Volker Hartzsch: What Is Entrepreneurship Through Acquisition?
Entrepreneurship through acquisition (ETA) is a means for aspiring entrepreneurs to own a business without expending the energy and time required to start their own. It can be an alternative (and potentially less risky) route to business ownership and offers two main pathways: search funding and self-funding.
The Benefits of ETA
Starting a business is often very stressful, involving long days, lots of work and – at the start, at least – typically very little financial compensation. The ETA option may provide a smoother road, with an entrepreneur able to purchase a healthy business with a solid customer base, already proven within its industry, and quickly take it to the next level.
The Importance of Communication
If an individual has decided to go down the entrepreneurship through acquisition route, it’s likely they’ll need to speak with many different business owners to identify the most suitable option for them. This will involve communicating around price point, and the prospective entrepreneur will need to convey their skills and values – as well as the opportunity they represent – to potential investors.
Search Funding and Self-Funding
As part of the ETA journey, an entrepreneur will need to decide whether to choose search funding or self-funding. The former involves forming a search fund to raise the necessary capital to help the entrepreneur find a business, whereas the latter is self-explanatory: the prospective entrepreneur will fund their search with their own money.
For some, the flexibility this option offers in terms of business industry and location is preferable. However, for others, search funding is preferable, giving immediate access to financial resources and capital, offering support and guidance from experienced investors with invaluable networks, and imbuing enhanced credibility.
Getting Started with ETA
To begin, the prospective acquisition entrepreneur should be clear on the type of business they wish to search for. Seasoned entrepreneurs like Volker Hartzsch understand that this will include considering the industry the business operates in and its size, as well as the time horizon.
The target business should be generating enough revenue to service a potential loan taken out for its purchase and sustain the buyer. Location is also vital: if the business to be acquired has a physical footprint, the entrepreneur must be willing and able to move to this location.
The search for the right business can be a lengthy process, with many acquisition entrepreneurs spending two years looking for the right target before closing the deal.
Additional Tips for Those Considering ETA
It is important to get the right advice by talking to other investors who have undertaken ETA, as well as accountants and solicitors who are familiar with ETA and can help you navigate the process.
It is also important to be prepared to work hard, as entrepreneurship through acquisition is not a get-rich-quick scheme. To be a successful entrepreneur through acquisition takes dedication and hard work.
Finally, doing your due diligence is essential. This includes assessing the market, talking to employees and reviewing financial statements, while thoroughly investigating the business you are considering buying in the process.