As baby boomers retire, many of that generation’s entrepreneurs are faced with the question of what to do with their businesses when they have no heirs or clear succession plans.
For enterprising individuals and aspiring business leaders, this situation presents an opportunity to pursue entrepreneurship through acquisition (ETA), also known as acquisition entrepreneurship. While we often think of entrepreneurs as starting their own businesses from scratch, ETA entrepreneurs leverage their skills, capabilities, and interests to actually purchase an existing business and grow and improve it from within.
The money for these acquisitions often comes in the form of search funds, which investors can pay into in order to support an entrepreneur’s journey in hopes that the success and growth of the business will pay off. The explosive growth in search funds in recent years suggests that buying your way into entrepreneurship is becoming much more prominent.
This process of taking an existing business under their wing becomes the ETA entrepreneur’s own leadership journey, and each of the 5 Cs of leadership capital from my book The Treasure You Seek: A Guide to Developing and Leveraging Your Leadership Capital applies to the ETA journey as well.
Capability and Culture in Acquisition Entrepreneurship
I recently coached an ETA entrepreneur with a background in engineering. He leveraged the specific skills and experiences he had gained from both school and working in a factory to successfully buy an engineered parts business. He connected with the business’s owner because he knew the field in its technical aspects and was able to bring insights from larger operations to that business, making him a uniquely qualified buyer.
This entrepreneur then sowed the seeds of his engineering superpower and leveraged his background in the culture of manufacturing to make a connection with this owner. In addition to his skills, they shared an underlying bond around shared interests and experiences, in spite of being of different generations and even different races.
Communication and Connection in Acquisition Entrepreneurship
The story you tell about yourself—to yourself and others—plays a key role in your journey to entrepreneurial and leadership success. In the self-reflective process of probing and testing what you really want—what treasure you seek and how to go after it—you may discover that ETA is not just a faster route to getting into business leadership, but is also a better way for you personally to enter into the field where you want to drive innovation and create personal wealth.
And once you’ve told yourself that ETA story, you’re going to spend a lot of time telling that same story to a lot of different business owners as you search for the right one who will sell you the right business at the best price. You also have to communicate your value, your skills, and the opportunity you represent to investors.
Effective communication in ETA goes beyond the transaction and involves creating lasting relationships with potential future employees and teammates, customers, and investors and partners in the business. In many cases, at the point of sale, the original owner will maintain some level of equity or investment in the business for a transitional period of time, which means developing a deep connection in creating a partnership that outlasts the transaction.
Confidence in Acquisition Entrepreneurship
Last but not least, ETA requires the confidence to step out into brave new territory. You may know a lot about your field, but you don’t necessarily know the nuances of this particular business, with its unique employees and customers. You are bringing your skills and background experiences into a new ecosystem, with the goal of creating new value, growing this business, and taking the business and your career to the next level.
ETA is an increasingly appealing option for those who may be looking to launch their entrepreneurial leadership journey. While it presents an opportunity for economic growth and economic empowerment for these individuals, I have also witnessed how, for the successful ETA entrepreneurs—now CEOs in many cases—this success is equally empowering internally as they start to see themselves differently and develop further confidence to keep pursuing their goals.