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Not every entrepreneur needs inspiration; entrepreneurship through acquisition might be where you shine.
When you think of an entrepreneur, you probably imagine some visionary with a grand new idea. The archetypal entrepreneur builds a plan centered around that idea and then bootstraps the business to great heights. We’ve seen this play out again and again — but not all of us have billion-dollar ideas. Does that mean we’re not entrepreneurs?
Of course not. You don’t need an Uber- or Airbnb-caliber idea to find your place as a business leader. It’s great if you have such an idea, but if you don’t, you still have options. For one, you can just buy a business.
Yes, “Just buy a business” might sound a little like “Let them eat cake” — somewhat obvious and unhelpful on its face — but I can offer advice on how to do it and what to do once you’re at the helm.
The search-fund model is perfect for entrepreneurship through acquisition
Failures have a way of breeding successes. My first foray into bootstrap entrepreneurship — a custom clothing business called Phoenix Clothiers — was a casualty of the 2008 financial crisis. However, I emerged with plenty of valuable experience and relationships.
One day over coffee, a former customer asked if I’d considered entrepreneurship through acquisition. I hadn’t thought of it before, but it made sense. I had a degree in finance and entrepreneurship from Emory University, had been an investment banker in the U.K. and was a voracious reader of books on business and leadership. While I didn’t have a big idea for my next great venture, I had the knowledge, experience and drive to do something great.
Soon after, I stumbled on a video by Irv Grousbeck, a Stanford professor considered the godfather of the search-fund model. The Stanford School of Business defines a search fund as an investment vehicle through which investors financially support an entrepreneur’s efforts to locate, acquire, manage and grow a privately held company.
The search-fund model was designed for folks like me who are on the path to being a leader but don’t necessarily have the desire or idea to go after a bootstrap startup. It’s a good middle ground, where you find a business that has a proven track record and make your own mark.
And so I attended business school with a pretty singular focus of entrepreneurship through acquisition. My business partner and I formed Seneca Partners and began searching in earnest for a business to buy in 2013. In 2014, we purchased Krueger-Gilbert Health Physics (KGHP), which would eventually become Apex Physics Partners.
You’ve acquired a business; now the work begins
You can buy a business, but you can’t buy the hearts and minds of your new colleagues or customers. As a newly minted CEO — especially one without technical expertise in your new industry — you might find yourself the subject of many rumors and uncomfortable questions: Does he know what he’s doing? Is he going to make deep cuts to staff? Does he even care about the industry?
In his popular book The Outsiders, William Thorndike chronicles several executives who succeeded in industries they weren’t technically versed in. One of the themes is that as an outsider, you have a unique perspective of the industry and its opportunities. You have a free pass to poke and prod and ask the dumb questions. When the answers to those questions boil down to “That’s how we’ve always done it,” you have a chance to make a change.
In other words, your ignorance of a company or industry isn’t a liability — it’s an asset. As the new CEO of a business, your job for the first year or so is to listen and learn the business’s true strengths and weaknesses. You must resist the temptation to make sweeping changes until you understand what is fundamental and elemental.
It’s also critical to spend the first year or so building relationships with your colleagues and customers. Drive to where they are. Take them out to lunch. Show them who you are — don’t leave them guessing. Go beyond the golden rule and follow the platinum rule: Do unto others as they would have you do unto them. This will help you earn respect and get buy-in from key stakeholders as you pursue your strategy to grow the company.
This will be hard for some hardworking entrepreneurs to hear, but don’t try to do too much. A consultant once told my partner and me, “You’ve mastered the art of putting out fires with your face.” Yes, we put out the fires, but it was painful. There are times when the most productive thing you can do is take a step back from the day-to-day, figure out what the problem really is and lead through your team.
Entrepreneurship through acquisition is a marathon, not a sprint
In seven and a half years, we’ve taken our business from a staff of 16 people in a handful of mid-Atlantic states to an organization that employs 130 people in more than 30 states. Those might not be eye-popping numbers, but it suits us fine. I’d rather see slow and steady growth that honors the company’s values than preside over rapid, unstable growth at the expense of the company’s staff and their families.
While the path of entrepreneurship through acquisition may not result in instant, stunning profits, and it may not be a vessel for your one great idea, it offers plenty else. It’s given us the chance to pursue long-term success, satisfy our intellectual curiosity and participate in a deeply meaningful learning experience.
When you’re the CEO of a company built around your idea, it’s easy to make everything about you. I still have a ways to go before I’m the CEO I want to be, but I understand that the role of CEO is not about me: It’s about what I can do in service of the company and all its stakeholders. The lessons I’ve learned about humility, accountability and leadership can’t be found in a textbook. These are ideas I’ve worked for, and they’re worth more to me as an entrepreneur than any one big idea.