# Define & Test Your Thesis

Stage 2 of 7 in buying a business.

Industry, geography, and size: the filter that turns a high volume of listings into a funnel you can work, and the first thing a broker asks you.

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](https://searchspheresource.com/glossary/fragmented-industry) 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.

Source: https://searchspheresource.com/roadmap/define-your-thesis
Not dated: The stages are editorial: what to decide, what it costs to get wrong, how the paths diverge. Nothing here reads a source that can age.

## What to Answer at This Stage

- 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?

## Common Mistakes Here

- “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

## How This Stage Differs by Path

- **Self-Funded**: The thesis is bounded by what an SBA lender will finance, so financeability is a criterion and not an afterthought.
- **Traditional**: Investors shape the thesis with you and expect a defensible one before they release [search capital](https://searchspheresource.com/glossary/search-capital).
- **Employed**: The firm's mandate sets the boundaries, and the work is finding the best target inside them rather than choosing them.

## Start from your unfair advantages

Strong 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. A buy-and-build thesis asks one more question, because its engine is [multiple arbitrage](https://searchspheresource.com/glossary/multiple-arbitrage): several small companies bought at small-company multiples and sold as one at a larger one. That pays off on size alone, and it needs capital and an integration plan a single-purchase thesis never has to find.

## 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. It also has to say whether you intend to be in the business. An owner-operated company and one bought to run as an [absentee owner](https://searchspheresource.com/glossary/absentee-owner) behind a hired manager are different boxes, because the second has to carry a manager's wage before it carries you.

## 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.

## 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. (Market Depth (Census CBP + SBA FOIA): /data/market-depth)
- Most of an industry cannot be bought: only about a quarter of laundromats and under three in ten 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. (Market Depth (buyable-band note): /data/market-depth)
- The owner-demographics tailwind a thesis leans on is measurable: 52.3% of U.S. employer businesses are owned by people 55 or older, and 74% of employer-business owners say they intend to sell or transfer the business rather than close it. That is the supply your box is competing for. (Market Depth (Census ABS, Gallup): /data/market-depth)
- The trade in your box sets the price of a dollar of earnings. Across the 91 industries the site tracks with a published [SDE](https://searchspheresource.com/glossary/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. In the car wash trade the land often sells too. Same earnings, several times the price, decided at this stage. (Deal Comps by Industry: /data/deal-comps)

## Tools for This Stage

- Thesis Tools: The ones you answer about a trade. (https://searchspheresource.com/tools/thesis-tools)
- Buyer Profile Builder: The broker one-pager, criteria included. (https://searchspheresource.com/tools/buyer-profile)
- Buy Box Builder: One paragraph an alert can read. (https://searchspheresource.com/tools/buy-box)
- Search Thesis Builder: Score the industry, then argue for it. (https://searchspheresource.com/tools/search-thesis)
- Compare Industries: Which trade to hunt, on the numbers. (https://searchspheresource.com/tools/compare-industries)
- Deal Box Depth: Does your box have anything trading in it. (https://searchspheresource.com/tools/deal-box)
- Brokers: Which brokers work where you are buying. (https://searchspheresource.com/tools/broker-match)
- Thesis Outreach Templates: What to ask before you commit to an industry. (https://searchspheresource.com/templates/define-your-thesis)

## Resources for This Stage

### Books

- Buy Then Build (Walker Deibel): The case for buying instead of starting. (https://searchspheresource.com/resources/buy-then-build)
- The Outsiders (Will Thorndike): Eight CEOs judged on where the cash went. (https://searchspheresource.com/resources/the-outsiders)

### Podcasts & YouTube

- Owned and Operated: Running and growing home-service companies. (https://searchspheresource.com/resources/owned-and-operated)
- UpFlip: Interviews with owners on how the business works. (https://searchspheresource.com/resources/upflip)

### Communities & Networks

- SCORE: Free one-on-one mentoring from volunteers. (https://searchspheresource.com/resources/score-mentoring)

### Education & Programs

- Acquisition Lab: A paid program for self-funded buyers. (https://searchspheresource.com/resources/acquisition-lab)

### Franchise Brokers & Research

- Franchise Business Review: Franchisee satisfaction surveys and rankings. (https://searchspheresource.com/resources/franchise-business-review)
- FranNet: Local consultants who match you to a franchise. (https://searchspheresource.com/resources/frannet)

### Off-Market Data & Outreach

- Apollo.io: Company search and outreach with a free tier. (https://searchspheresource.com/resources/apollo-io)
- Grata: Search 20M private companies for off-market targets. (https://searchspheresource.com/resources/grata)
- Hunter: Turn a target list into owner email addresses. (https://searchspheresource.com/resources/hunter-io)

## The Words This Stage Uses

- Absentee owner: An owner whose business runs without them in it day to day. (https://searchspheresource.com/glossary/absentee-owner)
- Bolt-on acquisition: A smaller company bought to fold into a platform business already operating. (https://searchspheresource.com/glossary/bolt-on-acquisition)
- Buy box: The written criteria a buyer screens deals against: size, trade, geography. (https://searchspheresource.com/glossary/buy-box)
- Fragmented industry: A trade where no operator holds much share, so most firms are small. (https://searchspheresource.com/glossary/fragmented-industry)
- High-propensity business application: A new business application the Census expects to become an employer. (https://searchspheresource.com/glossary/high-propensity-business-application)
- Lower middle market: The tier above main street, professionally run and priced on EBITDA. (https://searchspheresource.com/glossary/lower-middle-market)
- Main street (business): The smallest tier of sellable businesses, priced on a multiple of SDE. (https://searchspheresource.com/glossary/main-street)
- Multiple arbitrage: Buying small at a low multiple and selling the whole at a higher one. (https://searchspheresource.com/glossary/multiple-arbitrage)
- Owner-operator: An owner who does the work of the business as well as owning it. (https://searchspheresource.com/glossary/owner-operator)
- Platform company: The first business a consolidator buys, the base its add-ons join. (https://searchspheresource.com/glossary/platform-company)
- Switching costs: What a customer has to spend or risk in order to move to a rival. (https://searchspheresource.com/glossary/switching-costs)

Site index for machines: https://searchspheresource.com/llms.txt