BUSINESS OWNERSHIP THROUGH ACQUISITION

Whether you are a manager wanting to make a change in your career, serial entrepreneur looking for your next adventure or a recent MBA graduate looking to begin a management career, buying a small business is an option you should consider. You can buy an existing business, right now, and run it as CEO and forego the growing pains of starting a new venture from the ground up.

Running your own company offers a fundamentally different career lifestyle compared to working for a larger company. Business ownership allows you to step into a leadership role, make decisions that matter, and have the freedom and flexibility to work the way you want to.

The potential ﬁnancial benefits of business ownership are also attractive. A business acquisition usually involves using a combination of debt from banks and equity from investors and the entrepreneur themselves. The structure of the acquisition usually ensures that the entrepreneur retains a significant financial stake in the business which provides substantial opportunity for signiﬁcant ﬁnancial reward. Quality small businesses can be acquired for a price that allows you and your investors to earn an excellent return on your investment. Some of this return will be cash ﬂows that you’ll distribute each year to you and your investors. We always recommend that before entering into a business acquisition, that you have an exit plan which primarily involves selling the business at some point in the future. If during the period between you purchasing the business and eventually selling the business, you’ve been able to grow it, you should be able to sell it for significantly more than the original purchase price, resulting considerable ﬁnancial gain. If done correctly, business ownership through acquisition offers both dynamic career opportunities as well as signiﬁcant investment opportunities.

Part of what is fascinating about small business is the variety and uniqueness of the businesses themselves. Some of these businesses provide services you might have known about, like commercial landscaping for strata’s and condominium, whilst others you may never have had any inkling they existed, like Mobile device management services which uses a security platform to monitor, manage, and secure employees’ mobile devices (laptops, smartphones, tablets, etc.) that are deployed across multiple mobile service providers and across multiple mobile operating systems being used in an organization. These are typically smaller ﬁrms with steady annual revenues of $2 million to $20 million and annual cash ﬂows of $300,000 to $5.0 million. They are not the high growth and industry leading tech companies or desirable businesses.

SO, WHAT MAKES YOU QUALIFIED TO RUN A SMALL BUSINESS? DO YOU HAVE EXPERIENCE IN:

Managing others?
Financial performance/accountability?
Sales/Customer Service
Marketing
Operations
Etc.

People who have acquired businesses through acquisition are hard working, motivated and passionate about what they do, and they are probably not so different from you. Few have been CEOs before. Most have 5 to 15 years of professional experience, mostly at middle management levels. Most had never bought a business before nor had signiﬁcant personal net worth when they started.

Surprisingly most people who follow the path to business ownerships are not reckless risk takers, but strategic and careful planners who perform careful risk assessments before jumping at an opportunity.

What sets most entrepreneurs who acquires businesses through acquisition is their energy, tenacity, and intelligent individuals who are open to opportunities in smaller businesses and niche industries, rather than targeting opportunities with big brands or glamourous sectors.

Determination is a key trait in entrepreneurs as with any business there may be signiﬁcant challenges along the path to success. What are the greatest obstacles and challenges facing an entrepreneur on their journey to business ownership through acquisition?

Probably the greatest obstacles for most entrepreneurs looking for business ownership through acquisitions is the search process. It is not uncommon for potential buyers get frustrated and quit because their search has been unproductive and taking much longer than they anticipated.
Once you have found a potential business, not asking the right questions early in the process can result in months of work come unraveled if you find a material issue late in the process.
Some entrepreneurs don’t even start the process, because of feeling unqualiﬁed or not knowing how to begin their search or raise the capital to pay for their search or their acquisition.

The search process is critical for your success in acquiring the right business for you. If you buy the wrong business, there may not be an easy exit. If your company fails, you’ll likely lose it and your investment, not to mention the investments you’ve accepted from friends and family. Choosing well is extremely important.