2. Define & Test Your Thesis
The Stage in Brief
A thesis is the screen every deal must pass: which industries, which geographies, what size range. Good theses match your skills and story, favor fragmented industries with recurring demand and retiring owners, and stay inside what your capital structure can actually finance. The test most people skip is liquidity: a box that is defensible on paper and holds four businesses a year will outlast your runway before it produces a deal, so count what actually changes hands inside it before committing to it. Without a thesis, sourcing drowns you; with one, every hour of sourcing compounds.
Browse the Industry Guides
Deep dives on specific industries: market pricing, licensing issues, and the diligence lists that matter.
Where the Paths Diverge
- Traditional
- Investors shape the thesis with you and expect a defensible one before they release search capital.
- Self-Funded
- The thesis is bounded by what an SBA lender will finance, so financeability is a criterion and not an afterthought.
- Employed
- The firm's mandate sets the boundaries, and the work is finding the best target inside them rather than choosing them.
Questions to Answer Before Moving On
- Which industries does my background make me credible in, to sellers and to lenders?
- Is revenue recurring or re-occurring, and how fragmented is the market?
- What SDE or EBITDA range can my capital structure actually close?
- Is there an owner-demographics tailwind in this niche?
- How many businesses inside my box actually change hands in a year?
Mistakes That Cost Searchers Months
- “Anything profitable”: no filter means drowning in noise
- A thesis so narrow that only ten matching businesses exist
- Chasing hyped sectors where asking multiples outrun financeability
- Writing the thesis and never checking whether deals inside it come up for sale
What the Data Says
How often an industry changes hands varies more than tenfold: coin-operated laundries turn over about 14 times per thousand buyable businesses a year, dental practices under one. A thesis that ignores turnover can pick a market that never comes to market.
Most of an industry cannot be bought: only about a quarter of laundromats and a third of landscaping companies have five or more employees, the floor below which a business is a job rather than an asset. Size the real market before committing a year to it.
Source: Market Depth (buyable-band note)
The owner-demographics tailwind a thesis leans on is measurable: 52.3% of U.S. employer-business owners are 55 or older, and 74% of them say they intend to sell or transfer the business rather than close it. That is the supply your box is competing for.
The trade in your box sets the price of a dollar of earnings: across the 78 industries the site tracks with a published SDE range, bands run from about 0.9x at the bottom of the delivery-route quartiles to 6.7x at the top of the car wash ones, where the land usually sells too. Same earnings, several times the price, decided at this stage.
Source: Deal Comps by Industry
The Playbook
Start from your unfair advantages
The strongest theses begin with the industries where your résumé buys credibility, with sellers deciding who deserves their company, lenders underwriting your management risk, and employees deciding whether to stay. List the sectors where your story writes itself, then expand cautiously to adjacent ones where the skills translate.
Screen industries like an underwriter
For each candidate industry ask what a lender will ask: is demand recurring or cyclical, are customers concentrated by nature, does revenue require licenses you lack, and do businesses this size sell at multiples your structure can finance? An industry can be attractive and unfinanceable at once; that combination is a hobby, not a thesis.
Bound the box in numbers
A working thesis fits in two sentences with numbers in it: industries, geography, an earnings range your capital actually closes, and one or two dealbreakers. Vague theses produce vague funnels; a specific box tells aggregating tools what to alert you on, brokers what to send, and you what to ignore without guilt.
Test liquidity before committing
Before marrying the thesis, verify deals exist inside it: search the marketplaces for the last months of listings in your box and count. A thesis that surfaces a deal a quarter will outlast your runway. Widen geography or size before widening industry; focus survives dilution better along some axes than others.
Write it down and let it filter
Publish the thesis to yourself, a paragraph pinned above your pipeline, and let it make the daily rejections so willpower doesn't have to. Revise it deliberately on schedule, not reactively per shiny listing; a thesis edited weekly is a mood, and moods don't compound broker relationships.
Tools for This Stage
Thesis Tools
The ones you answer about a trade.
Buyer Profile Builder
The broker one-pager, criteria included.
Buy Box Builder
One paragraph an alert can read.
Search Thesis Builder
Score the industry, then argue for it.
Compare Industries
Which trade to hunt, on the numbers.
Deal Box Depth
Does your box have anything trading in it.
Brokers
Which brokers work where you are buying.
Thesis Outreach Templates
What to ask before you commit to an industry.
Resources for This Stage
Podcasts & YouTube
Communities & Networks
Education & Programs
Franchise Brokers & Research
Off-Market Data & Outreach
The Words This Stage Uses
Absentee owner
An owner whose business runs without them in it day to day.
Bolt-on acquisition
A smaller company bought to fold into a platform business already operating.
Buy box
The written criteria a buyer screens deals against: size, trade, geography.
Fragmented industry
A trade where no operator holds much share, so most firms are small.
Lower middle market
The tier above main street, professionally run and priced on EBITDA.
Main street (business)
The smallest tier of sellable businesses, priced on a multiple of SDE.
Multiple arbitrage
Buying small at a low multiple and selling the whole at a higher one.
Owner-operator
An owner who does the work of the business as well as owning it.
Platform company
The first business a consolidator buys, the base its add-ons join.
Switching costs
What a customer has to spend or risk in order to move to a rival.