What a Two-Year Search Costs, in Time and in Capital

Buyers budget carefully for the acquisition and almost never budget for the search. The purchase price gets a model, a capital structure, and three scenarios. The eighteen months before it gets a shrug and an assumption that it will work out.

The search fund world is the one corner of the market where that cost is written down, because someone else pays it and therefore insists on knowing the number. Stanford Graduate School of Business, in the 2026 edition of A Primer on Search Funds, reports that search capital is generally raised in the range of $400,000 to $500,000 per search entrepreneur (p. 17), covering approximately two years of salary, benefits, administrative costs, and deal expenses (p. 10).

That figure is useful to anyone buying a company, funded or self-funded, because it is the market's estimate of what it costs to find one — and because of what it is mostly made of.

The number is mostly one person's time

The Primer's own list of what that money covers is short: salary, basic benefits, and administrative and deal expenses, over a two-year period (p. 10). Set aside the administrative overhead and the deal expenses for transactions that do not close, and what remains is compensation for one or two people to do nothing but search.

That has an immediate implication for a self-funded buyer who reads the number and concludes it does not apply to them. It does. If you are searching part-time while employed, you have not avoided the cost; you have paid it in a currency that does not show up anywhere — a longer search, thinner coverage, and slower responses to the owners who do reply. If you are searching full-time on savings, you are funding the same line item from a different account.

The Primer treats the searcher's time as the scarce input throughout, and is explicit about the opportunity cost: "Be smart and efficient with resources, bearing in mind that a searcher has limited time and money and therefore faces a real opportunity cost in pursuing any given transaction" (p. 39).

Two years buys about 20 months of searching

The budget covers two years. The Primer puts the average search at 20 months, with some running three years or more (p. 7).

Those two numbers are close enough to be uncomfortable, and the gap gets smaller once you account for what happens at the end. The Primer notes that the entire deal process, from first introduction to closing, is "not uncommon" to take four to 12 months (p. 39), with comprehensive due diligence alone running 30 to 120 days (p. 43).

So a two-year budget contains something like twelve to eighteen months of genuine sourcing, followed by a closing process that consumes the remainder. Every month spent at the start on setup is subtracted from the sourcing window, not from the end. The Primer flags exactly this: "Opening an office, developing marketing materials, contacting brokers, and doing industry research can quickly eat into a search fund's limited time" (p. 37).

Industry research is the largest of those, and the easiest to underestimate. The Primer's own time-management warning is arithmetic: "Spending three days each on 10 industries can easily result in a month of effort" (p. 32).

What the capital is really buying

The Primer's description of the search phase makes the product of that spending clear. A searcher may contact thousands of companies, visit 50, submit letters of intent to 10, and conduct due diligence on one to three before acquiring one (p. 7).

Read as a unit-economics problem, that is roughly half a million dollars to produce one acquisition and a large quantity of resolved questions about companies that were not it. The resolved questions are not waste — they are what made the acquisition findable — but almost no buyer accounts for them as output, which is why almost no buyer tries to make them cheaper.

Why lean budgets are a valuation decision

There is a second-order reason search budgets stay lean, and it is not thrift. In the standard structure, search capital converts into equity at the acquisition at a step-up — typically 150%, per the Primer (p. 17). The more search capital consumed, the more of the acquired company's equity is owed to it.

The Primer draws the consequence out:

Many searchers keep their salaries low and budgets lean, recognizing that the more investor money they use during the search, the larger the investors' ownership stake will be later. In addition, the bigger the search budget—particularly once the step-up at acquisition is applied—the harder it is to target smaller companies. And many smaller deals can be attractive.

— Primer, p. 21

That last sentence is the one worth sitting with. A large search budget does not just cost equity; it removes deals from the board. A search that costs more has to buy a bigger company to justify itself, which narrows the universe precisely when a wider one would help.

The generalization for a self-funded buyer is the same in different units. The longer and more expensive your search, the higher the return the eventual acquisition has to clear to have been worth it — and the more pressure that puts on you to stretch on price or size.

The clock is the real expense

The financial cost of a search is bounded. The behavioral cost is not, and the Primer is unusually direct about it:

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.

— Primer, p. 37

It adds that investors "are generally reluctant to extend existing funds" (p. 37), which removes the obvious escape valve.

This is the mechanism by which a search budget becomes a valuation risk. A buyer in month 18 with a thin pipeline is a buyer with weak alternatives, and weak alternatives show up in price, in terms, and in which warning signs get talked past.

The distribution of outcomes

The Primer reports two figures on searches that do not end in an acquisition, and they do not perfectly agree. Page 4 says roughly one in three search funds failed to acquire a company despite full-time search efforts stretching two years or longer. Page 11 says approximately two in five end the search without acquiring, and that figure carries a footnote directing readers to the most recent Stanford Search Fund Study for detail on outcomes.

Either way, a material minority of well-funded, full-time, professionally supported searches do not end in a purchase. That is context, not a warning — the same document reports a historical average IRR of 35.1% and an average 4.5x multiple of investment as of 2023 (p. 4), which is why investors keep funding the model despite the failure rate.

The Primer's own reading of a search that ends without a deal is notably unsentimental:

While winding down a search fund without an acquisition is painful and results in the loss of investor capital, the loss of the search capital is small relative to the potential loss of capital if a suboptimal acquisition is made.

— Primer, p. 11

It also notes that roughly a quarter of search fund acquisitions have lost money for investors (p. 13), and that a failed searcher carries two to three years of relevant experience into whatever comes next (p. 11).

The hierarchy this implies is stated elsewhere in the document, attributed to an experienced searcher and investor: "A searcher's hierarchy of outcomes is (1) buy a good business, (2) don't buy a company, and (3) buy a bad company" (p. 28).

Where the money goes

The Primer records how searchers handle the labor-intensive parts. Interns "have typically been effective at developing lists and contact information for companies, brokers, and industry intermediaries, as well as organizing mass mailings" (p. 38). Searchers have also used "outsourced services, such as hiring overseas help using UpWork or similar platforms, to generate lists of companies and contact information" (p. 34).

Both examples are aimed at the same part of the process: assembling names and contact details. That is the cheapest step in the funnel and the one least likely to determine the outcome. The step that determines the outcome — deciding which of those companies deserves a visit — stays with the searcher, competing for attention with the deal currently in diligence.

That allocation made sense when researching a company was slow and manual and sending mail was not. It is the assumption most worth re-examining, because the Primer's own account of what breaks searches — arriving at month 16 with an empty pipeline after a dead deal (p. 38) — is a direct consequence of the expensive judgment work being un-delegable.

How to budget a search you are paying for yourself

Three practical translations of the research, for buyers without an investor base setting the number.

Price the search before you start it. Whatever your version of $400,000 to $500,000 is — foregone salary, savings drawn down, or a partner's patience — write it down, and write down the date it runs out. A search without a stated end date does not become cheaper; it becomes invisible.

Protect the sourcing window. Setup, industry research, and infrastructure all feel productive and all consume the phase that generates options. The Primer's advice is to "hit the ground running as soon as the search capital is funded" (p. 37).

Keep sourcing through diligence. This is the instruction most often broken and most expensive to break. "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" (p. 38).

The real cost of a search is the small number of months during which you have both money and options, and the ease with which the second runs out before the first. The salary and the travel are only the visible part.

See how DealPort supplies recurring analyst capacity for target research without making the buyer stop sourcing.