Tip of the Spear Ventures

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

entrepreneur through acquisition

9 Lessons In 9 Years at Tip of the Spear Ventures

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February 2012 – I am a 2%’er. Apparently, and I wouldn’t know this until later (much later!) that less than 2% of all entrepreneurial startups achieve successful exit. The experience of raising $8Million, launching a technology software startup that received consumer traction, and having a private equity firm acquire us was incredible! But now what? As I sat on a rock overlooking the ocean in San Diego, CA, I thought back to how it was just 7 years earlier that I had done the same to envision what was to come. “Now what?” was the question I was asking myself again, looking to the horizon where the sky meets the Pacific.

I knew that I enjoyed the private equity experience, and after a few moments determined that was what I wanted to do next. I wasn’t a total stranger to the financial space, having my formal education in Accounting and spending my formative years working in Strategic Planning and Finance. In the 9-years since that day, I’ve built something that I’m very proud of and I’d ike to share with you 9-lessons I’ve learned along the way.

Lesson #1 – Define Your “What?”

What are you made of and what do you offer? This is the “metal” that has been tested at Tip of the Spear everyday. We’ve “pivoted” over the years with different ventures, but the one mainstay was that we are “what” others should desire to be (Namely a group that puts forth A+ effort and content deliverables).

Lesson #2 – More People, More Problems

If you’ve hired as a part of your leadership journey, you know the pitfalls that can come with doing so. We’ve been at different times over the 9-years a small and big organization. I’m happy to say that we’ve settled on a model for the future that includes clustered growth. 

Lesson #3 – Think Strategically, Act Tactfully

In the heat of business, I want to win. I assume you do as well. However, and this was key for me, those “win” moments or victories that I sought to win were often at the expense of the war. I was reminded to think strategically and to act tactfully by an executive coach. The difference in thought/action appears in everything we do now.

Lesson #4 – It’s Lonely at the Top

I originally had a partner at Tip of the Spear Ventures. They were a silent partner that was low on injecting capital, but high on injecting their opinion. At about the three year mark we determined that parting company was best for the company (and us as individuals). I would rather be lonely than miserable.

Lesson #5 – It’s Lonely (but Don’t Go It Alone!)

This piggybacks off of Lesson #4… Even though you’re alone at the leadership helm of your firm/organization, you don’t need to go it alone! While opinions are like you know whats, if you tactfully align with peers/mentors you’ll achieve desired strategic outcomes faster.

Lesson #6 – Change Lives!

Opportunities to make money are everywhere, especially if you look for them! What might be even less obvious is the ability to change lives. I’ve been fortunate to receive recognition that what I was doing was actually making a difference for the people that I worked with. It is simultaneously humbling and rewarding.

Lesson #7 – Time… 

You, me, everyone only has 24-hours in a day. What are you doing with it that maximizes your efforts?

Lesson #8 – Agility

While processes and procedures form the structure of a successful business, the ability to be agile is a key differentiator. Want to stand out from the crowded crowd? Become agile!

Lesson #9 – It takes Blood, Sweat, & Spears!

I sometimes have to pinch myself… I’m a city kid from Detroit that was as my Mother says “Born in the shadow of a Ford manufacturing plant’s smokestack.” How far I’ve come has only been limited by my ability to imagine, visualize, and then take action. At one of our Boot Camps a few years back in Las Vegas, one of the participants accurately summarized that “Success takes blood, sweat, and tears!” The conversation morphed to one of “Blood, Sweat, and Spears!” which has stuck with us ever since (We’re running another Boot Camp starting 2.21.2021 for those seeking Entrepreneurship Through Acquisition). 

SUMMARY

These past 9-years have taught me so much, and I know that the next year will be even more insightful.  I’m determined to further establish in our ninth year the foundation that will drive the firm forward for the next two decades. I recognize that what worked in the past might not necessarily work in the future, so we will have to continue to evolve.  It is my goal to build an institution that outlasts me and continues serving entrepreneurs for generations to come. 

Sam Palazzolo

Acquisition Entrepreneurship – Selecting Professional Advisors

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If you’re a leader thinking about making a change in your career, a new MBA looking to launch into leadership, or maybe a seasoned entrepreneur through acquisition you know that the road to identifying an organization to purchase is littered with the corpses of  those that did not conduct thorough enough due diligence. In this series, Acquisition Entrepreneurship, I’ll tackle the topics that will make your journey on that road less risky on the way towards successful acquisition of a new entity. In this post, we’ll explore the Professional Advisors recommended to assist you towards acquisition… Enjoy!

Acquisition Entrepreneurship Selecting Professional Advisors

Selecting Professional Advisors

An Accountant and a Lawyer are two of the most important advisors you’ll want to engage during your due diligence phase in acquisitions. You should look for those accountants and lawyers skilled in working with similarly sized firms as the one you’re exploring (Typically, those that work with smaller firms).

The accountant should have familiarity with smaller firm’s accounting practices, including payroll taxes, sales tax, and noncash expenses such as bad debt reserves or accruals for sales force bonuses earned yet paid. The accountant should have well established protocols to quickly determine if the company has accurately accounted for these expenses.

The lawyer should know which contracts are successfully in play at the acquisition and typical terms and conditions therein. This could be the same lawyer that assisted with creating your Letter of Intent (LOI) as well as prepares the final acquisition documents.

Professional Advisor Fees

While accountant and lawyer fees typically vary, depending on geography and especially with the purchase of an organization that can last several months to a year, you could expect that accounting due diligence will cost somewhere between $20,000 to $50,000. The reason there is such a large range provided is that the cliché “it depends” is in play regarding how much work needs to be done to understand the company’s true financial picture.

Legal due diligence is more tightly focused and includes the cost to prepare purchase agreements and related documents. The fees one can anticipate typically are in the $50,000 to $75,000 range.

One last note on professional advisor fees, specifically contingency. In other words, you may want to see if both accountants and lawyers will work on a contingent basis and therefore get paid at the time of closing so that you won’t have to come out of pocket during the due diligence phase. Keep in mind that some professional advisors will do so, some won’t work on contingency. The bottom line is that you typically get what you pay for so select wisely but don’t eliminate these all too important professional advisors!

Other Professional Advisors to Consider

In addition to accountants and lawyers, there may be other professional advisors that you want to bring in while conducting due diligence. I’ve hired engineers to come and inspect manufacturing equipment, IT consultants to inspect software development, Environment consultants to gage appropriateness of the wet excavation procedures, and Marketing consultants to ensure accuracy in market potential was accounted for. Depending on your entrepreneur through acquisition strategy and the organizations you’re considering, it’s important to bring in the professionals at time of due diligence well before you officially take ownership (Again, it’s better to walk away from the acquisitions table because of issues identified by professional advisors than to sit at it and go hungry for a period of time because you didn’t employ them!)

SUMMARY

Acquisition Entrepreneurship is a great way to explore your entrepreneurial spirit and look to “buy then build” an organization (As opposed to the typically thought of entrepreneurial methodology of a startup). Regardless of the industry you’re looking in and the size of the organization therein, you want to ensure that you have the best team of professional advisors employed to serve you. This will help with risk mitigation regarding your entrepreneur through acquisition strategy.

Sam Palazzolo

PS – I’m typically asked what our Acquisitions Strategy is at Tip of the Spear. As such, we have summarized our Acquisitions Criteria here on our website: https://tipofthespearventures.com/acquisitions/. Please review and let me know if I can be of service.