Entrepreneurship Through Acquisition: Why Buying Small Businesses is a Big Step for MBAs

acquisition handshake

With the wide world of startups and Fortune 500 companies available to MBA grads after earning their degree, it can often be difficult for graduates to take a step back and see all the new possibilities open to them. Such decisions as seeking a business to acquire after graduation can prove to be an incredibly lucrative and beneficial path for MBAs, and yet few choose this route. Despite studies showing an increase in the recent years, students choosing the “entrepreneurship through acquisition” path are markedly low.

Entrepreneurship through Acquisition

According to the Harvard Business Review, a common concern among MBAs who might choose this path is the “risk” of the endeavor. And though a comparison of business plans from small company acquisitions versus more traditional careers do not reveal a huge difference, students nonetheless are wary of the uncertainty that comes with the acquisition process.

Despite the understandable concern, there are a number of reasons why choosing “entrepreneurship through acquisition” could be the right choice for many MBAs.

A Quick Rise to the Top

While the search process for acquiring a small business can indeed be harrowing, it typically only makes up the first year or two after graduation. Once the business is acquired, the MBA takes on the role of CEO.

From there, the business evolves to the needs of the CEO, who brings their skill set gleaned from their MBA studies to an already acquired business.

Compare this to the post-graduation years of a student in a more traditional consulting role: it can take years for a new hire to reach the top of the pyramid, and often, when this upward climb does happen, it actually requires less use of an MBA degree, as graduates must evolve to the antecedent needs of the business.

Not So Risky Business

Of course, there’s a reason why acquisition searches are fraught with anxiety. A recent Stanford study found that roughly one fourth of all searches end without acquisition.

So what happens then?

The Harvard Business Review contacted former students who had ended their search without an acquisition and found that most had abandoned searches because another opportunity had come along.

This is common — students either give up their search or are distracted by other openings, not simply a lack of success. For these students, they will enter their first professional position with all the skill they gained during the search, likely making them better managers and more primed for success.

It’s a Win-Win-Win

The benefits of an MBA acquiring a small business aren’t one-sided: a business owner looking to exit their company may find several positive aspects of selling to an MBA.

For example, business owners often love the business they’ve built but for one of various reasons, find they are not cut out for the role of CEO. By handing the company off to an excited and skilled MBA, the owner can take on a role more suited to them, while still preserving the original mission of the company. For the most part, selling to an independent MBA will allow business owners to keep the management team in tact, which would likely not happen if the business were sold to a competitor or strategic buyer.

If the idea of being your own boss is appealing, acquiring a small business after earning your MBA could be the perfect route. By choosing to acquire a small business, an MBA can offer themselves more independence, greater growth opportunity, and tremendous benefits for those on the other end of the deal.

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About the Author

Alanna Shaffer

Staff Writer, covering MetroMBA's news beat for Atlanta, Houston, and Dallas.

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