Growing up, my perception of entrepreneurship was straightforward. You came up with an idea, funded it out of your own pocket, and worked tirelessly to make it succeed. That was the only model I could see. I had no concept of venture capital, private equity, or the structural role that banks play in helping businesses scale.
I believed that businesses were exclusively bootstrapped, growing strictly through personal savings and reinvested profits. Fast forward a few years, and my perspective on business models and funding mechanisms has expanded significantly.
If you held those same assumptions, I completely understand. The modern business landscape is continuously evolving with new structures. Prior to starting my MBA, I stumbled upon an alternative model that changed my perspective on business ownership. I researched it extensively before my studies and deepened my practical understanding during the program. That model is known as Entrepreneurship by Acquisition.
ETA? What exactly is that?
ETA is a business ownership model where an individual or small team buys an existing small or medium-sized enterprise (SME) and operates it as the new CEO or owner, rather than starting a company from scratch. It’s a fast track to business ownership that bypasses the high failure rates and uncertainty of a startup by leveraging an established company with customers, cash flow, and proven products or services.
In other words, ETA lets you “buy a job” as a CEO, an opportunity to lead a company early in your career and share in the value you create without the uncertainty that comes with a startup, for instance.
Why should you consider ETA?
Desire for Ownership and Impact: Many young professionals now want direct impact and equity upside in their work rather than waiting to climb the corporate ladder. Instead of spending your 20s and 30s, for instance, in a lower-than-managerial or managerial level at a big firm, an ETA path can make you the CEO of a £1 million enterprise in your 20s or 30s. This level of responsibility and potential reward (both financial and personal) is incredibly enticing for entrepreneurial-minded young professionals. So if you're the kind of person who has this desire, this may be a path you can consider.
Great Transfer ("Silver Tsunami"): According to multiple reports and articles, including those by the Financial Times and The Wall Street Journal, many businesses, including small and medium businesses, have no succession plans. An FT report noted that 43.8% of firms have no succession plan in place and have not even begun considering one, while over 463,000 businesses are run by a single director aged 60, according to ExitRadar. Many of these companies are stable, profitable, and “boring” (in a good way) businesses. Exactly the kind of steady enterprises that are ideal for first-time acquirers.
Lower competition: Unlike large companies sought after by PE firms and buyers with larger pools of cash, these smaller firms may have fewer competitors looking to buy them, meaning you can buy them more easily and more quickly than if there were many competitors.
To go through this process, there are a number of steps you need to take, which I will briefly highlight, that include:
- Preparing and launching the search for the business you want to buy. You should be able to define the industry, size and characteristics of the business you want to buy.
- You need to evaluate the companies you find and conduct due diligence on them.
- You need to raise capital for the business, i.e a mixture of equity (cash from you and investors) and debt.
- Post-capital raise, the deal will be structured and the acquisition closed.
There's a lot more I could share on this topic, but I wanted to provide you with an intro to this business model.
ETA is not for everyone. It asks you to make a large commitment, assess a business carefully, and take responsibility for its people and performance. But for someone who wants to lead and grow an existing company, it may be a path worth exploring.
What are your thoughts on this approach to business ownership? Have you ever considered acquiring an established company instead of starting one from scratch? Share your thoughts in the comments. For more insights, visit hninsights.com and subscribe.
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