Software and tech companies get much higher valuations than traditional service-based companies because these “digital” companies are valued on a multiple of revenue instead of a multiple of EBITDA. This huge difference in how the business is valued provides a unique opportunity to reap high financial rewards by transforming old analog businesses into technology companies.

Today’s guest, Corey Tollefson of ArcSpring, shares how his company combines capital, technology, operational expertise, and design to unlock exponential growth in traditional businesses. He and his team of rock stars (a bunch of heavy hitters from Oracle and Info) are creating real value—and multiple arbitrage—by investing in companies they think should be software companies.

What You Will Learn In Today's Podcast Interview

• What ‘Analog to Digital’ (A2D) means and how it impacts the value of a business
• Why transforming an analogue business into a technology business changes the valuation methodology
• How ArcSpring scales their portfolio companies by focusing on ‘micro-verticals’
• The difference between a spreadsheet jockey private equity firm and one that has an operations background
• How ArcSpring defines digital transformation
• Why ArcSpring bought the largest flag football league in the area and how they scaled it by integrated technology 
• Why having—or upgrading—an ERP system is not the type of technology that can change your valuation multiple
• How to mine your customer base for new products and services 
• Why a five-year timeline to transform a business from analog to digital is more than enough time to capture the value creation and multiple arbitrage 
• How his company got to the tagline “Enterprise software sucks!”
• Why the experience and involvement of the general partners at a private equity firm matters
• How to use your customers and their needs as the backbone of your digital transformation
• Things to think about when you are trying to determine how much equity you should be rolling
• back into your business
• What makes companies consider becoming a SaaS business

Are You Growing The Value of Your Business

Take The 2-Minute Assessment To Get Your Intentional Growth Score™ And 1-Page Vision Board.

• Are your company's current initiatives intentionally designed to increase the value of the business?
• Do you know what you want from your business long term and why?
• Do you know what your company is worth?
• Do you know the differences between Management, Family Transitions, PE Firms, ESOPs and Strategic Buyers?
• Does the business have a written strategic plan on how to achieve the desired normalized EBITDA and valuation?

About the Guest:

Corey Tollefson is co-founder and general partner at Arcspring, a PE firm that invests in companies that should be software companies, and has over 20 years of experience in the software and technology industry. He’s on the Board of Advisors for #YesWecode, Sezzle and PLNIFY. Previously, Corey was senior vice president and general manager at Infor and group vice president at Oracle. He also has a BSc in Marketing and Management Information Systems from the G.R. Herberger College of Business at Saint Cloud State University.

Quotes:

06:57 - “To really own an industry and to become dominant in an industry, you have to have micro-vertical solutions.” – Corey Tollefson 

07:21 - “The more you can speak to run