The Hidden Power of Community: Strategic Sourcing for ETA Entrepreneurs

In the opaque world of deal-making, a simple yet profoundly effective strategy often goes overlooked: community. Entrepreneurs Through Acquisition (ETA), a model that thrives on uncovering small but promising businesses, faces perennial challenges in sourcing high-quality deals. Traditional avenues like brokers, databases, and cold outreach have become crowded hunting grounds where competition and intermediaries erode margins and opportunity. In contrast, community-driven deal sourcing offers an antidote—a strategy rooted in trust, authenticity, and collaboration.

At its core, community-driven sourcing leverages networks of professionals, advisors, and peers to uncover proprietary acquisition opportunities. It fosters long-term relationships that connect sellers to entrepreneurs who align with their values. This approach is not just a softer, relationship-first method but a strategically superior mechanism for identifying unique deals, mitigating risks, and lowering acquisition costs.

A Competitive Edge Built on Trust

In lower middle-market acquisitions, trust often trumps price. Business owners are reluctant to entrust their companies to unknown buyers, even when brokers facilitate introductions. According to a Harvard Business Review study on succession planning, 65% of small business owners see trust as the most important factor in deciding to sell their business—more important than valuation. A thoughtfully cultivated community provides precisely this element of trust, bypassing the transactional feel of brokered processes.

Howard Marks, co-founder of Oaktree Capital Management, embodied this principle. Marks famously emphasized the value of networks in identifying investment opportunities: “You can’t predict, but you can prepare.” Marks sourced off-market opportunities that competitors never saw by maintaining a robust network of advisors, industry experts, and personal connections. For ETA entrepreneurs, the lesson is clear: community amplifies preparedness, and preparedness uncovers opportunity.

River Guides: The Navigators of Community Sourcing

Every community has its sages—individuals who hold the keys to an industry or a region. Dubbed “River Guides,” these people are uniquely positioned to connect ETA entrepreneurs with business owners who might not otherwise engage. River Guides can include retired executives, niche consultants, or even local accountants who specialize in small businesses.

One illustrative case comes from the world of private equity. Richard Koch, author of The 80/20 Principle and a successful investor in numerous private equity deals, often relied on industry insiders to unearth targets. In one instance, Koch’s connections within the hotel industry led him to an underperforming property group with significant untapped potential. The deal was never listed publicly, and without his “River Guide,” Koch might never have found it.

For ETA entrepreneurs, engaging River Guides is a deliberate process. It starts with identifying individuals who have both credibility and influence in their spheres. Building a relationship with these guides often means providing value first—offering insights, making introductions, or collaborating on mutual interests.

The Metrics of a Community-Driven Strategy

Unlike broker-heavy sourcing models, which rely on measurable but often transactional metrics, community-driven sourcing introduces nuanced indicators of success. For ETA entrepreneurs, these metrics provide tangible evidence of the strategy’s value:

1. Network Expansion: Tracking the number of high-value connections added monthly, with a focus on depth rather than breadth.
2. Deal Pipeline Quality: Measuring the percentage of proprietary, off-market leads sourced through the community versus brokered channels.
3. Close Rate: Assessing the success rate of deals initiated through community connections. Community-sourced deals often outperform traditional channels due to trust and alignment.
4. Cost Efficiency: Calculating the cost per lead within a community-driven approach. Anecdotal evidence from private equity firms suggests that community-led deals often reduce acquisition costs by up to 30%.

Consider a lower middle-market private equity firm that began hosting informal breakfasts for local accountants and consultants. Over 18 months, the firm sourced ten off-market deals from these gatherings, acquiring three. Not only was the cost per lead significantly lower than through brokers, but the relationships built during these breakfasts created a pipeline of goodwill that extended far beyond immediate deal flow.

Challenges and Opportunities

While community-driven sourcing offers immense advantages, it requires patience and intentionality. Building authentic connections is not an overnight process; it takes consistent engagement and value creation. Moreover, not every contact in a community will yield tangible results. Entrepreneurs must balance community-building efforts with the demands of active deal sourcing and operational responsibilities.

Yet the benefits far outweigh these challenges. By embedding themselves in trusted networks, entrepreneurs position themselves as more than just buyers—they become collaborators and partners in the eyes of sellers. This reputation compounds over time, as communities grow and referrals multiply.

Case Studies from the Field

The success of community-driven sourcing can be seen in both historical and contemporary examples. In the 1990s, Jim Southern, an early pioneer of the search fund model, leveraged his MBA alumni network to identify his first acquisition. His professors, peers, and former business contacts became his greatest advocates, leading him to an undervalued printing company. Without this community, Southern might never have identified a business that ultimately propelled his career.

More recently, ETA entrepreneurs have harnessed digital tools to expand their networks. Platforms like LinkedIn, Slack, and industry-specific forums have democratized access to niche communities. One searcher, operating in the healthcare sector, created a WhatsApp group for retired medical device executives. Within six months, the group led to three warm introductions to potential sellers, all of whom were initially reluctant to engage with brokers.

The ROI of Community

The financial and strategic value of community-driven sourcing is undeniable. By cultivating trust and accessing off-market opportunities, ETA entrepreneurs reduce competition, lower costs, and secure deals that align with their values. The numbers back this up: proprietary deals sourced through trusted networks are 20–30% less likely to fall apart during due diligence, according to a study by Bain & Company.

As ETA continues to evolve, those who master the art of community-building will stand apart. They will uncover businesses not through cold calls or crowded broker channels, but through the quiet power of trust, shared vision, and mutual respect. In a competitive market, where every edge matters, the strength of one’s community may well be the ultimate advantage.