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

Why buy instead of build?

Traditional entrepreneurship is brutal. Terrible odds.

Of every 10 startups that launch, 9 crash and burn.

The typical "start from scratch" journey:

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

The ETA entrepreneur plays a different game:

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

See the difference?

Traditional entrepreneurship: years trying to reach the starting line.
ETA: You begin at year 5 of a business. Skip the hardest stage entirely.

High agency versus default path

Most aspiring entrepreneurs follow the default path. Start something new. Hope it works.

This is what business schools teach, tech blogs write about, and movies show.

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

ETA is that asymmetric opportunity.

The case for buying a business

The numbers tell the story.

Lower risk. Proven business models. Existing customers. Established cash flow.

Immediate income. Often, pay yourself a the reasonable salary from day one.

Leveraged returns. Use debt (SBA loans, seller financing) to amplify equity returns.

Faster path to CEO. Instantly become the 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. Baby Boomers are retiring.

High returns usually come with high risk. But in ETA, you're trading uncertain startup risk for more manageable execution risk.

Your success depends on operating and improving an existing business. Not whether new idea finds product-market fit.

ETA strategies: Different ways to play

There isn't just one way to approach ETA.

Buy-and-hold: The simple approach

Basic ETA strategy. Buy a single stable business. 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 business ownership with minimal complexity. Those not looking for a quick exit.

Buy-and-build or roll-up: Multiple companies in the same industry

Acquire multiple businesses in the same sector. Combine them into a larger entity.

Value comes from:

• Economies of scale (shared back-office, bulk purchasing)
• Enhanced market power (less competition, better pricing)
• Cross-selling opportunities (offer each company's services to other customers)
• Higher valuation multiples (larger businesses sell at higher multiples)

Example: Acquire five separate service companies across a region. Centralise administrative functions. Standardise branding. Emerge as a dominant regional player worth more than the sum of its parts.

This is multiple arbitrage. Buy smaller businesses at 6x EBITDA. Sell at 12-15x.

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

Programmatic acquisitions: Make deals a core capability

Incorporate multiple smaller acquisitions into the strategy. Not one big transformational deal. Several smaller deals per year consistently.

McKinsey research indicates this approach yields the best risk-adjusted returns. Programmatic acquirers have a 70% chance of outperforming peers.

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

Specific ETA model with two stages:

Raise search capital: $300k-$500k from 10-20 investors to fund your search

Raise acquisition capital: Once you find a target, return to investors to fund the purchase

After the acquisition, you operate as CEO with investor backing. The model typically targets larger businesses ($1-5M in EBITDA). Well-established track record in the US.

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

Self-funded search: The independent path

Not everyone needs formal funding. Some entrepreneurs use personal savings, bank loans, or small investor groups. 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. Value independence. 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. Significant commitment. Selection process matters.

Stage 1: Preparation

Define your acquisition criteria

Before you start looking, know what you're looking for.

Industry: What sectors do you understand or want to work in?

Size: What revenue and profit range fits your capacity and resources?

Geographic constraints: Local, regional, national, or international?

Owner involvement: Business you can run directly or one with management in place?

Growth potential: Steady cash flow or high-growth opportunities?

Secure your financing

Understand what resources you have and what financing options you'll pursue.

Personal funds: How much can you invest directly?

Investor capital: Will you raise from friends/family, angels, or search fund investors?

Debt options: Explore SBA loans (up to $5M), traditional bank loans, seller financing.

Equity partners: Consider if you need operating partners who bring capital.

For rough planning, assume you'll need equity for 10-30% of the purchase price. The remainder comes from debt and seller financing.

Stage 2: Sourcing deals

This is where real work begins. Most ETA entrepreneurs review 100+ opportunities before finding the right one.

Methods include:

Proprietary outreach (highest quality)

Direct mail campaigns to business owners in your target industries. LinkedIn outreach to owners nearing retirement age. Industry networking and conference attendance. Working with accountants, attorneys, and other advisors who know owners.

Business brokers (mixed quality)

Develop relationships with reputable brokers in target markets. Better businesses often don't appear on listing sites. Ask brokers to bring you deals before widely marketed. Remember, brokers usually show deals to those who pay the most, first.

Online marketplaces (variable quality)

BizBuySell, BizQuest, and similar listing sites. Acquire.com for digital and tech businesses. Expect to filter through many low-quality listings.

Remember: The best businesses are rarely publicly listed. They sell through brokers or directly to buyers. That's why proactive outreach is important. Alternatively, you can use a specialist broker.

Stage 3: Evaluating opportunities

Once you identify interesting targets, follow a structured evaluation process.

Initial screening

Review financials for consistent revenue and profits. Analyse customer concentration (avoid businesses where one client is >20% of revenue). Check owner dependencies (can business run without the current owner?). Assess industry trends (avoid declining sectors unless you have a turnaround plan).

First meetings and deeper diligence

Meet the owner (in person if possible) to understand motivation. Visit the business to observe operations. Interview key employees or managers (with owner permission). Review detailed financial statements and tax returns. Analyse recurring versus one-time revenue streams.

Red flags to watch for

Declining revenues or margins without explanation. Overly complex businesses for their size. High customer or employee turnover. Deferred maintenance or outdated technology. Reluctance to share information or allow verification.

Stage 4: Making offers and closing

When you find a business that passes your criteria, move decisively.

Valuation and offer strategy

Most small businesses sell for 2-6x EBITDA. Depends on industry, growth, and risks.

Consider a two-step approach. Initial non-binding Letter of Intent (LOI). Then a formal offer.

Structure can matter more than price. Seller financing, earnouts, consulting agreements.

Due diligence

Once under LOI, conduct comprehensive due diligence. Hire professionals for legal, financial, and operational review. Verify all claims made by the seller. Prepare a detailed integration plan.

Financing and closing

Finalise your capital stack (equity, senior debt, mezzanine, seller note). Prepare for closing requirements (often 60-90 days from accepted offer). Plan for the transition period with the seller.

Post-acquisition transition

Implement your 100-day plan. Communicate clearly with employees and customers. Establish new reporting and management systems if needed. Consider keeping the seller involved temporarily as a consultant.

Real success stories

Asurion: From roadside assistance to $6 billion tech giant

In 1994, Stanford MBAs Kevin Taweel and Jim Ellis raised a search fund. Acquired Road Rescue, a struggling roadside assistance company.

They soon pivoted into cell phone insurance. Mobile phones were just emerging. Found a massive growth opportunity.

Through excellent timing, strategic vision, and additional acquisitions, they built Asurion into $6 billion revenue company. Early search fund investors achieved returns of over 100×.

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

Botanical Designs: Doubling in size through professional management

Edward McDonnell, UVA Darden MBA, used the search fund model to acquire Botanical Designs. The company 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. Implemented professional management practices. Expanded to new locations. 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. Industrial services. Landscaping companies. Distribution businesses. Specialised manufacturing.

Codie Sanchez has acquired multiple "main street" businesses. Laundromats. Car washes. Generating substantial cash flow from operations that most investors overlook.

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

ETA versus traditional startups

Direct comparison.

Pros of ETA

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 exist.

Leveraged returns. Use bank financing to amplify 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). Gain general management experience across all functions. Build credibility as a business owner, not just an "entrepreneur with an idea."

Cons and challenges

Upfront capital required. Need money for 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. Average search takes 19 months. May review hundreds of opportunities before finding the right fit. 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 lower ceiling than startups. Far less likely to fail. Also, less likely to create a unicorn.

Common pitfalls and how to avoid them

Mistake 1: Overpaying for mediocre businesses

Many first-time buyers get excited to close the deal. Overlook fundamental problems. Pay too much.

Solution: Establish strict investment criteria and valuation parameters before beginning the search. Get professional help with valuation. Be willing to walk away from deals that don't meet standards. If executing a roll-up strategy, buy a smaller business first. Be prepared to make (and pay for) mistakes. They're inevitable.

Mistake 2: Underestimating integration challenges

The human element often causes the biggest problems. Employee resistance. Customer uncertainty. Culture clashes can derail financially sound deals.

Solution: Spend time with the team before closing. Create a detailed 100-day transition plan. Listen more than you talk in the early days. Defer significant changes until you have a deep understanding of the business.

Mistake 3: Taking on excessive debt

Leverage amplifies returns but increases risk. If business performance dips, debt payments become a severe burden.

Solution: Structure deals with breathing room. Aim for a debt service coverage ratio of at least 1.5× (ideally 2×+). Include contingency funds for unexpected situations.

Mistake 4: Ignoring seller motivation

Understanding why the owner is selling is crucial. Retirement after decades of successful operation is very different from an owner trying to exit a declining business.

Solution: Ask direct questions about why they're selling now. Verify answers through diligence. Watch for inconsistencies in the story. Talk to others in the industry about the company's reputation.

Mistake 5: Doing it alone

ETA can be a lonely journey. Especially during the search phase. Without support, you may make preventable mistakes. Give up too soon.

Solution: Build a network of advisors, peers, and mentors in the ETA space. Join online communities like Searchfunder.com. Consider partnering with someone (like a co-founder) who complements your skill set.

Your action plan

Ready to explore entrepreneurship through acquisition?

Step 1: Self-assessment (1-2 months)

Skills inventory: What industries do you understand? What functional strengths do you bring?

Resources check: What capital do you have access to? Can you afford to search full-time?

Risk tolerance: How comfortable are you with debt and at what levels? What's your safety net if something goes wrong?

Personal goals: Why do you want to own a business (if you haven't done it before)? While owning a business might sound glamorous, it's also hard work, and you need to be prepared for it.  

Step 2: Education and preparation (2-3 months)

Learn fundamentals. Read key books like "Buy Then Build" (Walker Deibel) and "HBR Guide to Buying a Small Business" (Ruback & Yudkoff).

Connect with the community. Join ETA groups on LinkedIn, Searchfunder.com, and local meetups.

Develop financial skills. Ensure you can analyse P&Ls, balance sheets, and cash flow statements.

Talk to ETA entrepreneurs. Learn from those who already did it.

Step 3: Structure your search (1 month)

Choose your model. Search fund, self-funded, or hybrid approach.

Define search parameters. Industry, size, geography.

Assemble your team. Legal counsel, accountant, advisors.

Secure search funding. If using the search fund model, raise capital from investors.

Step 4: Execute your search (6-24 months)

Set up systems. CRM for tracking opportunities, templates for outreach.

Implement sourcing strategies. Direct mail, broker relationships, and networking.

Analyse opportunities. Develop a consistent evaluation framework.

Run a disciplined process. Weekly goals for outreach and analysis.

Step 5: Close and transition (3-6 months)

Negotiate the deal. Structure terms that work for both parties.

Conduct thorough due diligence. Leave no stone unturned.

Secure financing. Finalise your capital stack and close the transaction.

Plan transition. Work with the seller for a smooth handover.

Step 6: Operate and grow (ongoing)

First 100 days: Focus on listening, learning, and building trust.

Medium-term improvements: Implement operational enhancements and growth initiatives.

Long-term vision: Decide whether to hold for the long term or pursue an exit strategy.

Resources to accelerate your journey

The ETA community has grown substantially. Rich resources for aspiring acquisition entrepreneurs.

Books

• "Buy Then Build" by Walker Deibel - Most accessible introduction to ETA
• "HBR Guide to Buying a Small Business" by Richard Ruback & Royce Yudkoff - Harvard's structured approach
• "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 is a hub for search fund entrepreneurs and investors
• Acquisition Lab (Walker Deibel) - Structured courses and community for first-time business 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"an (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

Business school ETA programs

Many schools now have ETA programs. Harvard Business School. Stanford GSB. INSEAD. Chicago Booth. London Business School. IESE (Barcelona). And many more.

Final thoughts

The entrepreneurial landscape is evolving. Starting from scratch will always have its place. But buying an existing business has emerged as a compelling alternative.

Consider current realities:

Generational transfer of business ownership is underway. Baby Boomers are retiring.

Capital 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. Own challenges. But also advantages that shouldn't be overlooked.

Remember:

High agency isn't starting from zero. It's finding the most advantageous path to your goals.

Best businesses often least sexy. Plumbing beats social media apps for predictable returns.

Your biggest advantage is asymmetric knowledge. Understanding opportunities others overlook.