On today’s show, we’re focusing on how a founding entrepreneur grew and sold his tutoring business to private equity. John Rood previously co-founded Next Step Test Preparation, which grew from a 2-person tutoring company to one of the largest MCAT test prep companies in the US. After building it up from scratch, he sold it to private equity in 2018. He runs us through why he chose private equity over other sales options (including an ESOP) and how that influences his buying patterns today.

 After selling, John started a search fund: an investment vehicle through which an entrepreneur raises funds from investors in order to acquire a company in which they wish to take an active, day-to-day leadership role. John isn’t shy about diving into how search funds operate, what makes an attractive acquisition target, how capital structures influence a purchase, and the incredible value of long-term planning if you want to achieve your goals and ultimate lifestyle.

In this episode, you’ll learn all about search funds: what they are, how they’re structured, and how they might be beneficial and a viable option if you’re partnered with the right person who is going to be the owner/operator. If you want to learn more about search funds, go check out the Intentional Growth course at Arkona.io.

What You Will Learn In Today's Podcast Interview

• How John turned his small tutoring business into a sellable business
• What a search fund is and how to make it work for you
• The big differences between private equity and a search funds
• Why you should put meaning and purpose behind your business
• How EOS© helped turned John’s business around
• John’s reasoning when selecting his exit, including what eliminated an ESOP for him
• The impact creating a board of advisors early on (before it was necessary)
• Why you should sit down and plan out what you want your life—all elements—to look like in 30 years
• What you should think about when choosing your staff to better address fit
• The value of building a moat around your clients and its impact on your valuation
• How John handled an out-of-the-blue offer
• Why it’s crucial to understand how valuations work if you want to have a successful sale
• What your network can tell you about market trends, especially in M&A
• The importance of connecting with your employees and equity partners to get the full picture of what they value in your business
• How to balance drawing a salary from your business versus taking distributions
• Why you should look at hiring like recruiting for a sports team—you’re constantly filling your bench
• What made John select an investment banker instead of a business broker
• How to shed societal values that don’t serve you, and the incredible benefit of therapy on figuring things out
• John’s key insights from selling his business that every business owner needs to hear

Are You Growing The Value of Your Business

Take The 2-Minute Assessment To Get Your Intentional Growth Score™ And 1-Page Vision Board.

• Are your company's current initiatives intentionally designed to increase the value of the business?
• Do you know what you want from your business long term and why?
• Do you know what your company is worth?
• Do you know the differences between Management, Family Transitions, PE Firms, ESOPs and Strategic Buyers?
• Does the business have a written strategic plan on how to achieve the desired normalized EBITDA and valuation?