Month 20 Is Where Buyers Make Their Most Expensive Mistake

For most of the last 20 years, roughly 7 out of 10 search funds ended up buying a business. That number is falling fast.

Stanford's 2026 search fund study puts the overall acquisition rate at 58%. For searchers who launched between 2021 and 2024, it's 48%. A Yale School of Management case published in July goes further. Its authors estimate the recent rate at around 41%, and their model puts the 2024 class near 29% once every search is finished.

These are MBA-trained buyers with investors behind them, full-time search budgets, and analysts helping them screen. And fewer than half of the recent ones are closing a deal.

If you're a corporate professional planning to buy one business with an SBA loan, you might read that and think the game is rigged. It isn't. But the market is telling you something about how to play it.

What's Really Happening Out There

Read between the lines and you see the real story. It's not that searchers got worse. It's that there are more buyers chasing a fixed pool of businesses worth owning.

The Yale authors make the point directly: the binding constraint is the flow of closeable deals, not the number of buyers. The U.S. has about a million employer firms with 10 to 99 employees. Only a small share are for sale in any given year, and fewer still are in industries a lender will finance at a price that works.

The broker data lines up. In BizBuySell's Q2 2026 Insight Report, 48% of brokers said they're seeing more interest from entrepreneurship-through-acquisition buyers and search funds, along with MBA grads looking to buy and run a company. At the same time, closed deals fell 10% from a year earlier to 2,117 for the quarter. More buyers. Fewer closings.

Then look at who's winning the expensive deals. According to the Yale case, searchers tend to be price-disciplined and walk away from the richest asks. Those deals go to buyers with cheaper capital or lower return hurdles, like private equity firms and strategic acquirers. Searchers don't lose because they can't find businesses. They lose because they won't pay a price the numbers can't support.

Good. That discipline is the right instinct. The question is what happens to it after two years of hearing no.

Watch What Happens at Month 20

The same Yale case notes that searchers tend to quit somewhere between 18 and 24 months, and the odds of buying drop steeply after month 24. That window is where I see buyers get hurt. Not by losing a deal, but by winning the wrong one.

I've seen this play out on a dozen deals in the last six months. A buyer starts with a tight buy box and a hard rule on price. Fourteen months in, they've lost three LOIs to higher bidders. By month 20, the rules start bending. The multiple creeps up. The coverage gets explained away. The deal gets done because the search is exhausting, not because the business is good.

Let me put numbers on it. Take a business earning $300,000 in SDE.

At a disciplined 2.75x, you pay $825,000. With a clean 80/10/10 at 10.5%, your SBA payment is $8,906 a month and your total debt service is $110,994 a year. Your stressed coverage is 2.16x. After paying a $75,000 general manager, your owner cash flow is $114,006 a year.

Now the month-20 version of the same deal at 3.5x. You pay $1,050,000. Your SBA payment is $11,335 a month. Your stressed coverage drops to 1.70x, and your owner cash flow falls to $83,736, under the $100,000 floor I want on any deal.

That's $225,000 more for the same business. Same customers, same employees, same seller. The only thing that changed was how tired the buyer was.

The most expensive thing in a business search isn't the deal you lose. It's the one you buy because you're tired of losing.

How to Run a Search That Doesn't Break You

After 35 years in private equity, I can tell you the buyers who close good deals aren't the ones with the best luck. They're the ones who set up their search so fatigue never gets a vote.

Plan for 24 months from day one. If you start expecting to close in six months, every lost deal feels like failure. If you plan for two years, losing three LOIs in the first year is just the process working. Budget your time and your patience for the realistic timeline, not the hopeful one.

Write your buy box down and date it. Industry, size, geography, maximum multiple, minimum stressed coverage. When you're tempted to change it, look at the date. If you're loosening your rules in month 20 that you set in month 1, ask yourself whether the market changed or you did.

Fish where the big money doesn't. Funded searchers and private equity firms generally hunt larger companies than most first-time SBA buyers need. A business with $250,000 to $600,000 in SDE often sits below their radar and above the tire-kickers. That's where an individual buyer with a clean 80/10/10 can compete on speed and certainty instead of price.

Score every deal the same way, every time. Run each one through the same five criteria so a tired Tuesday doesn't get a different answer than a fresh Monday. That's why I built DealScore Pro. The math doesn't get tired.

Keep volume high. The search success data says deals are scarce, so the answer is more looks, not looser standards. Review more listings, call more brokers, send more letters. The buyer reviewing 200 businesses doesn't need to compromise on any one of them.

Nobody tells you this part. Brokers know which buyers have been searching a long time. They can hear it in your voice.

A falling acquisition rate isn't a reason to quit. It's a reason to search the right way. You can do this. You just have to stay disciplined longer than most people are willing to.

What This Means For You

If you're planning to acquire in the next twelve to 24 months, write your buy box and your walk-away numbers down this week and date the page. Every time you feel like loosening a rule, run the deal through the same scorecard first and let the numbers decide.

Want to see how I stress-test every deal against cost shocks, revenue dips, and hidden liabilities before I'd put a dollar at risk? I walk through the entire Bulletproof method in a free 28-minute masterclass.

Forward this email. Tell them to grab Mike's free book - Real Estate Is for Suckers: Buy a Business Instead. Same framework Mike uses to stress-test every deal.