As the child of small-business owners, I have long admired what they do for communities. I knew I eventually wanted to own a company, but the real question was: to buy into an existing business or start a new one?
The possibility of acquiring an existing business became a reality when I learned that my company relies on people taking over existing insurance agencies from owner-agents. Most often, this happens when the owner retires and there is an opportunity to continue the business by becoming the new owner-agent. (This is in some ways similar to a franchise model, although Farmers agents are independent contractors and not franchisees.)
After doing my due diligence and considering all options, I decided to acquire one of these already established agencies. I hope my experience outlined below will offer helpful insight into the process for all future small business owners deciding whether to acquire an existing business or to start new.
A trusting client base
Acquiring a business provides an existing and already trusting client base. Not only did I walk into an office full of people and established processes, I also purchased the agency's existing book of business. This included clients who have worked with the agency for decades. As the "new guy," I had to gain their trust and ensure continued business, but that is part of the challenge and is exciting. Additionally, the revenue from the existing clients has helped fund the cost of retaining new ones, allowing us to take more calculated risks and grow faster, with fewer cash flow fears than a brand-new business.
An existing foundation
When starting a company from scratch, you start with next to nothing - no clients, brand recognition, staff, or revenue stream. Much of your time in the first few years is spent on building a client base, spreading the word about your company, and figuring out how to keep the lights on. However, when you acquire a company, you can hit the ground running. I purchased an agency from an owner who wanted to mentor me and boasted a 37-year record of serving the local community. The thoughtful mentorship, dedicated team and loyal customers contributed to a seamless acquisition and laid the foundation for success. Most business owners don't just sell their companies and leave, never to be seen again. My agency's former owner is available whenever I have questions or whenever clients want to get in touch.
Uncertainty for new staff and clients
From day one, transparency and open lines of communication with staff and clients is key. Through one-on-one meetings and other forms of communication, it is your job to share your vision for the business and how your staff and clients fit. Because acquisitions can lead to uncertainty for those involved, as soon as you can ease the minds of your new staff and clients, you will start building trust.
Everything you take in with your new acquisition isn't going to be perfect. While with a start-up, you set the path for products and the business standards, with an acquisition, pre-existing standards may not meet the level of quality you wish to provide; some of the products might not be ideal; or you might clash with certain staff members. You will need to spend time figuring out how to fix areas that need help, how to overcome staffing challenges, and how to explain any changes to existing clients. However, the upside is that imperfections provide an opportunity for you, the new owner, to make some real changes and make the business more of your own.
Steep learning curve
Naturally, the learning curve can be very steep with an acquisition. When you start your own business, you set the pace and learn while your company grows from ground up, but in an acquisition, you join a moving train and need to keep up with where you joined. You need to figure out your new role as a small business owner while at the same time learn the business itself. It will be tempting to compare your performance to that of the experienced previous owner, but that is unrealistic. Although the learning curve will be steep, once you get through the first few months, you will be amazed, like I was, at the progress and feel confidence in how well you've been able to get up to speed and maybe even surpass your initial goals.
The benefits I've experienced from acquiring my agency far outweigh the challenges. Thanks in large part to the solid team and loyal clients I've inherited, I feel confident in the stability of my company while I still reap the benefits of entrepreneurship I originally sought. If you, too, are looking to become a small-business owner, it might be worth exploring the possibility of acquiring an existing business instead of launching a brand new one.