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Acquisition Entrepreneurship

August, 2021

The two conventional pathways that have been appreciated and encouraged to be taken up by aspiring leaders are the C-suite route at a big company and launching one’s own startup. Another career path, acquisition entrepreneurship is increasingly becoming a popular way to grow today. Acquisition is a pathway that allows individuals to achieve massive growth overnight. It offers a combination of an existing small business’ profitable and sustainable infrastructure with the innovation and drive of an entrepreneur to improve and grow the business.

Acquisition Entrepreneurship has largely remained an under-appreciated concept because of the constant encouragement received by entrepreneurs to launch their own startup. According to the Small Business Administration, a third of all businesses fail within two years and half of those remain in business after 5 years and only 1 per cent of the startups make it to the final stages of funding. With acquisition entrepreneurship, the odds of failure can be significantly reduced as an individual buys a business that is already successful. Fledgling startups face a multitude of issues such as insufficiency of talent, capital and cash flow, lack of an established customer base, and ineffective management. Acquisition

entrepreneurship harnesses the power of synergy. An acquisition entrepreneur is immediately in charge and can make an instant impact. By buying an existing small business and building upon it, entrepreneurs get instant access to everything they need, to be successful. From there, they can mold their companies to fit their style, making it a smarter way to start. They are, hence, able to combine the sense of ownership with the relative security of running an established business.

Another benefit of acquisition entrepreneurship is that existing companies are already established with customer base, brand presence, employee base, and most importantly, profits and cash flow— everything a startup doesn’t have. Buying an existing business can eliminate much of the trial and error that happens in a typical start up. A profitable small business needs dozens of components that have to fit together properly in order to achieve growth and long term sustainability. When an existing business is bought, an established system, departments and divisions that have a track record of functionality are gained. Moreover, financing is a major challenge for any small business. However, financiers are far more likely to lend for the purchase of an existing business than they are for a start-up venture. Although the acquisition entrepreneurs skip the first start-up phase, they have the freedom to exercise their entrepreneurial skills to improve and grow the businesses they acquire.

Some of the reasons why companies choose to grow by acquiring other organisations is to increase market share, gain access to promising new technologies, achieve synergies in their operations, tap well-developed distribution channels and obtain control of undervalued assets.

For a lot of individuals, the process of dealing with investors, legal issues, employment, operations, and other aspects of starting a venture can take a heavy toll on their motivation. Thus, whether acquisition entrepreneurship is a suitable career path for an individual depends on a variety of factors, primarily one’s preferences, resources and temperament.

The entrepreneurs should not blindly invest in a business, some of the ingredients required for an acquisition to be successful are skilled people to evaluate acquisition candidates, the means to make the purchase in cash or through contact with funding sources, and the ability to run the purchased business. Hence, uncovering the real reason why the owner is selling, viewing the opportunity from the inside, and understanding the debt, the assets, and the cash flow when buying an established business are essential to enable an individual to make the right and well thought decision.

Sometimes, the most successful entrepreneurs don’t think of unique ideas, they spot the ideas and buy them.

  • Written By Diya Madan

Diya, Business Analyst at TSB, is passionate about marketing and human psychology, and believes that humans are conditioned to understand stories more than they are to understand logic.