Why Buying Businesses Can Be Easier Than Starting One

Many founders assume the only way to build a successful company is to start from scratch.

The narrative is familiar. Launch a product. Struggle through the early years. Slowly build traction. Eventually scale.

But Tom Shipley argues there is another path that many entrepreneurs overlook.

Instead of building everything internally, founders can accelerate growth by acquiring existing businesses.

In the latest episode of Build a Business Worth Buying, Tom explains how acquisitions can solve many of the most common challenges founders face.

The Moment That Changed Tom’s Business

Early in his career, Tom and his partner launched a skincare brand.

They had conviction in their strategy and went all in financially. They second mortgaged their homes, drained retirement accounts, and maxed out credit cards.

The business worked.

It generated about $331,000 in revenue and had strong customer economics.

But they ran out of cash.

Traditional financing options were not available. Investors would not fund a young company that had not yet proven itself.

Instead of shutting down the business, Tom proposed something unconventional.

They decided to buy another company.

They acquired a $15 million supplement business that generated about $1.5 million in cash flow.

The acquisition gave them something their startup lacked: resources.

The acquired company had infrastructure, technology, fulfillment, customer service, and an experienced team.

They placed their small skincare brand on top of that platform.

Within three years, the combined business surpassed $100 million in revenue.

Why Acquisitions Can Be a Powerful Growth Strategy

Organic growth is valuable, but it often comes with limits.

Every channel eventually becomes less efficient. Marketing strategies that once worked may stop producing results.

Tom experienced this firsthand.

His companies once relied heavily on print advertising, short form radio, and infomercials. Over time, those channels lost effectiveness.

Acquisitions offer a different approach.

Instead of building new capabilities internally, founders can acquire businesses that already have them.

Acquisitions can provide:

• Immediate cash flow
• Existing customer bases
• Proven systems and processes
• Experienced teams
• Operational infrastructure

These advantages can dramatically accelerate growth.

The Power of Multiple Expansion

One of the most important concepts Tom discusses is multiple expansion.

Imagine two businesses.

Each generates $500,000 in EBITDA. Individually, they might sell for about two times EBITDA, meaning each business is worth roughly $1 million.

Now combine them.

The new company generates $1 million in EBITDA. Larger businesses with stronger infrastructure often trade at higher multiples, perhaps four times EBITDA.

The result is a $4 million company.

Through integration and scale, the owner created significant enterprise value.

This is one reason acquisitions are often used as a core growth strategy.

The Massive Opportunity Ahead

The next decade may create one of the largest acquisition opportunities in history.

Tom estimates that roughly $14 trillion in businesses will transition ownership as baby boomers retire.

Many of these companies will struggle to find buyers.

In some cases, founders may shut down profitable businesses simply because they cannot complete a sale.

For entrepreneurs who understand acquisitions, this creates a unique opportunity.

Instead of building from scratch, founders can acquire existing companies with customers, revenue, and operational history.

Common Mistakes When Buying Businesses

Despite the opportunity, acquisitions still require discipline.

Tom highlights several mistakes founders often make.

One is desirability bias.

Entrepreneurs naturally see potential in everything. That optimism can cause them to overlook risks during due diligence.

Another is commitment bias.

Founders are trained to push through obstacles. But in acquisitions, the ability to walk away is critical.

If the deal no longer fits the original thesis, stepping back may be the best decision.

Building a Business Worth Buying

The central theme of the conversation is simple.

Acquisitions are not just a private equity strategy.

They can also be a powerful tool for entrepreneurs.

Founders who combine organic growth with strategic acquisitions can accelerate scale, increase enterprise value, and create stronger exit opportunities.

For operators thinking about the long term value of their companies, learning how to buy businesses may be one of the most valuable skills they can develop.

Listen to the full episode of Build a Business Worth Buying to hear the complete conversation with Tom Shipley.