Acquire And Improve A Small Business
This conversation was generated using Cook'd AI's career assistant and reviewed by Fallon Han from our editorial team for accuracy.
I am a first-year MBA student in Canada on a study permit, and I want to prepare for a small-business acquisition interview. I am targeting search fund investing. Can we do a realistic practice round where you assess my judgment on owner motivations, leverage, and operational improvement?
Absolutely. I will play the interviewer and keep it practical. Imagine you are meeting with a potential search fund sponsor.
Question 1: You are looking at a profitable family-owned HVAC company with steady cash flow. The owner says he is tired and wants to retire, but his children are not interested. What would you want to learn to determine whether this is a good acquisition target?
I would want to understand the true reason for sale, whether the business depends heavily on the owner, and if there are any hidden issues like customer concentration, maintenance backlogs, or weak financial controls. I would also ask how recurring the revenue is, how skilled the workforce is, and whether the owner has been holding back growth because of age or fatigue.
Good start. You covered motive and operational risk. To go deeper, I would expect you to separate what is cosmetic from what is structural.
Question 2: If the seller says the company has no debt and earns about 1.8 million CAD of EBITDA, how would you think about leverage in a possible acquisition? What would make you cautious?
I would think about using moderate leverage if cash flow is stable, but I would avoid overlevering if earnings depend on a few large customers or if working capital swings are severe. I would also be cautious if capital needs are high, the business is cyclical, or there is uncertainty around normalized EBITDA. I would want enough room for downside so debt service does not force bad decisions.
That is the right framework. You are showing downside awareness, which matters a lot in small-business buying.
Question 3: Assume you buy the company and discover the owner handled pricing personally, dispatch was messy, and technician productivity was uneven. What are the first three operational improvements you would try in the first 100 days?
First, I would standardize pricing and quoting so the business is not dependent on the owner’s judgment. Second, I would clean up scheduling and dispatch to reduce idle time and missed appointments. Third, I would build simple KPI reporting for close rates, labor utilization, and gross margin by job type so I can see where the profit leaks are. I would also spend time with the field team to understand resistance before changing processes too quickly.
Strong answer. You focused on systems, not just effort. The interview would likely like that.
Final question: What would concern you most about this deal as a first-year MBA student on a study permit in Canada, and how would you address it without sounding naive?
My main concern would be execution risk because I am early in my career and I need to show I can learn fast and manage people well. I would address it by saying I would lean on experienced advisors, build a disciplined operating cadence, and focus on businesses where process improvement matters more than deep industry expertise. I would also be transparent that I am not claiming to know everything, but I can ask good questions, use data, and execute consistently.