Career Focus

This course is suitable for anyone who is interested in owning, managing or investing in smaller businesses.

Educational Objectives

The course focuses on how to manage smaller businesses with an emphasis on the financial aspects of buying and growing these businesses. The cases are designed to give students practical knowledge that will be immediately helpful if they plan to own or manage a small business, provide consulting or financial services to these businesses, or invest in smaller businesses. These smaller businesses are privately owned, are typically led by a CEO/entrepreneur supported by a very small management team, produce a service or product for which a current profitable business model exists (as distinct from many VC-backed developmental businesses), and frequently the businesses are of a scale that they can be acquired and owned by individuals instead of institutions or families. The managerial and financial challenges for these firms are different from those of larger, public firms and often require a different approach because of their small scale, lack of liquidity and the difficulty of attracting and deploying capital. The careers of small business entrepreneurs are also very different from the employees of larger firms, and we explore those differences through numerous guests and a few cases that focus on the advantages and disadvantages of the career choice.

Click on this link to see comments of former HBS students who discuss why they chose a career in entrepreneurship through acquisition: https://courseware.hbs.edu/video/?v=0_cteitfd6

Course Content and Organization

The course first focuses on how to buy a small business. We begin with the case of two HBS MBAs who chose to purchase a small business using a search fund instead of pursuing a more traditional career path. The case tracks their search process and highlights the challenges encountered when acquiring a small business. We then learn about different ways to fund a search through five other acquisitions by HBS graduates. We then focus on the market for smaller firms including cases about private equity firms that operates in the small business market.

We then focus on how to successfully manage the financial aspects of smaller firms. We explore the difficulty of growing these firms and explore which business models are more likely to succeed. And, of course, we explore how these businesses finance themselves as they grow. These smaller firms, unlike bigger firms, often face tradeoffs between liquidity and profitability, and a common feature of successful firms seems to be a willingness to sacrifice profitability for liquidity. These tradeoffs are particularly relevant to acquisitions made by recent MBA graduates as they navigated through the Great Recession and COVID. We discuss four recent acquisitions that faced significant financial hurdles.

We study capital investment decisions made by smaller businesses, decisions that emphasize financial capacity and lifestyle choices instead of maximizing market value. We study alternative growth strategies including approaches to sales force management in the context of a smaller firm. We also learn about the special problems that confront smaller business such as customer concentration and conflicts between outside investors and managers.

We conclude the course with integrative cases that follow the experience of entrepreneurs as they search for a smaller company, acquire it and grow it successfully, and then confront the decision of when to sell the business so that they can realize the benefits of their entrepreneurial venture.

The course is a prerequisite for the EC field course, Entrepreneurship through Acquisition, which is offered in the spring term.

Copyright © 2023 President & Fellows of Harvard College. All Rights Reserved.