How Entrepreneurship Through Acquisition Works

Entrepreneurship through acquisition (ETA) lets entrepreneurs become business owners without starting a company from scratch. Instead, they purchase an existing business with established customers, operations, and revenue. 

This approach can reduce some of the uncertainty of launching a startup, but, as with any business endeavor, there’s financial risk, and finding the right business requires time and careful planning. For entrepreneurs using investor-backed search funds to acquire a business, the median search lasts 19 months, according to the 2026 Search Fund Study published by Stanford Graduate School of Business. Perseverance and knowing where to look can pay off.

This guide explains how ETA works, how to evaluate businesses for purchase, and the most common ways entrepreneurs fund an acquisition.

What is entrepreneurship through acquisition? 

Entrepreneurship through acquisition is a business ownership model in which an entrepreneur purchases an existing small or medium-sized business instead of founding their own. The entrepreneur then seeks to grow the business over time.

For example, Ricky Jones acquired ski mask brand Stratus from its founder after working with the business and building his ecommerce expertise. 

“The product really sold it for me,” he says on an episode of the Shopify Masters podcast. “I was super interested in it, and it was kind of a no-brainer for me to take it on.” Under Ricky’s guidance, the business has surpassed 10,000 orders and is doubling revenue year over year.

ETA has gained traction in recent years. Many universities and business schools have ETA opportunities for students, including clubs, conferences, mentorship opportunities, or even dedicated ETA fellowship programs. 

The next decade is likely to see increased entrepreneurship through acquisition. Baby boomers—the youngest of whom are now in their early 60s—are exiting the market, creating what McKinsey calls a “once-in-a-generation wave of ownership transitions.” The management consulting firm predicts that some six million small and medium-size businesses may change ownership by 2035. 

Pros and cons of acquiring a business

Entrepreneurship through acquisition offers a different path to business ownership than starting a company from scratch. Like any business model, it comes with advantages and trade-offs to consider before deciding if it’s the right approach. 

ETA pros 

ETA has many benefits:

• Faster path to business ownership: Buying an existing business lets you skip many of the early stages of starting a company, such as sourcing products, procuring operational tools, planning a launch, and hiring a team. 
• Proven demand: An existing business has already demonstrated market demand, reducing some of the uncertainty that comes with launching a new venture.
• Existing cash flow: Unlike many startups, an acquired business may already generate revenue, giving you a financial foundation from day one. 

ETA cons

ETA also has some downsides:

• Higher upfront investment: Purchasing a business can come with significant upfront capital requirements, unlike starting a business small and investing as it grows.
• Transition challenges: Taking over an existing business means earning employees’ trust, maintaining customer relationships, and adapting to an established company culture.
• Less flexibility: Rather than building your own business from the ground up, you’ll spend more time working within an existing framework to improve operations and grow the business.

How to find the right business to acquire

• Source and filter prospects
• Coordinate with the seller
• Review financial and business records
• Assess company culture
• Review the brand’s online presence
• Prepare for life after the deal closes

Finding the right opportunity requires patience and a deliberate search strategy. Here are some strategies you can use to do it right: 

Source and filter prospects

As you start to search, evaluate whether a sector or particular business is a good fit for your knowledge and experience. Don’t overlook specialized businesses that appeal to your niche skills or passions. Shopify research found that product categories outside the top 100 account for nearly 55% of all sales across the ecommerce platform. 

Once you zero in on your area of focus, work your current network and aim to build new connections to generate an opportunity pipeline. Meeting people and talking to business owners can be fruitful and yield leads, as can cold calling.

But when it comes to finding people who are selling their small business, nothing beats pounding the pavement, says Eduardo Zaldivar, cofounder and managing partner of Mosaic ETA, a private equity firm that invests in search fund entrepreneurs and the companies they acquire.

“You smile and dial, you call, you email, you visit in person,” Eduardo says. “Going to conferences, showing up, knocking on doors: That’s how the vast majority of searchers acquire.”

Even if a business owner isn’t ready to sell, keep in touch. Just because they aren’t ready to sell now, doesn’t mean they won’t be ready in the future.

There are also online resources, but Eduardo advises buyers beware. According to him, there are legitimate platforms, run by ex-investment bankers or ex-ETA searchers, and “very illegitimate” ones. He also cautions that most searchers don’t acquire companies through those platforms. Still, you may find it helpful to look online, whether via social media or signing up to receive newsletters. 

Some online resources include:

• ETA-focused business brokers
• Newsletters, workshops, or coaching
• Platforms that list businesses for sale by region, size, annual revenue, asking price, financing options, or sector

No matter your research approach, undesirable businesses will be numerous and necessary to filter out. Consider it normal if only a tiny fraction of the businesses you find are worth pursuing.

Coordinate with the seller

Once you narrow in on a business you might want to acquire, meet the seller to get a better understanding of the business. 

“It has to be a really tactful, respectful approach,” Eduardo says. “Sellers have a lot of options, and they’ll cut you off if you’re either aggressive or disrespectful.” 

He encourages searchers to try to get an informal understanding of the business’s financials within one to three meetings. “No lawyers are needed at this stage,” he says. The searcher can move on if the business is not the right fit.

If the acquiring process is progressing and both parties are happy, they will typically sign a letter of intent (LOI), which outlines the proposed terms of the deal and often includes an exclusivity period while due diligence is completed. 

Review financial and business records

You can get more granular insights into a business’s financial records after the LOI is signed, but before closing the acquisition. 

“That’s probably one to six months into the relationship,” Eduardo says. “Don’t ask for the Excel of their finances before LOI and certainly not before several months of building trust.

“Once there’s alignment overall, it is part of responsible due diligence to ask for all the documentation,” he says. This financial review typically takes place 45 to 90 days before the business acquisition is completed.

Consider asking for: 

• Proof of annual recurring revenue in the case of a subscription business
• Client base: Is it reliant on a single company or multiple customers? 
• Customer retention rate
• Financial statements
• Tax returns
• Contract terms with suppliers and employees
• Regulatory accreditation 
• State of inventory

Assess company culture

Visit the business’s office or production site, go in the field, and talk with employees of the business. Your level of access depends on how far you’ve progressed in the acquisition process and the trust you’ve built with the seller. 

Take note if the company culture is a good fit for your personality, management style, values, and lifestyle. Determine whether the current seller’s attitude and management style resonate with your own. Attend virtual meetings if the company is fully remote to assess employee morale, or go in person if possible. 

Review the brand’s online presence

If the business has a social media presence, look at its posts and engagement. Note what the business projects to the world. If the business is consumer facing, look at reviews and social media comments. Some negative reviews are par for the course, but use discernment when it comes to making sense of whether they’re making their customer base happy. 

Search reputable publications or resources, like the Better Business Bureau, for any history of complaints, lawsuits, and other issues.

Prepare for life after the deal closes

The purchaser is the new owner once the deal goes through. On day one, you roll up your sleeves and become responsible for all aspects of the business, from payroll to IT and marketing. No matter how familiar you are with the industry or a similar existing business, there will inevitably be surprises. 

Listen to employees to understand how systems could be improved. Assess where to make needed change, from employee hiring and firing to updating supply chains. Stay curious and keep learning.

Funding approaches to ETA

• Self-funding and SBA loans
• Search funds
• Private equity search funds
• Seller financing

Many entrepreneurs need some type of business financing to support either the search process, the acquisition, or both. Searchers raise capital in various ways, contingent on their access to resources, investors, and the asking price of the existing company. Here are some options:

Self-funding and SBA loans

Some ETA entrepreneurs are in the financial position to purchase a business outright with their personal savings. Often, though, entrepreneurs pursuing a self-funded business acquisition combine personal capital with external financing—most notably, Small Business Administration (SBA) loans. This hybrid approach lets entrepreneurs maintain more control and equity in the business compared to traditional investor-backed acquisitions.

Search funds

Search funds have become an increasingly popular ETA financing model over the past several years. University business school incubators, accelerators, and fellowships all use search funds. The entrepreneur (called the searcher) teams up with about 10 to 15 additional investors, typically a mix of individuals with personal funds and private equity investors, who also act as mentors and advisers. 

The search fund pays the searcher’s salary and search expenses, typically in the $500,000 range, while they search for a desirable business to buy. Once they find a suitable business, the search fund investors get the first opportunity to invest in the newly acquired business. If the deal moves forward, the investors provide another round of capital to purchase the business. 

Every deal is different, but typically the searcher becomes the CEO, sets their salary, and gets anywhere from about 8% to 25% in equity. “The searcher will start out owning a smaller percentage,” Eduardo says. “If they perform over time, their percentage will increase, which aligns incentives for both the searchers and investors.”

Some CEOs create a board of advisers; others have more informal relationships with their investors who provide guidance and advice. If they sell the acquired business years later, search fund investors may earn substantial returns. According to Stanford Graduate School of Business’s 2026 Search Fund Study, search funds generated an annual internal rate of return (IRR) of 33.9% through December 31, 2025. 

Private equity search funds

The structure for these is the same as a search fund, but, in this case, all the people putting up funding are private equity investors. You’re not teaming up with anyone who’s dealing with their own funds, but rather private equity firms that specialize in funding ETA entrepreneurs by using outside capital from investors. 

ETA private equity firms are not the same as traditional mergers-and-acquisitions private equity firms, which often purchase businesses for investment and may sell them after growing their value. The incentives for private equity–funded ETA entrepreneurs are different from a big private equity firm looking to flip a business. 

“Let’s say a private equity firm has 15 companies,” Eduardo says. “If one fails, it doesn’t matter as much because they have 14 others. A searcher has one company, and it’s their entire life.” As such, the financial incentive for an ETA entrepreneur is to expand the business and keep it stable.

Seller financing

Some sellers lend the purchaser some of the funds to make the acquisition. The buyer pays off the obligation in increments, just as they would with a standard loan. The seller might also retain a small percentage of the business ownership in equity.