For many aspiring business professionals the most commonly thought of way of becoming an entrepreneur is to start a business. However, a recent Harvard Business Review article discusses another popular route toward entrepreneurship: business acquisition.
Acquisition entrepreneurship is when an entrepreneur buys into an existing business that’s already running. And according to authors Richard S. Ruback and Royce Yudkoff, there is a growing popularity of acquisition entrepreneurship among entrepreneurs, with a record number of such acquisitions in 2016.
Ruback and Yudkoff point out a number of key differences between these two entrepreneurial routes that can help budding entrepreneurs — including those pursuing the Business Administration concentration in Entrepreneurial Management — better weigh different options.
For example, one of the key differences between starting a business versus buying into one is how quickly an entrepreneur may be able to feel the impact. Start-ups typically take time and demand a lot of effort to get the business up and running. In contrast, an acquired business allows the entrepreneur to jump into big-picture decision-making and assume a more high-level leadership role almost immediately.
At the same time, starting a business avoids many challenges associated with acquisition such as “search, deal negotiation, and transition to leadership,” write Ruback and Yudkoff. For example, searching for a business to acquire poses a difficulty because many “acquisition searches end without a successful purchase.” Also, the search can take six months to two years and requires full-time dedication.
Even once an entrepreneur has identified an opportunity and done the research, negotiating a deal may not be very straightforward. For example, securing the bank funds to purchase the business requires convincing the bank that this is a sound investment opportunity. Even when the funds are secured, there could be other buyers at the table complicating the negotiating process.
Finally, assuming leadership poses other threats like running out of cash — one of the most common issues for newly acquired small businesses, write Ruback and Yudkoff.
At William Woods University, students earning a Bachelor of Science in Business Administration who choose the entrepreneurial management concentration will have an opportunity to take several courses designed with entrepreneurs in mind. For example, BMT 325 Customer Service will help future entrepreneurs consider business transactions from the viewpoint of the customer. They will explore the role that customer service plays on the future of any business and what an effective leader can do to develop customer service policies and procedures that benefit all parties involved.