Buy, the Build

By Femi Olaiya

When faced with the decision to embark on a new business venture, many entrepreneurs grapple with whether to start afresh or purchase an established enterprise. Although the allure of building something from the ground up can be enticing, there are numerous advantages to acquiring an existing business that make it an appealing option. Several successful entrepreneurs, including Femi Otedola, Aliko Dangote, and Elon Musk, have demonstrated how buying an existing business can lead to remarkable success.

One notable example in Nigeria is Femi Otedola. A prominent Nigerian businessman, Otedola acquired a controlling stake in African Petroleum, which he then rebranded to Forte Oil. Through strategic investments and effective management, he transformed the company into one of Nigeria’s leading petroleum marketing companies. His approach showcases the advantage of taking over an existing business with a solid foundation and then implementing strategic improvements to drive growth and success.

Another distinguished Nigerian entrepreneur, Aliko Dangote, Africa’s richest man, provides a similar success story. Dangote acquired the Benue Cement Company from the Nigerian government during the country’s privatization exercise. He transformed this acquisition into the Dangote Cement we know today, which is Africa’s largest cement producer. By purchasing an existing operation and investing in modernizing and expanding its capacity, Dangote was able to quickly build a dominant market presence.

Switching to the international scene, Elon Musk’s acquisition of companies offers invaluable insights. Musk identified the potential in Tesla Motors, an existing company, and invested in it in 2004. His visionary leadership and relentless innovation propelled Tesla to its current status as a global leader in electric vehicles and renewable energy solutions. Similarly, Musk acquired SolarCity, which has since been integrated into Tesla to bolster its energy services division. These examples illustrate how acquiring and then strategically building on existing companies can lead to exponential growth and innovation.

First and foremost, an established business comes with an immediate customer base. This not only ensures that revenue starts flowing from day one but also means you inherit brand loyalty. Customers who already trust and engage with the brand provide a solid foundation upon which you can build and expand, removing the uncertainty and time it takes to attract and cultivate a new clientele from scratch.

Moreover, the business model of an existing company has already been tested and proven viable. This significantly mitigates the risk associated with new ventures, where many businesses fail within the first few years due to untested ideas and unpredictable market responses. With established operating procedures in place, you can focus your efforts on growth and improvement rather than on navigating the trial-and-error phase that accompanies new businesses.

Existing relationships with suppliers and vendors are another crucial benefit. These long-standing partnerships can often secure you better rates and more reliable service than you would be able to negotiate on your own as a new player in the industry. Furthermore, an established business generally comes with an experienced team of employees who are familiar with the intricacies of the operations. This continuity can ensure smoother transitions and maintain the day-to-day efficiency while you bring in your new ideas and strategies.

In essence, while starting a business from scratch offers the thrill of creating something new and unique, buying an established business provides a solid, lower-risk foundation upon which to innovate and grow. Entrepreneurs like Femi Otedola, Aliko Dangote, and Elon Musk exemplify how strategic acquisitions can lead to significant success and market leadership.