Being an entrepreneur isn’t always about launching a startup; value can be created and captured in many other ways. Creating value can mean acquiring a business and improving how it is run rather than starting one. Buying a business can be a quicker, less risky, and simpler pathway to entrepreneurship than launching a startup, as business operations are in place and a team is ready. But how can one become an entrepreneur through acquisition?
Experienced business owner Heather Barber answered this question in a workshop provided by Lassonde for Life, a free alumni program offering lifelong entrepreneurial support provided by the Lassonde Entrepreneur Institute at the University of Utah. Barber started her first business at 23. Now, she has five.
Barber compares buying a business to purchasing a house. You can build your dream home from scratch or find one with potential. One could create their dream home, or one could buy a fixer-upper in the right location. Renovating a house has a high reward for the effort put in and increases the home’s value.
What is true about houses is true about business. It may not be your dream, but it may be profitable. If there is cash flow and a solid customer base, you can create value for yourself and others. Underground construction, waste management, and plumbing are all far from glamorous but are economically valuable spaces.
Read on to learn more of Barber’s tips for finding, selecting, and upkeeping an acquired business.
Finding a business
Boomers are a cohort of adults born from 1946-1964. Twenty percent of this generation has a business, but many boomers are approaching retirement and don’t want to work anymore. The options for members of this generation are to shut it down or sell. Compared to shutting down, selling is the best-case scenario. Who better to sell to than the upcoming, tech-savvy generation?
Barber suggests prospective business acquirers start with the boomer generation. Find a business where you want to live and ask to buy it.
Lifestyle vs. high-growth business
There’s a difference between a lifestyle and a high-growth business. A lifestyle business follows a passion, allowing founders to live life as they like. For example, renting jet skis in Cozumel is a lifestyle business. Your life is great, but your business may not be high growth. High-growth business is not always fun and can be stressful but can make a lot of money. The route chosen depends on personal goals and presence.
Work does not always align with passions. Keeping identity and work separate can provide more balance in life. Barber said, “If you set your entire life around what you do for work, you set yourself up for failure.” Owning a business, or a job, does not define an individual when life has so many aspects.
Desirable business qualities
Barber points out there are several desirable business qualities to look for. Desirable attributes include high growth potential, scalability, strong management team, competitive advantage, and customer obsession.
Always consider what the owner takes home when evaluating a business. Besides revenue, consider what the owner can pay themselves and what other benefits they may receive. Look for a business with operations in place and marketing potential. Value can grow fast through marketing, advertising, and branding efforts.
Pattern recognition
When selecting a business to buy, pattern recognition is essential. “Industry does not matter,” Barber said. “It is the pattern that you follow.” Seeing gaps in the market and noticing potential leads to success. This way, organizations that adhere to upcoming trends may be identified. If a business has a consistent cash flow, the next steps become easier — such as receiving loans.
Focus on top-line revenue
Making money is easier than cutting expenses. Cutting expenses can derail quality. When a business is growing, sales are happening fast and require attention. Once an organization is up and running, it is easier to cut expenses, and downsizing is manageable.
Sales matter
“Every moment of every day you are in sales,” Barber noted. Sales happen in the small actions. Besides direct sales actions to customers, how entrepreneurs present themselves impacts customer perception – from dress, speech patterns, and interactions. Positive interactions with founders and companies help to convince consumers to support a brand.
