Why entrepreneurs are best suited to acquisition led growth
While many people treat the phrases small business owner and entrepreneur as interchangeable the difference in mindset means the latter is a lot more suited to growth through acquisition writes serial entrepreneur and investor Gez McGuire.
The differences between an entrepreneur and small business owner
A rapid growth mindset is perhaps one of the greatest differences between an entrepreneur and a small business owner. While the latter is often willing to develop slowly and steadily through a combination of sales and marketing an entrepreneur will be looking to scale-up realise a healthy return, move on or add on.
For owners, the business they’ve chosen to setup is often related to their previous profession in some way. It may be within a sector or industry that they have a real passion for or simply a strong set of expertise in. Either way the risks are known and so are the likely gains. An entrepreneur will be a lot less risk averse and more willing to take a sector agnostic approach, perhaps investing in new technologies and services that are yet to demonstrate a commercial return but could be expected to achieve high yields in the near future.
Another defining point of a successful entrepreneur is their willingness to take a hands-off approach. By creating or in some cases adopting a strong management team they give themselves the time and freedom to either consider expansion of the current business or the development of something new. Taking that step away from day to day management can often be the hardest thing for an owner manager to do and may not occur until retirement in some cases.
Why are entrepreneurs so suited to acquisition led growth?
Acquisitions are one of the quickest and safest ways to achieve rapid growth and personal gain. What could take decades through sales and marketing alone can be achieved within months, with the right purchase likely to mean the tripling or quadrupling the size and value of a business overnight.
Finding deals isn't as difficult as it sounds. This is particularly true for entrepreneurs who have a willingness to purchase businesses in sectors which they may have limited or no prior knowledge. Owners are always willing to discuss the potential value of their business - if approached in the right way. There are hundreds of businesses listed for sale online but approaching those that haven’t declared themselves up for sale can often prove to be the most fruitful. This is in part due to a commission-based brokerage process that means that many businesses are overvalued, with very few going through to completion.
Being open to collaboration and new opportunities is perhaps one of the greatest assets of any successful entrepreneur. Having a willingness to enter into joint ventures and consistently search for new opportunities will place anyone looking to grow through acquisitions in good stead.
The importance of an established network
If handled correctly, purchases can often be made without the buyer having to put their hand in their own pocket, with finance based on the assets and future revenue of the new entity. To do this however you need to ensure that you have the right people in place to allow you to make a purchase and a clear route to market. I’ve spent a considerable amount of time ensuring that I have the right financers, legal experts and business prospectors in place to enable me to identify and make credible offers to businesses of all sectors. Without financial and legal backing, as well as a clear way of identifying prospects it can often be a long arduous and in some cases costly enterprise.
For entrepreneurs a willingness to take on risk, desire to grow rapidly and openness to new opportunities and collaborations means that they are well-placed to grow through acquisition. While it might seem so at the start finding businesses that are willing to accept credible offers isn’t as hard as it sounds, if you avoid looking in obvious places. Essential to the process is a thorough understanding of the finances of the target company and the right backing in order to secure funding for the acquiaition, but for those with the right mindset it will often be the quickest, safest and most guaranteed way of achieving business growth and personal gain.
The question is, as an entrepreneur, why wouldn’t acquisitions be a, if not the, central point of your growth strategy?
