The plain version
What is entrepreneurship
through acquisition?
Entrepreneurship through acquisition, usually shortened to ETA, is buying an existing profitable business instead of starting one from zero. The buyer takes over a company that already has customers, revenue, and employees, then runs it as the owner-operator. In the United States most small ETA deals are financed with an SBA 7(a) loan and a seller note, and most carry a personal guarantee.
Why anyone does this
A startup asks you to find out whether anybody wants the thing. An acquisition skips that question. The customers already exist, the revenue already lands, and the payroll already runs. You are not betting on demand. You are betting on your ability to run something that already works without breaking it.
That is a real trade, not a free lunch. You inherit a business you did not build, staffed by people who did not pick you, usually with debt attached to your signature. The startup founder risks time and other people's money. The acquisition entrepreneur risks the house.
The four paths people actually take
The word ETA covers several different lives. They get lumped together and they should not be, because the capital, the timeline, and the downside are not the same.
Self-funded search
You search on your own dime, find a business, and finance it mostly with an SBA 7(a) loan, a seller note, and a small amount of your own cash. You keep most of the equity. You also sign a personal guarantee, which means the debt follows you home if the business fails. This is the most common path and the one with the sharpest teeth.
Traditional (funded) search
Investors fund a search budget that pays you a salary for roughly two years while you look. When you find the deal, those investors fund the equity and you earn into ownership through vesting tranches. Less personal downside, less equity, more governance, and a bar to clear before anyone writes the first check.
Independent sponsor
You find the deal first and raise the equity for it deal by deal, with no committed fund behind you. It is the hardest way to get started and the most flexible once you have a track record. Jed Morris, who hosts this club, works in this lane.
Owner-operator by any other route
Plenty of people buy a business without ever using the words search fund. A family business handoff, a management buyout, a competitor's owner who wants out. Same job on the other side of close.
How the money usually stacks
Small acquisition capital structures rhyme. A rough shape for a self-funded SBA deal: about 65 percent SBA debt, about 15 percent seller note, about 15 percent investor equity, about 5 percent of your own capital. On a $1.5M deal that is roughly $75,000 out of your pocket and a personal guarantee on the rest.
Leverage above 90 percent will kill you. A business that comfortably services its debt at close has nowhere to go when a customer leaves, and customers leave after a sale more often than the broker's deck suggests.
The part the pitch decks skip
SBA 7(a) loans have averaged a 5.2 percent five-year default rate since 1990, and FY2024 defaults ran roughly 3.7 percent with charge-offs tripling since 2021. The “acquisition loans are safe, they default at under 1 percent” pitch cherry-picks a window of young loans that have not had time to fail.
Deals also fail before they close, and the failures cost money. Quality of earnings work, legal review, and travel on a deal that dies are dead deal costs, and a searcher who has not budgeted for three dead deals is a searcher who quits after two.
Vocabulary you will hear in the room
- Buy box. The written definition of what you will and will not buy: industry, size, geography, owner situation.
- QofE.Quality of earnings. An accountant's verification that the profit the seller claims is real.
- LOI. Letter of intent. The non-binding agreement that starts exclusivity and the diligence clock.
- PG. Personal guarantee. Your signature making you personally liable for the business debt.
- SDE and EBITDA. Two ways of stating owner earnings. Small deals price on SDE, larger ones on EBITDA, and conflating them is how people overpay.
- Hair on the deal. The problems that make a business cheap. Some hair is opportunity and some is a warning.
Where San Diego ETA fits
Reading about this is not the same as sitting next to somebody who did it last year. San Diego ETA is the free monthly meetup for people on every one of these paths in San Diego County: the third Wednesday of every month, 5:30 to 7:30 PM, buyers first, no pitches from the stage.
The list
Can't make the next one?
Stay in the room anyway.
One email a month: the next date, the venue, and what actually came out of the last room. No pitches, no course, no funnel. The same rules as the room itself.