Can an Acquisition Solve the Plight of the Entrepreneur?

Updated: Jun 23

Entrepreneurs—we are a unique bunch. We thrive on change. In fact, we love it. It is why we choose this path.

We’re also highly driven—to solve, to achieve, to create! But what do you think really drives most entrepreneurs? Most would say freedom, whether that is the freedom to pursue a passion, to develop a product, financial freedom, or time freedom.

What invariably happens for most entrepreneurs, though, is that, in their pursuit of freedom, they unwittingly build a new prison. It’s one they can’t take a vacation from, occupies their every waking thought, challenges their relationships, steals their time, pillages their finances, and at various stages, teaches all thirty-eight flavors of stress and heartache. Sound familiar?

Now don’t get me wrong: all these things are hugely valuable human experiences. I wouldn’t trade them for anything, but there has to be a point where the masochism stops, and you get some clear air.

So what’s an entrepreneur to do? Well, I believe the next step as an entrepreneur is adding deal-making to your tool kit. I believe that doing deals—buying and selling companies—is a core component of taking your entrepreneurial experience to the next level.

Look at any successful entrepreneur, and you will see that they grew by acquisition or created wealth through an exit of some sort, whether as a sale (like Elon Musk or Richard Branson) or as an initial public offering (an IPO, like Bill Gates or Mark Zuckerberg). An acquisition is the only way a business can double its size “in an afternoon,” and sometimes the only way it can grow or breakthrough to the next level.

Have you noticed that there seems to be a glass ceiling on company size in many industries, where you find thousands of similar-sized competitors and a few larger players? Well, a solid plan to break through and become one of the larger players is to buy up a number of smaller companies to give you a quick scale.

The Solution: Growing by Acquisition

You should do deals because it’s a great growth strategy.

I believe if entrepreneurs added a “growth-by-acquisition engine” to their existing organic growth strategy, they would quickly improve their businesses and create amazing shareholder value. It is only by creating more shareholder value that we can achieve the freedoms we foresaw when we started. Now, a common misconception about growing by acquisition is that vast amounts of capital are needed, and this simply isn’t true.

I’ve done dozens of deals with no capital, and the members in my Harbour Club have done hundreds more. Often it is more about meeting the seller’s needs and the deal structure than the price. For example, distressed deals can be a great way to add new customers and revenue with no cash upfront. My first-ever deal was with a “motivated” seller, and in a single transaction, I added a year’s worth of sales to my business. Since then, I have honed my strategies, done bigger deals, and—most importantly—worked out ways to find a steady stream of motivated sellers. I call these “tactical acquisitions”—simple deals that grow your business quickly. Large companies, like Facebook, do dozens of these kinds of deals every month.

But you don’t always have to look for distressed companies; you can do deals with perfectly solvent, profitable, debt-free companies that are well run. How? By focusing on the needs of the owners and working out a structure that is a win-win but doesn’t involve cash upfront.

And no cash upfront doesn’t mean you need debt. Unfortunately, many people use working capital finance to do deals, and this can get toxic, fast. You are basically selling your future income and giving that money to a key employee…to leave!

One of the most valuable things I’ve learned about growing by acquisition is that you don’t have to run a marathon to grow your business; you can just run the last ten yards and still get the medal. This forced me to think more strategically, more like an investor or a shareholder. It was an epiphany, and the hairs on the back of my neck were standing up! I had just dismantled everything I believed to be true: I found a hack for value creation that didn’t involve blood, sweat, and years.

So, can an acquisition solve the plight of the entrepreneur? Maybe not fully, but it can help you break through the glass ceiling to level up and achieve growth goals in the time it takes to sign the deal. As I said before, it doubled my previous annual sales in an afternoon—and it can do the same for you.

Next time, I look forward to sharing more about something I’m deeply passionate about value creation and the inequality that plagues small- to medium-sized businesses. I look forward to sharing more with you then.

Until then, tell me below, what drives you as an entrepreneur? What makes you tick?

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©Copyright Jeremy Harbour 2020