5 Reasons Why Entrepreneurship Through Acquisition is the Right Choice for You – A Perspective from Booth School of Business Graduates
Entrepreneurship is an exciting field, and there are countless ways to start a business. If you’re thinking about embarking on an entrepreneurial journey, you might be considering starting from scratch, leveraging your existing skillset or acquiring an existing business. In this article, we explore why entrepreneurship through acquisition may be the right choice for you. We’ll draw on insights from Booth School of Business graduates who have pursued this path and experienced great success.
1. You Can Start with a Proven Model and Infrastructure
Entrepreneurship through acquisition involves acquiring an existing business with a proven model, customer base, and infrastructure. This differs significantly from starting from scratch and building a business from the ground up, which typically involves a slow and lengthy process of research, development, and testing. When you acquire a business with a proven model and infrastructure, you save a considerable amount of time and resources.
According to a study by the Harvard Business Review, the failure rate for new businesses within the first five years is 50%. In contrast, entrepreneurship through acquisition has an above 70% success rate within the same timeframe. By acquiring an existing business, you reduce the risk of failure and increase the chances of success.
2. Access to Established Customers, Employees, and Suppliers
When you purchase an existing business, you gain access to a ready-made customer base, employees, and suppliers. This is a considerable advantage over starting a business from scratch, where you need to build these relationships from scratch. With an established customer base, you can focus on serving their needs and retaining their loyalty rather than focusing on acquiring new customers.
By retaining existing employees, you can tap into their knowledge, skills, and experience, along with any customers or suppliers they have established relationships with. This contributes to a smoother transition, more streamlined business operations, and more considerable confidence for prospective buyers.
3. Greater Access to Financing Options
Entrepreneurship through acquisition gives you greater access to financing options than starting from scratch. Traditional banks and commercial lenders are hesitant to offer business loans to start-ups without established revenue streams, cash flow, and customers. In contrast, they’re more inclined to lend to entrepreneurs who have a clear track record showcasing they can run a profitable business. Private equity investors and search funds are also other financing channels entrepreneurs who want to buy existing businesses can explore.
4. More Flexibility in Market Entry and Scaling
When starting from scratch, entrepreneurs have less flexibility to scale or change their business model quickly. In contrast, entrepreneurship through acquisition offers entrepreneurs the flexibility to enter new markets or pivot their business model to adapt to changing market conditions. Moreover, established businesses tend to have more significant cash flows in place that can simultaneously serve as collateral for financing or help you quickly invest in new ideas.
5. You Learn Practical Hands-On Experience in Running an Existing Business
Entrepreneurship through acquisition is a hands-on learning experience that gives aspiring entrepreneurs practical experience running an existing business. In the process, you gain transferable skills such as management, leadership, and team-building, among others, that are critical to your future businesses’ success.
Conclusion
Entrepreneurship through acquisition offers aspiring entrepreneurs a low-risk pathway to business ownership and a more considerable chance of success. By acquiring an existing business, entrepreneurs save time and resources, gain access to an existing customer base, employees and suppliers, and gain practical hands-on experience in running a business. If you’re considering entrepreneurship through acquisition, we hope these five reasons from Booth School of Business graduates provide valuable insights into why this may be the best choice for you.
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