• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Tip of the Spear Ventures

A Family Office that behaves like Venture Capital | Private Equity | Business Consulting

  • Advisory Services
    • BRANDING & GTM
    • BUSINESS GROWTH
      • PE & VC Portfolio Growth
    • VENTURE FUNDING
    • M&A
  • FO Direct Investments
  • The Point Blog
  • Contact Us
    • Speaking
    • Speaking Resources
  • FREE eBOOK

30 Days to ETA | Day #2 – Leading Your Business

June 2, 2021 By Sam Palazzolo, Managing Director

In this 30 Days to ETA post, we’ll explore the topic of leading your business. Sounds pretty simple/straightforward, but there is a twist to consider! Specifically, if in Day #1 we tackled the decision of Startup or Acquisition (You can read the post by CLICKING HERE), in this post we’ll look at leading your business so as to create value or increase business valuation. Why? It’s keeping in line with our identification of the desired endpoint of the business. A business that you lead effectively should increase in value, and therefore be worth more to prospective buyers when you ultimately determine to exit. Understanding business valuations will help you as you start out on your Entrepreneurship Through Acquisition journey!

Attend Webinar Workshop: 30 Days to ETA

What Do Business Buyers Find Attractive?

In the book Walking to Destiny (2016), author Chris Snider gives business owners a plan to prepare their companies for sale where they the capital of their business. Driving the value of a business up will simultaneously increase net income. Increased value plus increased income are prime ways to increase profits achieved during the business sale.

Value Acceleration is the concept throughout whereby the focus is on value growth through the coordination of business, personal, and financial goals. I perceive Value Acceleration to be when business owners design and build a business that other people want to buy with purpose/intention strategically for sale.

So what characteristics are potential buyers looking for, especially if you can grow your company to a level where it “pops” on the radar of Private Equity firms? The following four business attributes appear at the top of every buyer’s wish list:

Top 4 Characteristics that Make a Business Valuable to Buyers

  1. Is it profitable – Does your business make significant net income?
  2. Is it competitive – Is your business beating the competition?
  3. Is it scalable – Can your business grow or downsize quickly to withstand ebbs and flows in demand?
  4. Is it sustainable – Can your business withstand economic and personal storms?

Your ultimate goal in getting into business, besides being able to be the hands-on leader running the organization, is to one day sell the business and live off of its proceeds. In order to do this, you must know how to make your company valuable to buyers. Business buyers look for profit, competitive advantage, scalability, and sustainability. These four criteria are cornerstones in leading a business blueprint.

Value creators work on their business instead of working in their business.

Sam Palazzolo, Managing Director @ Tip of the Spear Ventures

How Do Buyers Determine Business Valuation?

When you analyze a business, in addition to the operational efficiency, you’ll want to identify the accounting underpinnings. In other words, you’ll want to dig-in on the financial statements. I know this is not the sexiest part of leading a business, but you have to know your numbers. Here are a few accounting numbers to know:

  • Top Line Revenue
  • Cost of Goods Sold (COGS)
  • Net Earnings
  • Operation Expenses
  • Profit/Loss
  • Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)
  • Average Multiples for Similar Businesses Sold

How Leading a Business to Sell with Value

How, then, do we make our businesses profitable, competitive, scalable, and sustainable to make them valuable to potential buyers? As we’ve talked about, Value Acceleration is a process that focuses on value growth by aligning business, personal, and financial goals. Essentially, it creates a roadmap to success.

Before we can focus on growing value within our business, though, in leading a business you must recognize that value already exists within your company through meeting your customer’s need(s). For example, you provide a service or a product that people just have to possess. That’s valuable. You’ve already identified a need in the market that your competitors haven’t met, and you’ve seen the profit that can come from meeting that need. Over time, you’ve put together a team of people to help you reach your target market and take care of your consumers once they find you. You’ve even purchased insurance plans and the like to make sure that your company can weather storms. Your business, therefore, has value.

Business Cycles Effect on Leading a Business

Your business’s value exists when you open your company’s doors, and it exists within every cycle of your business’s life. Just like the national economic market, you’re going to experience expansion; you’re going to experience contraction. You’ll go through cyclical periods of recession, recovery, and expansion throughout the entire life of your business. Worth exists throughout those cycles, but the amount of your business’s value will rise and fall according to what period of the cycle you are in. However, you as a business owner determine the severity of value loss or the significance of value gain over the life of your business.

Successful business owners identify what their business is worth at all times, and they determine the worth they want their company to have. They keep that value goal at the top of their minds all the time. In other words, they have an end worth in mind.

SUMMARY

Successful entrepreneurs know their current worth and their goal worth, but more importantly, they take active steps to achieve those goals. The systematic approach to identify, protect, and build value is at the heart of this process. Creating detailed, written, systemized plan to increase company capital value comes through a relentless strategic plan and following thereof.

Sam Palazzolo

Filed Under: Blog Tagged With: 30 days to eta, business valuation, entrepreneur, entrepreneurship through acquisition, leading your business, sam palazzolo, tip of the spear ventures

About Sam Palazzolo, Managing Director

Sam Palazzolo is Managing Director at Tip of the Spear Ventures, an agile Venture Capital and Business Advisory Services firm specializing in Mergers & Acquisition, Sales / Business Development, and Business Funding.

Primary Sidebar

Related Content

  • It’s Not a Pitch. It’s a War Room Briefing
  • M&A Integration: It’s Not the Deal, It’s the People
  • 2025 M&A Blueprint: Real Strategy for a Shifting Market
  • Palazzolo’s AI Hierarchy of Needs: A Strategic Framework for Scaling AI with Purpose
  • Reinvention or Irrelevance: What 72% of CEOs Know—and the Rest Should Worry About
  • COVID-19 Five Years Later: Riding the Black Swan of Change
  • The Blueprint for Sales Growth

Search Form

Footer

Ready to Scale?

Download Sam Palazzolo’s ’50 Scaling Strategies’ eBook ($50 value) for free here…
DOWNLOAD NOW

Copyright © 2012–2025 · Tip of the Spear Ventures LLC · Members Only · Terms & Conditions · Privacy Policy · Log in