Scott Crosby chose ETA after a winding career (politics → media → construction CEO → media/TV production → software sales), with two pivotal triggers: early exposure to leadership and networking in politics, and later being denied a large commission - pushing him to “control his own destiny”

He restarted his search immediately, leaning heavily on relationships and local presence: a “Top 50” networking strategy (identify 50 community connectors, ask for conversations, then expand via intros) plus tapping an economic development resource center as a free, underused searcher tool for lender introductions and SBA-business-plan support

His buy box was shaped by constraints and preferences: within ~2 hours of St. Louis, self-funded, smaller businesses (~$250–$500k SDE range), and a strong preference for B2B relationship-heavy customers over transactional B2C/home services

He submitted 4 LOIs, had 2 accepted, and learned a sharp filter: younger sellers (not retirement-driven) can be “wishy-washy,” increasing fall-through risk

He closed on American Services (HVAC + refrigeration + hot-side cooking equipment repair), offering ~$800k against a $1.2m ask - priced from his own valuation work rather than being anchored by asking price, and won by moving quickly and cleanly

Post-close the business was far more fragile than it looked - small team, key-person risk, and immediate operational fires (staff turnover, unreliable tech capacity, two clients going bankrupt, and a large contract that created a working-capital crunch because no deposit was collected)

Earnouts are commonly used to bridge valuation gaps in acquisitions by tying part of the purchase price to future performance, allowing sellers to capture upside while buyers reduce the risk of overpaying for projected growth

Earnout structures can increase total transaction value by roughly 30–33% when targets are achieved, but they introduce complexity because the final purchase price depends on post-closing performance rather than forecasts alone

These arrangements require ongoing collaboration between buyer and seller after closing, including detailed reporting and milestone tracking, which often keeps sellers engaged in the transition but also increases operational and legal complexit

Disputes are relatively common in earnout deals, with disagreements occurring in roughly 28% of cases and some transactions requiring renegotiation, highlighting the importance of clear metrics and dispute-resolution mechanisms

Fixed-price structures provide greater certainty by locking in the purchase price at closing, typically with cash representing 70–80% of deal value, but buyers usually price conservatively because they assume all future performance risk, resulting in lower valuations compared with earnout-based deals

Permanent Equity organizes diligence around four core questions: Who are you? What do you do? Where are the risks? What else should we know?—to build a full picture of the business before investing

“Who are you?” focuses on ownership and structure: legal entity, organizational documents, ownership table, company history, locations, and any interests in other entities

“What do you do?” examines operations in depth: financials and projections, customers and suppliers, assets and intellectual property, IT systems, and how employees are managed

“Where are the risks?” identifies liabilities and exposures such as debt, taxes, insurance claims, litigation, regulatory compliance, environmental issues, and contingent obligations

“What else?” captures remaining deal-critical details like material contracts, approvals required for a transaction, and any additional information needed to fully understand the business