Want to be an entrepreneur but don’t have a business idea? There’s another way: acquisition

If you haven’t come up with a unique idea on your own, you can still be an entrepreneur. 

That’s the premise behind entrepreneurship through acquisition (ETA), serial ETA professional Doug Fastuca told Technical.ly, Temple University Entrepreneurship Academy Director Geoff DiMasi and a live audience at the Innovation Leaders Speaker Series. 

Fastuca’s professional experience also includes his work as the managing director at Malvern Investment partners and a board member at machine and metal equipment provider Schmidt Industrial Services.

“It’s becoming an entrepreneur by purchasing an established cash flow generating business which can be considered boring,” Fastuca said, “where you will become the CEO after purchase.”

ETA involves sourcing a deal, screening it for potential and then executing on the acquisition and management. The ultimate goal is to find an enduringly profitable business, according to Fastuca, which he defines as having consistent gross margins and cash flow, a reputation for its competitive advantage and a strong customer base. 

A well-known version of the ETA strategy is search funds, a structured model where investors provide capital to support the acquisition. 

Fastuca identified four things to consider as you start to dive in: location, industry, time commitment and funding the search. But before all that, he suggests starting an LLC or C corp and hiring a lawyer. 

“If you’re gonna be signing any kind of NDAs or legal documents, you’re just putting yourself at risk, and an LLC shields … your personal property,” Fastuca said. “A lawyer can answer those questions very, very simply.”

Now, you’re ready to start the process. Spending time on location with team members makes for stronger connections and gives you a better feel for the state of any physical facilities, according to Fastuca. That can help determine whether you’re seeking an acquisition nearby or want to broaden your search to a national scope, knowing you might have to regularly fly out somewhere to keep tabs on things . 

What industry should you pursue for an acquisition? Depends where your interests lie. Fastuca, who specializes in small manufacturing, said you don’t have to be an expert in a particular line of work for it to be a good fit. In fact, wide-reaching knowledge across sectors can help diversify an ETA strategy. 

There are two big time commitment factors to consider. From the get go, you’ll have to commit to a search. You could quit your job and make the search into your full-time gig. Or you could try to fit it into your existing schedule — you won’t need to give up a steady income, but it can take longer to find the right fit. 

Once you do find the target, you’ll have to be ready to undertake the role of CEO and coach the existing team through an acquisition. 

“Do no harm. These people have been running the business very well for a long time,” Fastuca suggested. That said, you’ll need to be ready to take the reins. “Make incremental changes, but be ready to make drastic changes if things hit the fan.”

Of course, you’ll also need the funds to purchase the company, which can be difficult to do without the right connections. 

Maybe you have the savings already banked. If not, you can seek personal and professional relationships willing to invest in you as a trusted source for this endeavor. Bank, private credit or Small Business Administration loans are also often a part of the process, Fastuca said. 

The ETA path can be rewarding, but you’ll want to really consider if the lifestyle is right for your career path and personal life. 

“This gives you the opportunity to control your own destiny,” Fastuca said, but he cautioned, “it’s kind of lonely at the top in these little companies, because many times you don’t have peers that you can hang out with.”