search fund model grew from its roots at the Stanford Graduate School of Business. The model provides a road map to entrepreneurs who want to acquire an established company instead of starting one from scratch. In order to succeed, these entrepreneurs raise funds from seasoned investors and operators, who often help guide them through the search and acquisition process. The mentorship of a fractional CFO can provide key insights for entrepreneurs and the investment team.
Here’s an overview of how the process works:
- The entrepreneurs put together a team of investors willing to make an initial investment. This is the search fund, and it pays for the process of locating a viable business for the entrepreneur to take over. This process can take up to two years and requires the guidance of many resources, including experienced financial leaders willing and able to see the company through due diligence.
- Although the main purpose is to find a company for acquisition, the journey does not end there. At this stage, you may finally become a CEO. If there is more than one entrepreneur, they may assume other senior leadership roles. A fractional CFO can be an affordable way to fill in one of these key positions without giving up equity in your business. They can help guide you through board interactions, financial reporting, and establishing the KPIs and metrics needed for strong financial stewardship of your company.
- Typically, the final stage of a search fund investment results in an acquisition, merger, or other liquidity event. The best fractional CFO companies can handle financial diligence requests and valuation support that allow you to stay focused on running the business and maintain performance during the exit process.
How Can a Fractional CFO Help Investors?
A fractional CFO typically has multiple CFO roles on their resume and brings significant business management and financial expertise to your search fund endeavors. When you outsource the CFO function, you gain access to comprehensive financial capabilities under a single roof. However, you don’t have to pay full-time in-house staff or manage them.
Fractional CFOs can help you understand regulatory compliance and tax implications for decisions you make. They can also provide deep insights that can help you manage your risks at each stage of the acquisition.
Here are a few other advantages of hiring a fractional CFO to lead your search fund accounting team:
- Consistently applied valuation methodologies
- Maintenance of the fund’s books and records
- Proactive handling of all investor inquiries
- Providing outsourced accounting services to the acquired business
Fill a Leadership Void and Find Funding with a Fractional CFO
Fractional CFO companies can help you build processes and find resources familiar with mergers and acquisitions. Outsourcing the CFO role to an experienced leader can increase your credibility until you have the time and resources to hire a full time CFO. In short, outsourcing gives you the flexibility and agility needed to adapt to each stage of search and phases that come after.
The best fractional CFOs have a combination of business acumen and financial wizardry that allows them to both negotiate and plan your company’s finances.
Ravix Group offers fractional CFOs and other outsourced accounting in San Francisco. Let us help you build your investor team and successfully execute a search fund acquisition. Contact us online or call us at 408 216 0656 to discuss your search fund accounting needs today.
