Buying a Business: The Strategy Redefining Entrepreneurship in LATAM

Traditionally, entrepreneurship has been synonymous with starting from scratch. The narrative of crafting an idea, building a team, overcoming obstacles, and ultimately watching a business come to life is a powerful one that has fueled generations of entrepreneurs. But what if you didn't have to start from zero? What if there was a way to skip the most uncertain and complex stages and focus directly on what really matters: growing a business?

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This is the proposition of Entrepreneurship through Acquisition (ETA), a strategy that is rapidly gaining traction in Latin America. Buying an existing business not only reduces risk but also opens the door to immediate and scalable growth opportunities. This alternative is transforming the way entrepreneurs view success, especially in emerging markets where the barriers to starting a business from scratch are higher.

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A New Way to Entrepreneurship

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Entrepreneurship through Acquisition isn't merely an alternative to traditional entrepreneurship; it's an approach that redefines the rules of the game. Instead of creating a business from nothing, one acquires an existing one, with ongoing operations, established teams, and loyal customers. This allows entrepreneurs to jump directly into the heart of the business without spending years building the foundation.

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In markets like Mexico, Brazil, and Colombia, this strategy is gaining traction. From small family businesses to medium-sized companies with high growth potential, ETA is proving to be one of the most effective and strategic ways to start a business in Latin America.

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Why Buying a Business Can Be Better Than Starting from Scratch

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1. Reduced Risk: The traditional path of entrepreneurship is fraught with uncertainty. Validating an idea, finding customers, and building operations are all steps filled with risk. According to studies from Stanford and Harvard, 90% of startups fail within their first five years, primarily due to market problems or running out of funds. In contrast, an established business has already overcome these initial barriers. Buying a business allows for informed decisions based on concrete data such as cash flows and historical performance.

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2. Immediate Results: While starting a business from scratch can take years to generate profits, acquiring one with positive cash flows means that revenue starts from day one. This not only alleviates financial pressure but also allows entrepreneurs to focus on what truly matters: strategic growth.

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3. Leveraging a Recognized Brand: Building a brand from scratch is one of the most challenging tasks in the business world. Buying a business means inheriting not only a loyal customer base but also an established reputation. This allows you to focus on strengthening that relationship and expanding the offering, rather than starting from anonymity.

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4. Inheriting Infrastructure and Teams: One of the biggest challenges of starting from scratch is creating a team and establishing efficient processes. Acquiring an existing business means inheriting a functional operational structure. In Latin America, where logistical and operational difficulties are common, this advantage is invaluable. An experienced team and established systems allow for a faster and more efficient transition.

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5. Scaling with Vision: ETA not only minimizes risk but also opens the door to innovation and expansion. Many businesses in Latin America have immense potential for optimization. From digitizing processes to exploring new markets, the opportunities are abundant for those who know how to identify them.

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Main Entrepreneurship through Acquisition Models

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ETA is not a one-size-fits-all model. There are different approaches depending on the needs and resources of the entrepreneurs:

• Traditional Search Funds: Funded by investors to search for and acquire businesses.

• Self-Funded Search: The buyer uses their own resources, retaining greater control of the business.

• Management Buyout (MBO): Employees or executives acquire the company they work for.

• Sponsor-Backed Acquisition: Family offices or accelerators provide financial backing for the purchase.

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The Latin American Context: Advantages and Challenges

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Advantages:

• Diversity of Markets: LATAM offers a wide range of opportunities, from technology businesses to traditional family businesses.

• Scalable Growth: Sectors such as health, technology, and financial services are expanding rapidly.

• Attractive Valuations: Many businesses in the region have competitive costs, offering a higher margin for improvement.

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Challenges:

• Access to Financing: Credit options, such as SBA Loans in the US, are not common in LATAM. Alternatives like seller financing or family office support are fundamental.

• Conservative Culture: Many owners are reluctant to sell, either due to emotional attachment or distrust of buyers.

• Lack of Transparency: The limited availability of reliable data makes due diligence essential for any successful transaction.

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How to Identify a Good Opportunity

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Choosing the right business is key to the success of ETA. Some critical factors to consider include:

• Stable Finances: Businesses with healthy margins and positive cash flows.

• Diversified Customer Base: Businesses that do not depend on a single customer or contract.

• Growing Industry: Sectors with high demand and stability.

• Willingness of the Owner: A good relationship with the current owner can facilitate the transition.

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Buying a Business: More Than a Shortcut, a Smart Strategy

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‍Entrepreneurship doesn't always start with a new idea. Sometimes, the greatest act of leadership is recognizing the potential of something that already exists and transforming it into something extraordinary. Buying a business isn't merely a transaction; it's a strategic bet, an opportunity to take what others have built and take it further under your vision.

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ETA doesn't eliminate effort but focuses it where it truly matters. It allows you to enter the market with a solid foundation, reduce risks, and dedicate your energy to growing and optimizing. It's a model that challenges the traditional narrative of starting from scratch and demonstrates that entrepreneurship is also an act of transformation.In Latin America, where many family businesses and traditional companies are seeking a new chapter, Entrepreneurship through Acquisition is much more than an alternative. It's a path to create immediate impact and build a sustainable future, leading businesses with the purpose of scaling and reinventing them.

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Success isn't always in creating something from scratch; sometimes, it's in discovering the hidden value in what already exists.

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Are you ready to find that diamond in the rough and turn it into a masterpiece?

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Join the M&A Revolution

• ‍‍‍Discover all the investment and acquisition opportunities here.‍
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