Tip of the Spear Ventures

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

sam palazzolo

Acquisition Entrepreneur – Art or Science?

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The Point: We’re often asked about our Mergers & Acquisitions business specifically, “How can I be an Acquisition Entrepreneur?” The reality is that most entrepreneurs that take on an acquisition are not born that way, they are trained to do so. If learning is at the forefront, what else is involved in the background? So, in this post we’ll explore the Acquisition Entrepreneur – Art or Science… Enjoy!

Things to Consider As an Acquisition Entrepreneur

The acquisition of a business is often thought of as the same thing as buying an existing enterprise, however, there are several key differences. An acquisition can be more difficult for some entrepreneurs because of their inexperience and limited financial resources. Acquiring businesses involves a series of steps.

No Cowardly Lions!

The first step to successful acquisition is having the courage to buy a business. There is often fear among investors that if they invest in a startup it will fail. This is not true. The reason for this is that successful entrepreneurship is built on sound principles, strong leadership, and an excellent business plan.

You are an Investor

To buy a business, investors require information about the owner. They want to know the entrepreneur’s personal and professional background. This includes information on the founders, the current business model, and the products or services offered. Having this information allows investors to evaluate the potential acquisition more objectively.

What Does the Business Do Well?

Investors also look for the strength of a business. In addition to a strong business plan, an entrepreneur should have experience in his field. Additionally, he should show that he has the ability to manage and grow a business. In addition, it is important for a start-up to demonstrate how the business will survive during tough times. These can be difficult to assess when a company is still in the development stages.

What is the Legacy of the Business — and You?

When buying a company, investors look for companies that are well-established and that have a solid financial footing. It is also important for the entrepreneur to convince potential investors that he is capable of managing the business. By conducting a survey of the company and its current location, he can show investors that he knows where he is going. He can also convince potential funding sources that he has a great idea for making the company successful. If he is able to generate interest from interested funding sources, he may find himself able to buy the company more easily than he had originally expected.

Time is the Great Equalizer

Another important thing to consider when it comes to being an acquisition entrepreneur is the time line for making a successful acquisition. Most companies that are interested in buying a business develop interest over time. However, it is not always easy to close a deal at the right price and time. As a result, some companies prefer to wait to make an acquisition until they have more negotiating power. This gives them a better chance to get a good deal on the business. On the other hand, a strong acquisition entrepreneur knows that he needs to quickly close a deal so he needs to be ready to negotiate with all of his potential funding sources.

SUMMARY

In this post, we’ve explored the topic of Acquisition Entrepreneur – Art or Science. We know that there are a lot of ways in which you can explore your entrepreneurial spirit. Becoming an acquisition entrepreneur is a smart way of doing so.

Sam Palazzolo

Five Tips For Becoming an Entrepreneurship Through Acquisition

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The Point: Being an entrepreneur is great! However, the saying, “Work smart!” should be a tactical advantage with a strategy of buying a business being front/center! I see time and again entrepreneurs that start a business from scratch — and that’s just plain hard work! In this post we’ll explore Five Tips For Becoming an Entrepreneur Through Acquisition (ETA)… Enjoy!

You do not need to begin a new business from scratch in order to become an entrepreneur. In fact, purchasing a company with which you are familiar could be a wiser choice. Creating, marketing, and then selling companies are all a part of your entrepreneur s journey. There are certain things you will want to keep in mind when looking into purchasing a company, though. Below are four tips for becoming an entrepreneur through acquisition.

Tip #1 | Entrepreneurship Through Acquisition

The first and most important step to becoming an entrepreneur is being able to finance your business. Financing is crucial to making any business work, but it is even more critical when you are just starting out. If you are working with a limited budget, your options may be limited. In order to get everything lined up, you will want to begin working with a lender as soon as possible, particularly if you intend to use credit cards or other forms of capital. When you are seeking seller financing for your business, you will have to provide substantiation of your income, a solid plan for increasing your sales, and a clear plan for paying back the loan.

Tip #2 | Entrepreneurship Through Acquisition

The second step in becoming an entrepreneur through acquisition is finding a seller financing program. Most traditional banks do not look favorably on businesses that have never made a profit or do not have a history of revenue. In order to get everything lined up for your business, you will have to secure funding from either a bank or a private investor. A good real estate investor will be especially helpful because he or she can get you loans with a lower interest rate than what you can get from a bank.

Tip #3 | Entrepreneurship Through Acquisition

The third tip to becoming an entrepreneur through acquisition is to make sure you can make a profit on your investment after your first acquisition. The ideal scenario would be to purchase a business with low start up costs and high revenue potential. Most businesses fail shortly after they are launched. If you cannot turn a profit on the first sale, you may have to take a loss on every sale thereafter until you break even.

Tip #4 | Entrepreneurship Through Acquisition

The fourth tip to becoming an entrepreneur through acquisition is to consider a gradual increase in profits over time. An entrepreneur does not simply buy a business with the best potential for revenue and expect a huge windfall from it the next day. Business development takes time and effort. Your job during the early stages of your business venture is to generate customers and build a strong relationship with your suppliers.

Tip #5 | Entrepreneurship Through Acquisition

The fifth and final tip to becoming an entrepreneur through acquisition is to consider starting your own company as a small business. When you start your own business, your goal is to have low start up costs, high annual revenue, and a strong customer base. This means you will have a limited amount of resources to work with in terms of finances. Starting your own business can be extremely difficult if you do not have a comprehensive business plan in place. You must set a budget and identify your target market to determine how much money you can invest in your new business venture.

SUMMARY

In this post we’ve explore Five Tips For Becoming an Entrepreneur Through Acquisition (ETA). If you’re ready to put the strategic advantage of acquisition — buying a business — to work for you instead of starting one from scratch, success is still going to be hard work. However, the outcome can be much more advantageous.

Sam Palazzolo

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

Do You Really Need Venture Capital?

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The Point: “Do you really need venture capital?” is a question that we’re typically asked at Tip of the Spear Ventures, regardless of the organization is lead by entrepreneurs in a startup pursuit or an existing entity. The short answer is “No!” The long answer, well that’s a “No” too… In this post, we’ll explore the question do you really need venture capital… Enjoy!

Would you be surprised to learn that the majority of companies, successful companies, never took a dime from a venture capital firm? Companies on the Inc. 5000 in the USA, the Fast Track 100 in the UK, and similar lists everywhere didn’t follow what most would be consider the “conventional” script when it came to funding their business.

What did these organizations do then to raise capital? The huge majority of them never obtained a pound or dollar or rupee of venture funds, and they did not guarantee or mortgage their houses in the process. Rather, they were able to find ways to achieve getting their businesses up and running, then growing, without pandering to VCs or groveling to their company’s CFO.

These organizations accomplished their business funding goals by simultaneously solving pressing consumer problems, or by creating delightful customer experiences that transformed the previously mundane business that was present. Most of these entrepreneurs constructed vibrant, growing businesses without increasing treasure troves of venture capital.

“Where did their business funding come from?” you might ask. The lion’s share of these got almost all of the money–initially, at least, and sometimes for the whole journey–from a much more hospitable and agreeable source: their customers.

Sam Palazzolo

If you, or your organization are exploring Business Funding options, please drop us a line at info@tipofthespearventures.com.

Business Funding – Subscription Models

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The Point: We’re often asked at Tip of the Spear Ventures, “What are the best ways to go about business funding – Should we consider subscription models?” The short answer is “Yes.” Subscription models are yet another way to accomplish business funding over a traditional capital raise. So in this article we’ll explore business funding through the use of subscription models… Enjoy!

Small business funding refers to the way in which an aspiring or already existing business owner obtains cash to launch a new business, buy an existing business or increase capital to finance future business activity. Business funding can come in many forms, but the most common sources are angel investors, venture capitalists or third party lenders. Entrepreneurs looking for startup capital should take note that all investors are not created equally and each has different goals and business needs. So it begs the question, “Why not explore customer funding options, specifically subscription models?”

Entrepreneurs should consider carefully how they plan to use any business financing options and should always have a game plan before approaching a private investor or a bank. Often it’s the case that entrepreneurs don’t even need to approach an outside funding source. A number of private investors offer startup capital at a discounted rate to entrepreneurial risk candidates who possess a well-developed business plan, a strong personal credit history and a steady track record of profit and loss repayments. To attract and qualify for such financing, entrepreneurs need to demonstrate a strong business plan with a well thought through exit strategy. Additionally, entrepreneurs should develop a set of metrics to track key metrics such as customer satisfaction, profit margins and return on investment.

When it comes to small business funding, entrepreneurs should also keep in mind that there are several options available to them. There are many different types of startup loans including bank loans, credit unions, commercial real estate loans, equity loans from family members and friends, working capital options from multiple lenders and lastly, entrepreneurs can tap prepaid credit cards as working capital. While some entrepreneurs may have better success securing business funding through more traditional means, most borrowers fail to secure enough capital to launch or expand their operations. There are several successful stories of entrepreneurs who obtained small business funding on a shoe string budget. If you have the desire and the ability to be financially secure and succeed in the entrepreneurial business environment, then you may want to consider applying for funding from a private lender. All of this said though, an avenue to pursue before doing so is the applicability of a subscription model as a way of raising capital for your enterprise.

Sam Palazzolo