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Entrepreneurship Through Acquisition

There’s more than one road to Entrepreneurship

The default road to Entrepreneurship in many cases is the proverbial Startup Avenue.

While this road is a viable option for many founders, there is another road – Entrepreneurship-through-Acquisition (ETA). However, ETA is  often overlooked although, in many case, it may be a more viable option that carries less risk with more upside

Instead of creating a new product or service and trying to determine the optimal customer, product and market fit that most startups never quite figure out, aspiring Entrepreneurs can acquire and operate an existing and operational small or medium-sized business.

Taking the ETA road shifts the Entrepreneurs focus from trying to prove the viability of every aspect of the business to determining how to maintain and sustain existing operations, scaling, growing and increasing productivity, all while continuing to service customers and generate revenue.

If you haven’t considered ETA, here are 3 reasons to consider ETA as a viable option to starting a new venture from scratch:

  1. More avenues to access to capital. 

Access to capital is one of the biggest hurdles and challenges faced by a startup founders.

While access to capital is a challenge for ETA, raising capital for an existing business with customers and revenue presents opportunities not otherwise available to startups.

In addition to traditional capital options – private investors, banks, loan, etc. – ETA provides creativity in deal structure – earn-outs, carry forwards, etc. -to reduce the reliance on securing 100% of the capital needed to acquire an existing business.

It is also worth mentioning that financing options including lines of credit, equipment leases and 401k rollovers provide additional financing vehicles for ETA.

  1. Opportunity to de-risk.

Approximately 60% failing within 5 years and only 1/3rd making it to 10 years. This provides an ability to de-risk your business venture as acquiring an existing business that has survived past 10 years, you automatically avoid the traditional failure timeline that sinks many startups.

The reasons starts-up fail during this period varies but the fact remains that acquiring an existing and mature business can put you a safer and more stable position.

  1. 2+ million SMBs that will need a home.

20-25% of the U.S. population is ‘baby boomers.’ This representative segment of the population owns for over 2.4 million small-to-medium businesses (SMB), employing over 25 million people.

The average age of the segment is 60-70 years of age and a transition of these businesses is a necessity. In other words, there is – and will be – a lot of SMBs to approach and acquire.

Entrepreneurship through Acquisition is an option worth considering and you don’t have to analyze it alone . . . contact The Hollines Group and we will walk you through the Ins and Outs of ETA to determine if it’s a road you should travel.