How Many Companies Do You Have to Contact to Buy One?

Ask ten people who have bought a lower-middle-market business how many owners they spoke to first, and you will get ten different answers, all of them vague. The honest ones say "a lot." The number matters, though, because it is the difference between a search you can staff and a search that quietly consumes two years of your life.

Stanford Graduate School of Business publishes the closest thing the field has to a real answer. Its A Primer on Search Funds, 2026 edition, describes the acquisition funnel plainly: a searcher "may contact thousands of companies, visit 50, submit a Letter of Intent to 10, and undertake due diligence on perhaps one to three before an acquisition is consummated" (p. 7). The same page puts the average search at 20 months, and notes it runs to three years or more in some cases.

Those are planning numbers, and almost nobody plans against them.

The shape of the funnel

Read the Primer's funnel from the bottom up and it changes character. One acquisition rests on one to three diligence processes. Those rest on ten letters of intent. Those rest on fifty company visits. Those rest on outreach measured in thousands.

Each step down is roughly an order of magnitude, and each step costs more than the one above it. A contact costs minutes. A visit costs a day and a flight. An LOI costs legal review, a conversation with a capital partner, and a real commitment of attention. Comprehensive due diligence, per the Primer, typically runs 30 to 120 days (p. 43), and the whole process from first introduction to closing is "not uncommon" to take four to 12 months (p. 39).

So the funnel is a budget. The top of it is cheap and enormous; the bottom is expensive and singular. Most searches fail not because the top was too narrow but because unqualified companies were allowed too far down, where they cost real money.

Twenty months is an average, not a plan

The 20-month average sits inside a hard constraint. Search capital is generally raised to cover approximately two years of salary, benefits, administration, and deal expenses (Primer, p. 10). Investors, the Primer notes, "are generally reluctant to extend existing funds" (p. 37).

That produces the single most quoted line in the document, and the one worth pinning above a desk:

Time and money are the two most valuable—and scarce—resources that a searcher has. Many searchers report that the clock starts ticking loudly the day the fund is closed. With approximately two years of funding available, each month that passes increases the searcher's anxiety level and willingness to "settle" by acquiring a company with a less-than-ideal set of internal and industry attributes.

— Stanford GSB, A Primer on Search Funds, 2026 ed., p. 37

The funnel math and the clock interact badly. If it takes four to 12 months to move one company from introduction to close, and the average total search is 20 months, then the sourcing window — the part where you are still generating new options — is meaningfully shorter than the search itself. Every month you spend building a target list is a month subtracted from the only phase that produces optionality.

Where the funnel leaks

There are two candidate explanations for why the top of the funnel has to be so wide. Only one of them is true.

The list is not the constraint

The first explanation is that qualified companies are scarce. They are not. Fragmented lower-middle-market sectors contain thousands of firms in the Primer's own target range — $10 million to $30 million in revenue with more than $1.5 million in EBITDA (p. 24). Databases exist; the Primer names Grata and LinkedIn Sales Navigator among the tools searchers use to assemble industry lists (pp. 31, 34).

It also warns about them: "Use caution when collecting this information; many databases rely upon self-reported numbers, which small private companies are often reluctant to provide or may embellish" (p. 34). A list is a starting point that is frequently wrong about the two numbers you screened on.

Qualification is the constraint

The second explanation is the real one. The funnel is wide because most of what enters it is untested. You do not know whether the revenue figure is accurate, whether the owner has any intention of selling, whether there is a succession plan, or whether you are about to become someone's free valuation service. The Primer is blunt about that last risk:

A critical step in the deal sourcing process is qualifying sellers; that is, to determine if the company is truly an attractive target and if the owner is willing to sell in the near term. With limited resources, a search fund cannot afford to spend time, money, and energy getting to know a company, only to find out the owner is not truly committed to a sale but is instead looking for a free valuation service from a smart MBA investor.

— Primer, p. 33

Read that alongside the funnel and the leak becomes obvious. Thousands of contacts collapse to fifty visits because the contact step establishes almost nothing. The work that separates the two — verifying the business, reading the ownership situation, confirming there is a genuine transition on the horizon — is the expensive part, and it is the part most searches do last instead of first.

What the intermediated channel does to the same math

The alternative to sourcing directly is waiting for companies that arrive already marketed. That channel has its own arithmetic, and it is not favorable to a buyer.

Axial's 2026 M&A Fee Guide, which surveyed 331 North American M&A advisors in the second quarter of 2026, reports that the average effective success fee on a $5 million transaction is 5.7% of total enterprise value, falling to 4.1% at $20 million and 3.2% at $50 million. These are sell-side fees paid by the business owner to their own advisor, not costs a buyer pays, and they are averages across respondents — the report publishes no medians.

They still describe the buyer's world, because a fee of that size buys a process. The seller's advisor is paid to run one, and Axial asserts in its foreword that top advisors "can drive a 10 - 40% higher valuation" — a claim the guide states without a supporting figure anywhere in its 18 pages, so treat it as Axial's estimate rather than a survey result. The direction, at least, is not in dispute. The Primer's own view is that in a competitive auction, private equity firms and strategic acquirers "generally have an advantage over search funds" because of committed capital, proven execution, and incumbent capital relationships (p. 26).

There is a second, quieter cost. One investor told the Primer's authors that brokers brought deals to search funds "only after credible private equity investors with committed capital had already passed on them, meaning searchers were likely not seeing the most attractive deals" (p. 36).

So the intermediated funnel is narrower at the top and worse at the bottom: fewer companies, more bidders per company, and adverse selection in what reaches you.

The number worth tracking

The Primer does not prescribe a weekly contact quota, and neither will this article, because any specific number would be invented. What it prescribes is that you have one:

Committing to a level of measurable activity (number of calls, meetings, company visits, etc.) and reporting on the actual results ensures accountability; it can also help create a sense of accomplishment in what can be a grueling and otherwise binary process.

— Primer, p. 37

Work backward from the funnel instead. If one acquisition requires roughly ten LOIs, and you have somewhere between 12 and 18 usable sourcing months before the closing process eats the rest, you need to be generating LOI-grade opportunities at a rate of close to one a month, sustained, for more than a year. Everything above that in the funnel is whatever volume that rate demands.

That reframing matters because it makes volume a derived quantity rather than a goal. Contacting more companies is only useful if the additional contacts convert at the same rate. Most volume increases do the opposite.

Building a funnel that survives a dead deal

Deals die. The Primer's advice on this is specific and widely ignored:

It is not uncommon for a time-consuming deal to fall apart after weeks or months of effort. Experienced search fund principals and investors advise searchers to continue actively sourcing new deal opportunities until the day the paperwork to acquire a company is signed. This scenario is especially true for solo searchers who may be drawn into detailed due diligence at the expense of mining new opportunities.

— Primer, p. 38

This is the hardest instruction in the document to follow, because diligence is absorbing and sourcing is not. A single searcher in month 14, deep in a quality-of-earnings review, has every incentive to stop calling. If that deal dies in month 16, the funnel behind it is empty and the clock has four months left.

The structural answer is to make sourcing something other than a task competing for the searcher's attention. Historically that meant delegation to people: the Primer records that searchers use interns for list-building and contact research (p. 38) and "outsourced services, such as hiring overseas help using UpWork or similar platforms, to generate lists of companies and contact information" (p. 34). It notes that the quality of that work "depends on their skill and sophistication, as well as on the search fund's willingness to invest time in training them."

The substance of the instruction is durable regardless of who or what does the work: the top of the funnel cannot depend on the availability of the person running the bottom of it.

What "qualified" has to mean before it counts

Given the cost curve, the useful discipline is to push verification as far up the funnel as it will go. A company should not consume a visit until you know more than its name and an estimated revenue band.

The Primer lists what genuine seller intent looks like — willingness to share sensitive business information, allowing a meeting with other employees, announcing the process internally, stating a price, signing an exclusive LOI, and spending their own money on lawyers in anticipation of a sale (p. 33). Those signals arrive late. What arrives early, and is checkable without the owner's cooperation, is the rest of it: whether the business is really in your size range, whether ownership has been in place long enough to be thinking about succession, whether the industry has the characteristics you screened for.

Every company you rule out on that evidence is a company that never costs you a flight. That is not a consolation prize. In a funnel where the bottom step costs a hundred times the top step, a fast, well-evidenced "no" is the most valuable output the process produces.

The honest summary

Treat the Primer's funnel — thousands, then fifty, then ten, then one to three, then one — as a specification. It tells you the top of your funnel has to be enormous and cheap, the middle ruthlessly qualified, and the bottom protected from anything that has not earned its way down.

Most searches invert this. They spend expensive attention at the top, building and rebuilding lists by hand, and then arrive at month 16 with a thin pipeline and a loud clock. The Primer's own account of what happens next is the one sentence in the document worth taking personally: each month that passes increases the willingness to settle.

The funnel is fixed. What you can change is what it costs you to fill it.

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