Understanding Entrepreneurship Through Acquisition
Entrepreneurship through acquisition, or ETA, means you buy an existing company and run it yourself.
The approach began with a search fund model at Harvard in 1984.
A search fund is a pool of equity that one or two people raise to find and buy a small business.
Since 1984, over 700 search funds have formed worldwide (Source).
Searchers look for firms that have steady cash flow, little tech risk, and room to grow.
They then buy and manage those firms for a typical span of six to ten years.
The search fund model has two main paths:
Traditional Search fund model: Here, one or two partners raise between $2 million and $10 million.
They get this money from a small group of investors. They then hunt for a target business and buy it with that fund. After the acquisition, they run the company and pay back the investors, often with strong returns.
Self-funded model: In this case, a solo searcher uses personal savings and debt. That searcher often targets smaller firms worth less than $5 million. This option lets the searcher keep full control. It also means the searcher takes on all the risk.
While the traditional funds aim at deals in the $5 million to $50 million range, self-funded searches target deals closer to $1 million to $10 million.
Traditional searchers often share equity with investors in exchange for larger capital and mentorship. Self-funded searchers keep all equity but bear every drop of risk.
Both paths follow the same core steps: raise money, find a business, do due diligence, close the deal, and run the business.
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Growth-Focused Strategies – From sourcing to marketing, we drive growth and prepare you for a profitable exit.
Expertly Managed Exits – We build a high-value brand designed for a Lucrative exit.
ETA Success Rates and Financial Outcomes
The 2024 Stanford GSB Search Fund Study reports a 57 percent acquisition rate for all searchers.
Traditional funds started in 2023 saw a 63% rate, above the decade’s average. Self-funded searches show slightly lower rates, nearly 48%, due to smaller deal sizes and fewer resources.
Across all search funds, the aggregate pre-tax internal rate of return is 35.1 percent (Stanford GSB, 2024).
Returns vary by deal.
About 11 percent of deals delivered more than 10× cash-on-cash returns.
Another 36% of deals yielded 2× to 5× returns. Yet about 31% of deals delivered a loss.
These numbers are a clear indicator that some deals fail and some win big.
Key factors matter: A searcher with an MBA from a top school often has better access to investors and deal flow.
An entrepreneur with deep industry experience may spot value that outsiders miss.
Tech-enabled services and healthcare firms often outperform more volatile sectors.
Finally, the broader economy matters: Low interest rates and easy capital raise deal volume and prices. High rates can slow deals but create buying chances for cash-rich searchers.
Why Choose Acquisition Over Starting from Scratch?
Starting a new firm can fail fast.
Nearly 90 percent of new startups fail in their first year (Harvard Business Review, 2023).
A major reason is untested markets and unclear product-market fit.
Buying an existing business cuts that risk.
You get a proven product, a known customer base, and an existing cash flow. That simple fact can save you time and stress.
ETA also gives you a fast track to CEO.
You do not need to climb a corporate ladder or beg venture capitalists for rounds of funding.
Once you close the deal, you step into the owner’s role. You control strategy, hiring, and growth from day one.
Buying an existing firm also gives you systems.
You inherit operational processes, supplier contracts, and a sales pipeline.
You can focus on growth steps like online ads, new product launches, or better customer service.
You spend less time building from the ground and more time making money.
Related: How To Use Trend Hijacking To Find Businesses Worth Acquiring
Best Practices for Entrepreneurs Buying Online Businesses
When you pick an industry, we strongly advise you to aim for recurring revenue models.
Subscription boxes and membership sites offer stable cash flow.
Always check market trends with tools like Google Trends and SEMrush. That data shows if interest in your niche is rising or falling.
You then size up customer concentration.
Low concentration means no single client can sink your business.
You also need to set a fair price. Start with a normalized EBITDA.
Use a conservative multiple. Avoid paying full market price when a firm shows volatile sales. A small price cut now can give you a safety net later.
You should hire a third-party accountant to confirm seller's claims. A clean audit reduces the chance of buyer’s remorse.
You do not have to go it alone. Join search fund communities like Searchfunder.com to share deals and tips.
Attend accelerator programs or MBA alumni gatherings where searchers meet mentors and investors.
That network can open doors to off-market deals and debt options.
Future Trends in Entrepreneurship Through Acquisition
The shift to online commerce sped up during the COVID-19 pandemic. Many firms moved sales and services online.
This change created new opportunities for searchers with digital marketing skills. They can tap into growth channels like paid search, email marketing, and social ads.
Emerging funding models also change the game. Entrepreneur-in-residence programs at top schools let you search while drawing a stipend.
Single-investor search funds let you work closely with one backer, speeding decisions. You trade a small equity share for quick capital and mentoring.
Rising interest rates may lower valuation multiples in the near term. That drop can open a window for well-capitalized searchers to make deals below peak prices.
Economic slowdowns can hurt consumer spending but weed out weaker buyers. You need strong cash reserves to strike in those times.
Overall, the ETA field will grow as more people see it as a clear path to business ownership.
We Help You Buy / Build, Manage and Scale E-commerce Brands for an EXIT
E-commerce Simplified for Busy Individuals – We handle the buying, building, and scaling, so you can focus on what matters.
Growth-Focused Strategies – From sourcing to marketing, we drive growth and prepare you for a profitable exit.
Expertly Managed Exits – We build a high-value brand designed for a Lucrative exit.
Final Thoughts
ETA lets you buy and operate an existing business, avoiding startup risks.
About 57% of searchers succeed, with an average pre-tax IRR of 35.1%. You can choose traditional or self-funded models based on your risk and capital.
Success requires post-acquisition work, due diligence, and fair valuation.
Focus on recurring revenue and digital skills. Online platforms and evolving funding trends offer growing opportunities in this space.
If you need help acquiring an existing online business, you’ll definitely want to check out our Acquisition Partnership Program.
We help you find the right deal, handle due diligence and negotiations, and support you post-acquisition to grow and scale your store 2–4x.
When the time’s right, we’ll guide you to a high-value exit.
Let us be your partner on your path to becoming a successful acquisition entrepreneur.
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