Skip the Startup Struggle: Why Acquiring Businesses Beats Building From Scratch

In preparation for the most recent Business Acquisition Virtual Summit, our own Ross Tomkins hosted a live-streamed presentation titled: “When & Why to Acquire a Business: Using M&A to Create Your Future — with a 22x Dealmaker.”

During the called, he admitted to having made a rookie mistake:

After completing over 20 acquisitions in the past 6 years, he recently started a new business from scratch. Soon after, he was quickly reminded why acquisition is such a powerful strategy...

In a startup, you do everything and wear every hat. Until you can afford to build a team, you handle the $10 tasks per-hour tasks (like administrative tasks), the $100 tasks (doing market research), and the $1,000 tasks (taking sales calls).

But when you acquire an existing business? You leapfrog those painful early stages entirely. You inherit an established team, existing customers, proven supplier relationships, and—most importantly—immediate cash flow.

The Fortune 500 Playbook You Can Steal

Here's what most people miss: This isn’t inventing anything new; it’s simply copying what the biggest companies in the world have been doing for decades.

Consider these numbers:

• Google: 200+ acquisitions

• Apple: 114 acquisitions

• Amazon: 110+ acquisitions

• Facebook: 96 acquisitions

Even "smaller" players like Tesla have completed 12 acquisitions. These companies didn't become giants just through organic growth—they bought their way to the top, acquiring technology, talent, and market share.

These big boys are playing at the billion-dollar level, but you can play the exact same game at the hundred-thousand or million-dollar level.

Your First Critical Decision: Cash Flow vs. Exit Strategy

Before you start looking at businesses, you need to answer one fundamental question: Are you optimizing for immediate cash flow or building toward a significant exit?

If you need cash flow now, consider consulting-for-equity deals or growth partnerships where you take a percentage of an existing business in exchange for your expertise. These arrangements can generate income within 30-60 days.

If you're playing the long game, focus on a roll-up strategy—acquiring multiple smaller businesses in the same industry and combining them into something worth far more than the sum of its parts.

Here's the math that makes roll-ups so attractive: Small businesses doing $200,000 in profit typically sell for 3x earnings, but a business doing $2.5 million in profit? That commands 6-10x. 

If you buy a handful of small businesses at 3x and combine them efficiently, you've now just created something worth 6x or more.

The Rapport Factor Nobody Talks About

Here's something that might surprise you: In 4 of Ross’ acquisitions, his team wasn’t the highest bidder, but they won because the sellers saw them as the safest pair of hands for their life's work.

Small business acquisitions aren't won in spreadsheets, they're won in conversations. When Ross meets a seller for the first time, he never leads with numbers. Instead, he asks questions like:

• Why did you start this business?

• What happens to the business when you go on holiday?

• What are you planning to do after you sell?

• How many hours are you currently working?

Ross learned to start asking the last question the hard way—He was acquiring a physiotherapy practice with 2 owners. They budgeted to replace 2 salaries, but after closing, they discovered both owners were working 60-hour weeks, not 40-hour weeks. So, they actually should have budgeted for 3 full-time replacements, not just 2.

The "Imperfect Action" Principle

Ross has this phrase painted in massive letters on the wall of one of his warehouses: "Imperfect action beats perfect inaction."

You can attend every summit, read every book, and listen to every podcast about acquisitions...

But until you're having real conversations with business owners and reviewing actual financial statements, you're not making progress.

The more sets of accounts you review, the better you'll spot opportunities or red flags. The more sellers you talk to, the more natural these conversations become. There's no substitute for getting in the game.

Your Next Move

Ross’ leaves us with a final thought:

Forget what society tells you wealth looks like… the cars, houses, expensive clothes...

True wealth is good health, peace of mind, life options, and financial freedom. And acquisition entrepreneurship—instead of startup entrepreneurship—can more quickly accelerate your path to all 4.

So, whether you're an accountant looking to buy an accounting firm, a surfer wanting to acquire a surf shop, or someone with general business skills looking to help any company grow, there's an acquisition strategy that fits your situation.

The businesses are out there... The sellers are getting ready... The only question is: Are you ready?

Thanks for reading Acquiring & Exiting.

The Acquiring & Exiting Newsletter is brought to you by the same team behind the Business Acquisition Summit.