The Entrepreneur's Acquisition Playbook: Why Buying a Business Beats Starting One

Ever get the feeling that entrepreneurship advice is stuck in a loop?

"Follow your passion! Create something new! Disrupt industries! Start from scratch!"

Yet the data paints a stark reality: 90% of startups fail. Most founders end up with nothing but battle scars, depleted savings, and "lessons learned" after years of grinding.

What if there's a smarter path to business ownership?

Enter Entrepreneurship Through Acquisition (ETA) — the approach where you buy an existing profitable business rather than creating one from scratch.

Research suggests that ETA entrepreneurs often achieve higher success rates, better returns, and faster paths to real CEO experience than traditional startup founders.

This isn't just theory. From Asurion (a roadside assistance company turned $6 billion tech support giant) to thousands of smaller success stories, the evidence is clear: buying then building often beats starting from zero.

In this post, we'll cover everything you need to know about entrepreneurship through acquisitions, from why it works to how to do it yourself. Consider this your complete playbook for this alternative (and potentially more successful) entrepreneurial path.

Why Buy Instead of Build? The Game-Changing Case for ETA

Let's be honest: traditional entrepreneurship is a brutal game with terrible odds.

Of every 10 startups that launch, 9 will crash and burn. The typical "start from scratch" journey looks like this:

1. Year 0-1: Burn savings by developing an idea
2. Year 1-2: Raise capital, diluting ownership
3. Year 2-3: Pivot when the original idea doesn't work
4. Year 3-5: Fight for survival with no salary
5. Year 5+: Either join the 90% in failure or finally reach stability

Meanwhile, the ETA entrepreneur is playing an entirely different game:

1. Month 0-18: Search for the right acquisition target
2. Month 18-24: Close the deal with financing
3. Day 1 Post-Acquisition: Inherit existing revenue, customers, and team
4. Year 1+: Optimise, improve, and scale from a stable base

See the difference? In traditional entrepreneurship, you spend years trying to reach the starting line. With ETA, you begin at year 5 of a business, skipping the most challenging stage entirely.

High Agency vs. Default Path

Most aspiring entrepreneurs follow the default path: start something new and hope it works. This is what people are taught in business schools, read about in tech blogs, and see in movies.

But high-agency entrepreneurs question defaults. They ask: "Is there a more asymmetric approach? Can I get a similar upside with less downside risk?"

ETA is that asymmetric opportunity.

The Compelling Case for Buying a Business

The numbers tell the story:

• Lower Risk: Acquisition entrepreneurs work with proven business models, existing customers, and established cash flow
• Immediate Income: You can often pay yourself a reasonable salary from day one
• Leveraged Returns: You can use debt (SBA loans, seller financing) to amplify your equity returns
• Faster Path to CEO: Instantly become CEO of a real company with real revenue
• Attractive for Investors: Traditional search funds deliver ~35% IRR and 5.2× returns on average
• Seller's Market: Over 73% of business owners (10+ trillion in business value) plan to sell in the next decade as Baby Boomers retire

High returns usually come with risk. But in ETA, you're trading uncertain startup risk for more manageable execution risk. Your success depends more on your ability to operate and improve an existing business than on whether a new idea finds product-market fit.

ETA Strategies: Different Ways to Play

There isn't just one way to approach entrepreneurship through acquisition. Let's explore the main strategies and which might be right for you:

Buy-and-Hold: The Simple Approach

This is the basic ETA strategy: buy a single stable business and run it for cash flow and growth. You might:

• Focus on operational improvements to increase margins
• Expand geographically to new locations
• Add complementary products or services
• Upgrade systems and technology for efficiency

Works best for: First-time entrepreneurs who want to learn the ropes of business ownership with minimal complexity. It's also ideal for those not necessarily looking for a quick exit.

Buy-and-Build or Roll-Up Strategy: Buy Multiple Companies in the Same Industry

In a roll-up, you acquire multiple businesses in the same sector and combine them into a larger entity. The value comes from:

• Economies of scale: Shared back-office functions, bulk purchasing
• Enhanced market power: Less competition, better pricing
• Cross-selling opportunities: Offering each company's services to the other's customers
• Higher valuation multiples: Larger businesses typically sell at higher multiples than smaller ones

Example: One entrepreneur might acquire five separate service companies across a region, centralise administrative functions, standardise branding, and emerge as a dominant regional player worth more than the sum of its parts. This is known as multiple arbitrage, where you buy smaller businesses at a multiple of 6x EBITDA and sell them at 12-15x (as an example).

Works best for: Experienced operators with industry knowledge who can spot consolidation opportunities in fragmented markets.

Programmatic Acquisitions: Make Deals a Core Capability

Programmatic acquirers often incorporate multiple, smaller acquisitions into their strategy. Rather than one big transformational deal, they consistently make several smaller deals per year.

McKinsey research indicates that this approach yields the best risk-adjusted returns, with programmatic acquirers having a 70% chance of outperforming their peers.

Why it works: You develop a "muscle" for finding, closing, and integrating deals. Mistakes on small deals won't sink you, and the learning compounds over time.

Works best for: Growth-oriented entrepreneurs who enjoy the deal process and want to build a larger enterprise through systematic expansion.

Search Fund Model: The Structured Approach

The search fund is a specific ETA model with two stages:

1. Raise search capital: $300k-$500k from 10-20 investors to fund your search
2. Raise acquisition capital: Once you find a target, return to investors to fund the actual purchase

After the acquisition, you operate as CEO with investor backing. This model typically targets larger businesses ($1-5M EBITDA) and has a well-established track record in the U.S.

Works best for: MBAs and professionals with strong credentials but limited personal capital who want to buy a substantial business and have investor support.

Self-Funded Search: The Independent Path

Not everyone needs a formal fund. Some entrepreneurs use their personal savings, bank loans, or small investor groups to search and buy directly. You'll likely target smaller businesses (often <$1M EBITDA) but retain more equity and control.

Works best for: Entrepreneurs with some capital or access to financing who value independence and are willing to start with a smaller business.

How to Find and Acquire the Right Business

Finding the right business is like finding the right spouse – a significant commitment, and the selection process matters. Here's how to approach your search:

Real-World Success Stories: Case Studies in ETA

Let's look at some examples of entrepreneurs who succeeded through acquisition:

Asurion: From Roadside Assistance to $6 Billion Tech Giant

In 1994, Stanford MBAs Kevin Taweel and Jim Ellis raised a search fund and acquired Road Rescue, a struggling roadside assistance company. They soon pivoted into cell phone insurance (when mobile phones were just emerging) and found a massive growth opportunity.

Through excellent timing, strategic vision, and additional acquisitions, they built Asurion into a $6 billion revenue company. Early search fund investors received over 100× returns on their investment.

Key lesson: Sometimes, the initial business you buy is just a platform to enter an adjacent, faster-growing market.

Botanical Designs: Doubling Size Through Professional Management

Edward McDonnell, a UVA Darden MBA, used the search fund model to acquire Botanical Designs, a company that provides plant services for office buildings.

He grew it from a local Seattle operation with 80 employees to a national company with over 200 staff. McDonnell implemented professional management practices, expanded to new locations, and eventually attracted private equity investment.

Key lesson: Adding professional management to a solid business can drive substantial growth, even in a "boring" industry like office plants.

"Boring Business" Millionaires: The Quiet Wealth Builders

Some of the most successful ETA entrepreneurs operate businesses you might never think of – such as industrial services, landscaping companies, distribution businesses, or specialised manufacturing.

For example, Codie Sanchez has acquired multiple "main street" businesses, such as laundromats and car washes, generating substantial cash flow from operations that most investors overlook.

Key lesson: Unglamorous businesses often provide the best returns and face less competition from buyers.

ETA vs. Traditional Startups: A Clear-Eyed Comparison

Let's directly compare the ETA approach with traditional startup entrepreneurship:

Pros of ETA (Buying an Existing Business)

Immediate cash flow

• Start with revenue and customers on day one
• Pay yourself a salary from existing profits
• Use business cash flow to fund growth

Lower failure rate

• You're buying a business that has already survived the startup phase
• The product or service has proven market fit
• Customer relationships and processes already exist

Leveraged returns

• Use bank financing to amplify your equity returns
• SBA loans or specialised bank loans can cover up to 90% of the purchase price
• Seller financing can further reduce the cash needed

Career acceleration

• Become CEO of a real company immediately (with staff, customers, etc.)
• Gain general management experience across all functions
• Build credibility as a business owner, not just an "entrepreneur with an idea"

Cons and Challenges of ETA

Upfront capital required

• Need money for the down payment (10-30% of purchase price)
• Search costs before acquisition (unless funded by investors)
• Potential personal guarantees on loans

Integration and culture challenges

• Leading an established team that predates your arrival
• Potential resistance to change from long-time employees
• Need to respect institutional knowledge while driving improvements

Finding the right business is hard

• The average search takes 19 months
• May review hundreds of opportunities before finding the right fit
• The emotional toll of rejection and dead ends

Limited "creative" satisfaction

• You're optimising someone else's creation, not building your own
• Less suitable for product innovators or mission-driven founders
• Often involves "unsexy" industries (though they can be very profitable)

The risk-reward tradeoff is clear: ETA offers a higher floor but potentially a lower ceiling than startups. You're far less likely to fail, but also less likely to create a unicorn.

Battle-Tested Advice: Common Pitfalls and How to Avoid Them

Having studied hundreds of ETA cases, here are the most common mistakes and how to avoid them:

Your ETA Action Plan: How to Get Started

Ready to explore entrepreneurship through acquisition? Here's your step-by-step action plan:

Resources to Accelerate Your Journey

The ETA community has grown substantially in recent years, creating rich resources for aspiring acquisition entrepreneurs:

Books

• "Buy Then Build" by Walker Deibel - The most accessible introduction to ETA
• "HBR Guide to Buying a Small Business" by Richard Ruback & Royce Yudkoff - Harvard's structured approach to acquisition entrepreneurship
• "The Messy Marketplace" by Brent Beshore - Insights on buying small businesses from a leading investor
• "Main Street Millionaire" by Codie Sanchez - Focus on acquiring everyday local businesses

Online Communities and Courses

• Searchfunder.com - The hub for search fund entrepreneurs and investors
• Acquisition Lab (Walker Deibel) - Structured course and community for first-time buyers
• Contrarian Thinking (Codie Sanchez) - Newsletter and community focused on acquiring "boring" businesses

Podcasts

• "Think Like an Owner" (Alex Bridgeman) - Interviews with acquisition entrepreneurs
• "Acquiring Minds" (Will Smith) - Stories of people who bought businesses
• "Buy and Build" (UK-based) - European perspective on ETA

People to Follow

Sieva Kozinsky - Sieva's Business Building Academy

Ben Kelly - Acquisition Ace Academy

Dan Peña - QLA

Codie Sanchez - Contrarian Thinking

If you're a student or alum, many business schools now have ETA programs:

• Harvard Business School
• Stanford GSB
• INSEAD
• Chicago Booth
• London Business School
• IESE (Barcelona)
• And many more

The Game Has Changed: Final Thoughts

The entrepreneurial landscape is evolving. While starting from scratch will always have its place, buying an existing business has emerged as a compelling alternative that more entrepreneurs are discovering.

Consider the realities of our current economic environment:

• A generational transfer of business ownership is underway as Baby Boomers retire
• Capital is actively looking for stable, cash-flowing alternatives to traditional investments
• The risk/reward proposition of traditional startups has become increasingly challenging

ETA offers a different path – one with its own challenges, but also with advantages that shouldn't be overlooked.

Remember:

• High agency isn't starting from zero; it's finding the most advantageous path to your goals
• The best businesses are often the least sexy – plumbing beats social media apps for predictable returns
• Your biggest advantage is asymmetric knowledge – understanding opportunities others overlook

That is part of the Game.