Why to Consider Selling to a Young Entrepreneur

Over half of today’s small business owners are baby boomers and many of them are now nearing retirement without a tangible plan regarding who will take over the business. An increasingly popular choice is entrepreneurship through acquisition (EtA) or search funds, through which an individual or group works with investors to evaluate, negotiate, and close on the purchase of a business that they will own and manage, without using any of their own money.

Search funds have increased in popularity because they offer young and energetic entrepreneurs the unique opportunity to have a more involved CEO role, rather than the more traditional positions available post-MBA. Essentially, search funds offer aspiring entrepreneurs the opportunity to step into a CEO role at an early age and have partial ownership of a business. That being said, however, there is a risk-return tradeoff to consider as the searcher faces the opportunity cost of losing two to three years of professional development while they look for a business to purchase. There is also the chance that the entrepreneur won’t find any business to acquire at all and will then have to change their career path again.

For business owners, there are benefits to selling your business to a young entrepreneur. Entrepreneurs commit to moving to and operating that one business that they acquire for the long term. These entrepreneurs understand the financial opportunity that comes with owning a business, but also the risk; that is why they look for strong businesses where they can rely on the employees, culture, and practices. These entrepreneurs carry on an owner’s legacy, bringing their passion and energy to the business they acquire.

EtA creates an exciting opportunity for both entrepreneurs and owners. It allows owners to leave behind their company and its legacy in the hands of a young entrepreneur ready to take on a new leadership role.

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