The LP Playbook for Investing in Small Businesses

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Buying a business is hot right now. Everyone wants to be the next owner-operator… 

…Until you’re the one running payroll, managing staff, and handling operations. 

In this episode of The Passive Income Playbook, Sean Smith—Managing Partner at Search Fund Ventures, where he built a network of 3,800+ LPs, reviews 250–300 deals a year, and just closed a $5M fund focused on cash-flowing, recession-resistant companies like HVAC and B2B logistics—explains the smarter path.

Instead of becoming the CEO, LPs can back skilled operators through the search fund model, capturing predictable cash flow and private equity–style returns without ever becoming the CEO.

In this episode we cover:
✅ Why the “silver tsunami” + SBA leverage create a generational LP opportunity
✅ How the search fund model works (traditional, self-funded, and independent sponsor)
✅ How to build a thesis around essential businesses with predictable earnings
✅ Sean’s 215-point due diligence checklist—and the red flags that instantly kill a deal
✅ How family offices, institutions, and retail LPs each play in this space
✅ The terms and structures LPs must watch for to avoid getting crammed

If you’re interested in generating private equity–style returns without running a business yourself, this episode is for you.

Chapters
00:00 – Why Buying a Business Might Be the Wrong Play for LPs
02:01 – Meet Sean Smith: Building a $5M Fund for Small Business Deals
02:32 – Search Funds Made Simple: 3 Models Every LP Should Know
07:18 – The Silver Tsunami: $7–10T of Small Biz Changing Hands
09:41 – Where LPs Win: Why Services Beat SaaS & Manufacturing
15:18 – Building a Cash Flow Thesis: Essential Businesses in Durable Markets
21:03 – The 215-Point Checklist: How to Spot Red Flags Before Wiring Money
25:30 – Diligence in Action: From Teaser to SIM to Data Room
35:19 – Why Deal Flow Matters: Reviewing 300 Deals to Fund 2%
45:05 – Terms That Protect LPs: Prefs, Leverage, and Fair Splits

Creators and Guests

Host

Pascal Wagner

I help accredited entrepreneurs & executives in the US replace their primary income through private investments.

Guest

Sean Smith

I’m the Managing Partner at Search Fund Ventures, where we back acquisition entrepreneurs and independent sponsors building the next generation of enduring small businesses. Our mission is simple: support operators who are buying great companies and want to grow with long-term capital and operational support. Alongside SFV, I founded SMB Investor Network — a co-investor community of 3,000+ investors who believe in the value of small business ownership. We’ve built a trusted ecosystem that’s closing the gap between qualified searchers and the capital they need to acquire and operate companies across North America. Earlier in my career, I worked in M&A, leveraged finance, and corporate strategy at firms like Applico and CIBC Capital Markets. I’ve seen the power of entrepreneurship from every angle, from the boardroom to the groundfloor. Today, I’m all in on helping SMBs thrive for the long haul.

What is Grow Your Cashflow Podcast?

Welcome to Grow Your Cashflow Podcast where we help accredited investors learn how to earn consistent monthly passive income from private placements.

If you're uncertain about where to invest for dependable returns, have limited access to exclusive opportunities like private placements, or are looking for expert insights and guidance on generating consistent income across various asset classes, then this show is tailored just for you.

By listening to this show, you'll achieve your passive income goals faster by learning:
🚀 Proven strategies to secure monthly passive income. 
💡 Expert insights from successful fund managers and investors. 
🌐 How to access exclusive opportunities in private placements. 
📈 Techniques to diversify across multiple asset classes for a robust portfolio. 
💰 The well-guarded secrets of wealth accumulation used by the world's elite.

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