No great startup idea? No problem. Here’s how to buy a business.
August 10, 2021
6 minutes to read
Opinions expressed by Contractor the contributors are theirs.
Not all entrepreneurs need inspiration; entrepreneurship through acquisition might be where you shine.
When you think of an entrepreneur, you probably imagine a visionary with a great new idea. The archetypal entrepreneur develops a plan centered on this idea, then takes the business to great heights. We’ve seen this happen over and over again, but not all of us have billion dollar ideas. Does this mean that we are not entrepreneurs?
Of course not. You don’t need an Uber or Airbnb caliber idea to find your place as a business owner. It’s great if you have such an idea, but if you don’t, you still have options. On the one hand, you can simply to buy a company.
Related: How to Finance an Acquisition Using an SBA Loan
Yes, “Just buy a business” might sound like “Let them eat cake” – a little obvious and unnecessary at first glance – but I can give you some advice on how to do it and what to do. once you are at the helm.
The fundraising model is perfect for acquisition entrepreneurship
Failures have a way of multiplying success. My first foray into bootstrap entrepreneurship – a bespoke clothing company called Phoenix Clothiers – was a victim of the 2008 financial crisis. However, I came away with a lot of experience and valuable connections.
One day over coffee, a former client asked me if I had considered entrepreneurship by acquisition. I hadn’t thought of it before, but it made sense. I had a finance and entrepreneurship degree from Emory University, had been an investment banker in the UK, and was a voracious reader of business and leadership books. Even though I didn’t have a big idea for my next big business, I had the knowledge, experience, and motivation to do something big.
Shortly after, I came across a video of Irv Grousbeck, a Stanford professor considered the godfather of the fundraising model. The Stanford School of Business defines a research fund as an investment vehicle through which investors financially support an entrepreneur’s efforts to locate, acquire, manage, and develop a private business.
The fundraising model was designed for people like me who are on the path to becoming a leader but don’t necessarily have the desire or idea to pursue a bootstrap startup. It’s a good middle ground, where you find a proven business and make your own mark.
So I went to business school with a rather singular focus on entrepreneurship through acquisition. My business partner and I formed Seneca Partners and started looking seriously for a business to buy in 2013. In 2014, we bought Krueger-Gilbert Health Physics (KGHP), which would eventually become Apex Physics Partners.
Related: Fundraising: What You Need To Know About This Investment Model
You have acquired a business; now the work begins
You can buy a business, but you can’t buy the hearts and minds of your new colleagues or customers. As a newly created CEO, especially without technical expertise in your new industry, you might be the subject of a lot of rumors and uncomfortable questions: Does he know what he’s doing? Is he going to make deep cuts in staff? Does he even care about the industry?
In his popular book The foreigners, William Thorndike chronicles several leaders who have succeeded in areas in which they were not technically well versed. One of the themes is that as a foreigner you have a unique perspective on the industry and its opportunities. You have a free pass to push, push, and ask the silly questions. When the answers to these questions boil down to “This is how we’ve always done it,” you have a chance to make a change.
In other words, your ignorance of a business or industry is not a handicap, it is an asset. As the new CEO of a business, your job for the first year or so is to listen and discover the real strengths and weaknesses of the business. You must resist the temptation to make drastic changes until you understand what is basic and basic.
It is also essential to spend the first year or so building relationships with your colleagues and clients. Drive where they are. Take them to lunch. Show them who you are, don’t let them guess. Go beyond the golden rule and follow the platinum rule: do to others what they would like you to do to them. This will help you earn respect and gain buy-in from key stakeholders while continuing your business growth strategy.
This will be hard to hear for some hard-working entrepreneurs, but don’t try to do too much. A consultant once said to my partner and I, “You have mastered the art of putting out fires with your face.” Yes, we put out the fires, but it was painful. There are times when the most productive thing you can do is take a step back from the day-to-day, figure out what really is the problem, and lead your team.
Related: How to Keep Company Culture Alive After an Acquisition
Entrepreneurship through acquisition is a marathon, not a sprint
In seven and a half years, we’ve grown from a staff of 16 in a handful of Mid-Atlantic states to an organization that employs 130 people in more than 30 states. These may not be mind-boggling numbers, but it suits us very well. I would rather see slow and steady growth that honors the values of the company than to preside over rapid and unstable growth at the expense of company staff and their families.
While the path to entrepreneurship through acquisition doesn’t necessarily translate into instant, mind-blowing profits, and may not be a vessel for your big idea alone, it does offer a lot more to it. It gave us the chance to pursue long-term success, satisfy our intellectual curiosity, and participate in a deeply meaningful learning experience.
When you’re the CEO of a business built around your idea, it’s easy to do it all. I still have a way to go before I am the CEO I want to be, but I understand that the role of CEO is not about me – it’s about what I can do in the service of the company and all its stakeholders. The lessons I have learned about humility, responsibility and leadership are not found in a manual. These are ideas I have worked for, and they are worth more to me as an entrepreneur than any great idea.