Inside 370 ETA Deals: What 4 Years at SMB Law Group Revealed

I wanted to thank the Raleigh Underground. This is an incredible venue. This is our second year here at the Raleigh, and I think we'll be here as long as they allow us to be. Until they kick us out or become too expensive. I love that this is the home of SMBash for the foreseeable future. So thank you to all the staff at the Raleigh, everybody we've worked with. They're excellent to work with, and thank you for all that they do to put this together. Please clap for them.

Third, I really want to thank our sponsors. We have an excellent group of sponsors. One of the things we try to do with sponsors every year is not just help pay for this event, because candidly without their contributions, and not just financial contributions, but the work that they put into this event, promotion, and the different things that they do to help us plan for it, it wouldn't be possible. Let's just be transparent about that.

What we try to do with these sponsors is really get folks who are at the forefront of this ETA ecosystem, particularly on the self-funded search front. I think we did a really good job this year of getting a group of companies and their leaders together who really reflect the ETA ecosystem in a really good way. So I want to thank every single one of our sponsors for their contributions, their time, and their effort.

Specifically, I want to thank Amplio for hosting the Yard Games events, even though we didn't really get to get into the Yard Games because of the last-minute space change. Sincerely appreciate those guys. And I want to thank Apple Tree Business Services. I know Patrick Dichter is going to be around here in a second, but I want to thank him for sponsoring the opening bash happy hour that we just enjoyed. Patrick, why don't you come up here for a second and tell us a little bit about Apple Tree and how you fit into the ETA ecosystem.

Thank you for having me. It's awesome to be here. This is my third SMBash. It really is a special community. I saw my favorite internet dad, Michael Girdley, in person for the first time. Where are you, Girdley? He helped me on a few things for free, and then I made a connection to somebody that is trying to sell a commercial bakery in the Northeast to somebody else I know in the Northeast. And then I met a great group from Atlanta searching for a business. Those kinds of things don't happen when you're back home. So I just really appreciate all the relationships and the friendships that are built here and the familiar faces that we get to see, if you've been here before. If we can help you with QoE or accounting and tax, I'm happy to chat. Thank you for having me.

Thanks, Patrick. We thought it would be fun this year to spend just a couple of minutes as we kick off SMBash. The one thing that we all have in common in the room really is ETA. We support the entrepreneurship through acquisition space. Many of you are searching. Many of you are successful searchers. Some of you are failed searchers, and that's okay, too.

ETA really is at the heart of SMBash. That's what we all have in common. SMB Law Group, where I work and co-founded with my partners, Sam and Eric, and David is our COO for those that don't know, we have a unique place in the ecosystem just in sheer volume of deals that we see. Several years into our journey with SMB Law Group, I thought it'd be fun to spend a couple of minutes before we invite Michael Girdley on stage to talk about lessons learned from business failures, to maybe talk about some successes.

A couple of quick general macro stats. It depends on who you ask the quality of the data. But roughly, in a recent survey, almost half of small business owners said that they plan to sell within the next three years. We all know that 50% of businesses that plan to sell are not all going to sell. There are a lot of unsellable small businesses out there, and that's fine. But the point is, this is a massive market. $37 billion in 7(a) loans approved in fiscal year 2025. We can have a very healthy debate, and I hope we do over the next couple of days, over whether that's a good thing or whether that's a bad thing. But one thing that it is, is reflective of how much of the backbone of the American economy small businesses represent.

One interesting thing, just to contrast. Some of the data that I'm going to talk about here, we've gleaned from 370 deals that we've done in one law firm in four years. Compare that with traditional search. The GSB search fund study from 2024, the last year they published, tracked 681 closed traditional search fund searches since 1984. Completely different ballgame in the self-funded search space. So much of that small business economy is represented in self-funded search, as opposed to what gets a lot of the limelight out there in the books and treatises and law school classrooms. The reality is self-funded search is where deals are getting done.

Of course, it's not all sunshine and lollipops. 3.7% 7(a) loan default rate in 2024. When I was pulling this together, I couldn't find the 2025 stats, though I think it's up slightly. That was the highest in 2024 that it had been since 2012, bottom of the financial crisis. There's a lot going on out there. There's more competition, which is leading to higher multiples, which is leading to more leverage, which is leading to more risk, and that's scary when you're personally guaranteeing a multimillion-dollar loan.

These are true default rates. We all know in this room, default rates don't tell the whole story. There are a lot of businesses that are getting in trouble, getting into debt workouts with lenders, getting into really difficult situations that never ultimately bear out in those default rates. So a little bit of the sobering statistics along with those deals.

What have we seen since we launched SMB Law Group in May of 2022? We're coming up on our four-year anniversary in two weeks. Over 500 matters, 370 of those closed deals. When I pulled the stats, we're closing daily, it's probably 373 at this point in four years. You can see our ramp up: half year 2022, 27 deals, up to peak in 2025 of 121 closed deals. We did 34 in Q1. On a run rate perspective, that should put us somewhere around 140 this year. Q2, David probably has better visibility into Q2, but I don't think it's going to be 34.

A lot of deals are happening. Pushing $2 billion in deal volume. 40 states where we've done deals. As much as the popular states, everyone talks about Florida, Texas, California, hate on it all you want, there's a lot of business getting done there. The reality is deals are getting done all across the country.

Asset versus stock sale breakdown. This one's a little bit surprising. Everyone thinks asset sales. We push asset sales. It's protective for buyers. There are a lot of great reasons to do asset sales. But just over a third of our deals are equity acquisitions. That's for a lot of different reasons. We'll get into some of those reasons throughout the course of SMBash. A lot of equity deals getting done. Not necessarily something to be afraid of, but something to be knowledgeable about and understand.

Probably the most surprising statistic to me of the deals I tracked: split pretty evenly SBA and non-SBA. A lot of deals in our practice getting done, even in this small business, Main Street, lower middle market that involve non-SBA debt. That could be 100% seller financing, that could be independent sponsor or private equity deals that we're involved in. Obviously, a large part of our portfolio, but not the lion's share. You can see a breakdown size distribution of deals, what you would expect in a self-funded search focused law firm. With that number of transactions, fairly representative of the self-funded search space in terms of size of deals.

Let's look at some terms. The most fascinating thing to me as I ran the analytics: if you think about what was going on in the economy from 2022 to 2026, a lot of change going on. Interest rates increased rapidly 2022 into 2023. Seller notes, seller financing, unbelievably consistent. Flat-lined at 7% interest rates on secured and unsecured seller financing notes. That was a little bit surprising to me. Seller financing interest did not track the market.

Median maturity, six years. However, very bimodal. I didn't put the percentages up here, but almost a third of our deals were five-year maturity. Almost a third of our deals were 10 years of maturity. The other third was kind of a mix all over the place. Two to three, up to 10. So very consistent five or 10-year maturity on those notes.

A couple of other interesting statistics. About 20%, a fifth of our deals have contingencies in the seller notes. That's something for those of you going to some of the searcher sessions that you can glean out: some of the tools that we have even in the SBA program to have the ability to peg business valuation to performance.

On the purchase side, about two-thirds of our deals include a working capital adjustment. I include that almost for the opposite. A third of our deals have no working capital adjustment. Really interesting things going on. If you're in the private equity, lower middle market world, that would be a mind-blowing statistic. That should be like 99.8%. But a lot of deals getting done for a lot of reasons with and without working capital adjustments.

I won't spend too much time on the wonky stuff. Median baskets for indemnities. Non-competes, five years, very consistent. I wanted to include the percentage because just saying five years doesn't necessarily tell the story. Every business deal almost has a five-year non-compete. If your seller's asking for less, red flags. I tell this to every client. Interestingly, even in our practice, about 10% have some form of escrow or indemnity withholding. Not all deals use just seller notes, and that can be an important deal feature. About 13% of our deals have rollover equity.

I actually ran the statistics. I was interested to see how this changed with the SBA SOPs moving last year. We surprisingly had more deals in 2025 going into 2026 with rollover equity than we did in 2024, even with the SOP changes. It's just changing how deals get done without the SBA program as opposed to whether or not rollover equity is involved. I thought that was a really interesting statistic.

The last thing I wanted to talk through: sectors. We get asked all the time, what are you seeing out there? Lots of HVAC companies, lots of plumbing companies? The candid answer, not as much as you'd think anymore. It's so popular with private equity that I love you all, but almost none of you in this room are going to compete on multiple with private equity funds. So some of those really popular sectors just aren't moving as much in the self-funded search space.

Beekeeping, pet aquamation. Okay, I read this. I did not do this deal. I read this, I was like, is that aquarium installations? Trigger warning here. It's apparently a new way of pet cremation that uses some form of liquid. Let's move on. Space-related government contracting, dental equipment repair, supplements, sports camps, aviation parts supply. All over the place. The opportunities out there are endless. If you're setting your sights on plumbing, HVAC, roofing, B2B marketing, and accounting, no shade to any of my accounting, marketing folks in here, you're setting your sights too narrow. The landscape of possibilities is endless.

The final thing I'll say: we put our money where our mouth is. We acquire, too. My wife and I acquired a couple of months ago. I should say my wife acquired. Feel free to ask her about Supreme Wraps. I threw up some stats there about the deal. Literally doing what you guys do. It's fun to be part of the team, not the outcast service provider.

All that's to say, we live, eat, and breathe ETA. We are so excited to be sharing this with you guys, both from SMB Law Group, Supreme Wraps, all the sponsors, and everyone. Thank you once again for being here. Really excited to spend time with you. Please make the most of it. Ask hard questions, ask pointed questions, and if you leave on Friday with your mind blown of possibilities, opportunities, new things to try, then we've done our job. So thanks to everyone, and with that, David, if you want to introduce Michael.

First, give a round of applause for Kevin, please. That was wonderful. Without further ado, I'd like to introduce Michael Girdley to the stage. Michael is probably one of the most recognizable voices and faces and people in the ETA and SMB ecosystem. It's a real treat that we've got him here with us today. For this community, he's probably most known for Acquisitions Anonymous or writing on Twitter or LinkedIn or wherever you see him, his newsletter. But he's a seasoned entrepreneur. He's here to talk about lessons from 100 failed businesses. Michael, why don't you please join us? Give a round of applause, a warm welcome for Michael.