04_The Professional Pivot: From Corporate Executive to Business Owner

12.03.23 11:49 AM By Lorette Farris

04-Evaluating Business Acquisitions for Professionals Leaving the Corporate World

 | Disclosure and Transparency StatementThis article includes AI-generated content; see the complete statement below.

After years of moving up the corporate ladder, many executives dream about being their own boss. The security of a regular paycheck begins to lose appeal as you ponder leaving your corner office for an entrepreneurial venture you can call your own.

I understand why going out on your own can sound terrifying when you're accustomed to the structured corporate environment. A regular salary, benefit packages, and career mobility programs – walking away from the stability is challenging. But many professionals in leadership roles have made the pivot, and most find it incredibly rewarding.

The key is being strategic in how you approach business ownership. Too often, executives fall into the trap of romanticizing cute little shops or buying into franchise opportunities without doing diligence. When making a significant career and financial decision like this, you need reliable data to evaluate your options objectively.

As a business broker and M&A advisor who has guided corporate veterans in their transition, I'm here to demystify this process for you. Let's walk through a pragmatic framework focused on profitability indicators, growth potential, and risk assessments. By focusing on the numbers and ratios instead of getting swept up by glossy brochures and enthusiastic reps, you'll set yourself up for success as you embark on the next chapter – leading a company with your vision in mind.

Understand the Acquisition Landscape

As a corporate executive exploring business ownership, the most strategic path forward is often acquiring an existing company rather than starting from scratch. With baby boomers hitting retirement age, a massive turnover is happening across industries. Small and mid-sized business owners are looking to exit and enjoy the fruits of their labor, which has primed the landscape for acquisitions.

Rather than building something from the ground up, purchasing one of these established businesses allows you to leverage existing infrastructure to scale faster. You benefit from years of brand building, honed operations, loyal customers, proven products, and retained employees. The foundation is there – you bring a fresh perspective to take things to the next level.

Take John, a Fortune 500 manager eager to break out on his own. He opted to acquire a respected local marketing firm that had been steadily growing over the past twenty years. Because the business was already thriving, the transition was smooth. John could rely on the recurring revenue and talent roster on day one while he got fully immersed. Eighteen months later, he expanded service offerings and added additional team members to support higher demand. Now, he is enjoying life as his own boss, leveraging his corporate expertise in a more flexible and fulfilling venture he can shape from the inside out.

The marketing firm is just one example of an established small business that makes an attractive acquisition target. As you survey the landscape, prioritize options aligned to your background that have demonstrated profitability and growth. A business like this won't come cheap. Still, you can make the numbers work with the right combination of down payment, seller financing, and outside capital. Finding these diamonds in the rough will take some legwork, but the payoff of walking into an operating venture from day one is well worth it.

Decoding the Market of Opportunities

With the impending retirement of numerous baby boomer entrepreneurs, the market landscape is undergoing a significant transformation, creating an opportune moment for acquisitions. These businesses, meticulously developed over their owners' lifetimes, now present corporate professionals with an entry into ownership roles within established operational frameworks. Moreover, these businesses possess loyal customer bases and reliable revenue streams.

Let me illustrate this point with the story of Michael, a seasoned corporate finance executive who worked with an experienced M&A advisor. The advisor guided Michael through the process of seamlessly transitioning into owning an established financial consulting firm. The firm's original owner was a retiring baby boomer looking to sell her decades-old practice to the right successor who could carry on her life's work. Through this acquisition, Michael ensured continuity of service under an already trusted brand while injecting fresh corporate strategies from his career background to further enhance the firm's success in the years to come.

The mature M&A landscape, with many baby boomer-owned businesses ripe for acquisition, allowed Michael to quickly step into a leadership role within a solid company without facing the risks and uncertainties associated with launching a startup operation. With the advisor's consultative guidance, Michael was able to secure financing, navigate negotiations with the seller, and walk into an ideal firm on day one - with trained staff, recurring revenue streams, and tremendous growth potential.

Timing: The Strategic Intersection

When making the leap from corporate to business owner, timing is critical. The stars need to align personally and market-wise for an acquisition to pan out advantageously.

On the personal front, you need to gauge your internal readiness for change. Are you genuinely prepared to trade the structure of corporate life for the demands of entrepreneurship? For some, the desire for autonomy and new challenges builds over time until taking the risk is irresistible.

At the same time, sector conditions must be ripe for entry based on your background and skills. Thirty years in consumer goods? Identify a promising brand in a growing niche. Have IT and cybersecurity expertise? Emerging data privacy regulations are flooding the space with opportunity.

I've seen well-timed pivots firsthand that leveraged both personal readiness and market momentum when making strategic acquisitions. Take Sarah, an IT executive who saw cyberattacks skyrocketing as remote work became ubiquitous. She capitalized on surging security demand by purchasing a managed security services firm whose aging owner welcomed new blood. It was the perfect intersection - Sarah was eager to steer her own ship after years of climbing the corporate ladder, and cybersecurity solutions were more vital than ever.

Another example is Brian, a longtime hospitality executive who struck out on his own. He acquired a regional hotel chain right as leisure travel rebounded. Then, he drew on his corporate efficiencies experience to update their operating model. In both cases, the desire for change aligning with ideal acquisition prospects in their domains led to fulfilling outcomes.

Timing major transitions is certainly more art than science. But by reflective readiness plus researching market indicators in your specialty, you can identify promising windows to pivot to business ownership.

Challenges to Consider

Making the leap from corporate executive to business owner is undoubtedly rewarding. But I'd be remiss if I didn't address some of this transition's very real challenges. I want you to go into this with your eyes wide open.

  1. There is no guaranteed paycheck. As an exec, you're accustomed to a steady salary and cushy benefits package. But owning a business means far less predictability when it comes to getting paid. You'll need to demonstrate commitment working for free upfront quite often.  For instance, when ex-CMO Ashley acquired a digital marketing agency, she went 90 days before taking any salary despite working around the clock. Revenue flowed, but she reinvested everything to hire top talent and upgrade systems first. You'll need financial reserves while building.
  2. Greater financial risk. In the corporate world, you likely weren't accountable for P&L in the same way. With your own business, you shoulder all the risk. One disastrous quarter or major lawsuit can tank a company. It's vital that you have an appetite for risk as an owner. Marcus received sound advice when he purchased a fleet of food trucks. He smartly isolated risk by incorporating each truck separately. When one truck was involved in an accident early on, the business was insulated from litigation threats and disruption.
  3. Potential social isolation. As an executive, you were likely surrounded by support staff and colleagues. Running your own show can be solitary. If the isolation gets to you, be intentional about networking with peer owners through industry associations and mastermind groups. After her long tenure overseeing HR for a Fortune 500 bank, Patty thrived on the autonomy of acquiring her own small boutique HR consultancy. But she soon found herself missing the social bonds and support of corporate life dearly. With only a tiny team of contractors initially, her home office felt isolating. Patty combatted loneliness by actively networking with other women entrepreneurs in her community. She joined a local Women Presidents' Organization (WPO) chapter and scheduled monthly coffees and lunches. Leaning on fellow business owners for camaraderie, idea exchanges, and partnership opportunities restored joy during stressful stretches when the family didn't grasp her experience. Patty learned she needed to proactively nurture a community she no longer had built in at corporate.
  4. Learning business basics. While corporate honed your specialty skills, owning an operation means getting good at everything from marketing to HR, accounting to compliance. Be ready for a learning curve as you rapidly expand your skillset. Consider a fractional CFO or specialized consultants to fill knowledge gaps. The key is anticipating potential pain points so you can proactively mitigate rather than reacting when challenges surface. I guide clients through contingency planning to ensure they're prepared for the ups and downs of business ownership after corporate life.
  5. Managing your own success. In the corporate world, promotions and metrics were clearly defined. As a business owner, it's on you to set goals, measure key performance indicators (KPIs), and self-monitor your progress. Adjusting to this autonomy takes work for some executives used to preset paths. Take Lena, who left a GM role to purchase a custom home goods business. Without a predefined ladder to climb, she initially struggled to accept that her advancement was entirely in her hands. Lena was coached to set and track metrics tied to the growth she wanted to see annually. Her mindset shifted once she took ownership of quantifying her vision. 
  6. Long hours. As an executive, you may have grueling weeks. However, owning a business often means going 24/7/365, especially in the early days. You and your family must accept this heavy lift when acquiring an existing company or say goodbye to defined weekends for the first few years. When Barry, former corporate counsel, bought an independent law practice, he discovered trial prep meant 20-hour marathon days rather than handing off cases at 6 pm sharp. His spousal negotiations included a lavish annual vacation to provide temporary relief for the household. 
  7. Limited time off. Between client demands and overseeing operations, taking extended vacations or sick leave is often impossible for new business owners. Strategic delegation to a strong management team has to be priority one. Waiting lists, shift overlaps, and emergency coverage procedures will be your best friends when you step away. Craig was initially thrilled when he purchased an established landscaping firm as his ticket out of an executive sales role he had grown bored in. But over that first grueling summer season, he quickly realized taking holidays and days off wasn't an option. With time-sensitive client project deadlines and being perpetually short-staffed, he had to indefinitely delay that 2-week trip to the Bahamas. 
  8. Capital outlay pressures. You may have managed P&Ls as a corporate exec, but the actual dollars were theoretical; as an owner signing checks and facing supplier invoices every 30 days, the stakes feel exponentially higher. I've seen execs lose sleep over making payroll on slow revenue months. We advise new owners to set up 18 months of capital reserves so they can breathe through the ebb and flow. Connect with multiple financing sources, including community banks and alternative lenders, to access capital quickly if needed. 
  9. Relationship stress. The demands on your time can strain personal relationships, especially in the first few years. The work is all-encompassing. Be transparent about expectations upfront and carve out intentional date nights or family time. Consider bringing on a business coach for the psychosocial aspects many new owners face. Having an outlet to voice fears, frustrations, or disenchantment can help prevent sending that negative energy towards loved ones unfairly. 
  10. The buck stops with you. There's always a safety net in corporate life, even as a senior executive. Owners have to make high-stakes decisions without that backstop team. Licensing agreements, expensive equipment leases, taking on investor capital - the accountability can feel heavy.

Developing an advisory board of fellow owners or mentors can prove invaluable for getting guidance before major calls. Just know that ultimately, wins and losses sit firmly on your shoulders, whether home runs or strikeouts.

Rewards to Savior

I've outlined considerable challenges with acquiring a business, but I would be remiss not to spotlight the immense upsides. Once you push past the demanding early phase, life as an owner unlocks gratifications the corporate ladder could never offer.

  1. Total authority. Remember battling bureaucratic bottlenecks for simple sign-offs? As the head honcho, you dictate every aspect of operations without justification. The autonomy is incredibly fulfilling once you get used to it. Take ex-executive Anne, who bought a thriving pet supply retailer. She no longer needs permission to test an express checkout lane or extend store hours for customer convenience. The little day-to-day decisions that shape success are entirely in her hands now. 
  2. Reaping rewards. Corporate bonuses feel abstract compared to seeing revenue surge firsthand thanks to a viral marketing campaign you developed or a new product line you sourced. Your vision unfolding fuels motivation at all hours. Take former Sales VP Andre ringing the bell at closing after his custom printshop delivered their first million-dollar fiscal year since he acquired it. His tireless hustle built that prosperity. 
  3. Values alignment. Executives often reluctantly uphold policies they privately disagree with. Calling your own shots lets you cultivate a workplace genuinely aligned with your principles from parental leave, environmental footprint, community giving, and beyond. Amit had risen far in the telecom industry, but growing misgivings around privacy policies that monetized user data drove him to purchase a small ISP provider instead. Finally able to weave ethical standards into operations, Amit instituted transparent data-gathering practices, funded local digital literacy programs, and even offered subsidized internet for income-qualified households. He felt proud upholding his convictions through the business. 
  4. Leadership impact. Managing teams in corporate settings centered on driving performance metrics. Guiding employees now provides infinitely more chances for mentorship moments that inspire loyalty through authentic human connections. Former retail executive Tessa never found formal mentorship initiatives rewarding in the cutthroat corporate domain. However, acquiring a small pharmacy chain outlet introduced daily opportunities to coach young interns from underserved communities on professional skills that changed trajectories. Seeing her proteges blossom made the risk worthwhile. 
  5. Unleashing ideas. When concept testing required seven steering committee reviews, bold innovations were stifled. Chasing your most daring visions without restraint is liberty few positions allow. Fund your most audacious experiments and see what sticks! Product innovation at the CPG giant Melissa worked for involved an 18-month R&D cycle rife with consumer testing. When she took over a fledgling candle maker, she had the liberty to swiftly launch adventurous new scent profiles that captured niche audiences like gearheads and foodies. Melissa found untethered creating profoundly fulfilling. 
  6. Accelerated growth. By necessity, business owners expand their skill sets fast. You could oversee marketing, finance, HR, and branding within months. The compressed learning curve is invigorating. Mark expected his Walmart Supply Chain background to ease the transition to running a small-scale mattress manufacturer. But in just months, he picked up web design, branding, Ops optimization, and even some light welding equipment repairs on top of navigating his specialty. The exponential learning was invigorating after years in a corporate silo. 
  7. Work-life harmony. Once through the survival phase, owners can build customized lifestyles aligning business and personal priorities more seamlessly than rigid corporate careers often allow. Owning her PR agency allowed Chantel to balance her professional and personal realms. Summertime Fridays spent at aquarium camps and school potlucks were non-negotiable. At the same time, she maintained Melissa McCarthy and other A-list clients thanks to an ace team she could direct remotely. Blending priorities was finally achievable. 
  8. Freedom from office politics. Hidden agendas, sabotaging colleagues, gossip circles, taking credit – executives can tire of the repetitive, unproductive drama. As solo captain, you dictate the culture. Hire those aligned with your values and vision. Model the sincere, collaborative energy you want to see. After a messy merger process full of closed-door negotiations and throwing colleagues under the bus, health tech executive Brenda longed for transparent human interactions. Acquiring a tiny custom medical prosthesis startup introduced her to impassioned pros who shared knowledge freely and collaborated without manufactured competition between teams. The open, mission-aligned environment felt like a reclamation of her purpose.

The Path to Acquisition Readiness

After weighing considerable pros and cons of leaving corporate life for business ownership, proper diligence, and strategic preparation become make-or-break factors when seeking the right acquisition target. Remember, with risk comes reward if aligned correctly to experience and aspirations—melding ambition with market realities.

My framework starts by analyzing industry trajectories with an eye for high-growth niches related to your expertise. For example, marketing executives with digital content experience should explore innovative startups (yes, acquisitions are not only about retiring baby boomers). At the same time, logistics leaders would better fit an e-commerce operation poised to scale. Location opportunities abound only if grounded in real social and economic trends.

With a target sector and future objective clarified, evaluate operational compatibility. Suppose you eventually hope to build a values-based culture but purchase a rigid hierarchy unlikely to embrace change. In that case, trouble brews – just like the risks of isolation we covered. Vet current structure, policies, and team dynamics thoroughly. Assess where your leadership style can elevate versus overwhelm existing workflows.

Assessing Financial Readiness

When executives set their sights on business ownership, financial preparedness extends far beyond personal savings. With acquisitions, you should blend capital from diverse sources into cohesive infusion plans. I take a 360-degree view of the resources available based on your situation. This customized perspective spotlights options you may overlook for a masterful fiscal foundation.

Consider David, a financial analyst targeting a supply chain operation. He wisely braided liquid savings with an SBA loan to minimize risk. The blended capital ensured smooth sailing through unforeseen headwinds post-purchase without sinking prospects for growth investments.

Financial readiness involves assessing holdings and your economic landscape's full terrain. What unconventional tools can elevate strong personal capital? Rollover for Business Startups (ROBS) opportunities exist for those with retirement bounties to fund purchases while avoiding early withdrawal penalties. This approach allows you to use 401(k) savings to support the purchase while preserving the retirement funds and circumventing potential tax penalties and early withdrawal fees, illustrating a savvy use of available financial instruments to facilitate a business acquisition. Some sellers offer creative financing terms to secure worthy successors.

Concluding the Pivot With Precision

For executives looking to traverse the corporate world but hunger for a new challenge, acquiring a small business might satisfy that desire. Today, the timing aligns perfectly for leaders looking to divert skills into ownership. Guiding profitable ventures into the next era to channel your capabilities while achieving personal dreams.

Blending corporate know-how with established local operations creates sparks when combining promising fits between your expertise and the right enterprise eager for a seasoned leader. This shift goes beyond a new job; it's embracing your community from an empowered role. With proper navigation and a fulfilling work life, you can flourish.

I invite you to explore this path of acquiring a business poised for revived energy. Examine options tailored to what matters. Whether seeking new income streams or just impact, now is the era to leverage skills into leadership ventures ready for a guiding hand. Together, we'll craft balanced plans so you can enjoy earned rewards on this trailblazing trail. The destination is ownership – let's start packing!

The upcoming article, "Technical Takeover: Transitioning from Technician to Entrepreneur," will serve as an insider's guide, providing valuable insights and strategies for technicians aspiring to acquire and successfully manage a business within their field of expertise.

Previous Articles In This Series

01 - The Acquisitions Market: Baby Boomers Retiring - A Market Ripe with Opportunities to Partner, Merge, or Buy Businesses from Senior Transitions

02 - Navigating New Horizons: Growth By Acquisition - When Startups Should Consider Buying a Business as a Growth Strategy 

03 - The Acquisition Advantage: Scaling Small Businesses - How Small Businesses Can Identify the Right Acquisition Opportunities

Disclosure and Transparency Statement:

This article is founded on my industry knowledge and expertise, coupled with the assistance of artificial intelligence (AI) tools. As a committed advocate for small businesses and a pioneering voice in expanded capital solutions, I leverage technologies such as OpenAI, Bard, Bing, Claude, Grammarly, and other aids in my productivity, research, and composition processes interchangeably. This includes writing, editing, refining, or assisting in creativity, brainstorming, or outlining. The core substance of this content is sourced and prompted by my extensive experience and industry acumen of over 30 years. This and other blog posts have been refined to provide clarity and substance in service to the readers' success.

Lorette Farris