**Episode 16 of the Business Growth and Exit Strategies Podcast**
When you understand somebody else’s acquisition criteria and what they are looking for, you can plan accordingly.
If you are considering selling in the future, go to some investors, go to some private equity firms, and ask what they want. Then model your business plans accordingly—two years, three years, four years, or five years out.
What you need to know is you could be growing fast and becoming less valuable.
Buyers and investors do not want to see growth that requires constant feeding of money to keep the machine going. They want to see steady.
## The Difference Between Growth and Scale
Growth is going from $10 million to $12 million, but added revenue requires added cost to get there. You had to put a whole bunch of extra gas in the tank to get from 10 to 12.
Scale is when you go from $10 million to $12 million with minimum inputs in revenue and minimum inputs in adding people.
People confuse growth and scale all the time. They say they are scaling, but if you are putting a bunch of money in, you are growing.
You absolutely want to grow a business, but where the magic happens is where you scale it.
Scale is revenue without proportional increases in cost and complexity or founder involvement.
This is why some really high-growth companies get discounted when they go to sell. They were not scaling. They were growing. That confusion costs people exit money, and they do not even realize it.
## What Buyers Prefer
Buyers prefer a business that is repeatable over and over again. The actions happen pretty much automatically, and profitability stays the same or gets better with each action.
They want margins that are defendable and a machine that works without crazy heroics.
Growth is attractive only when buyers see evidence of a scalable machine—not a founder sprint.
You can go in and look at a team and realize the founder and management team are just pushing to get the deal over the line so they get a higher multiple.
## Why Growth Without Structure Gets Punished
When revenue increases but ops, systems, and controls do not keep up, the buyer sees future cleanup costs.
They think: we are going to have to pay for somebody or a team to come in here and fix this stuff.
The cleanup shows up in:
– A lower multiple
– Tighter terms
– Slower due diligence
It can jam up your sale.
Sometimes, depending on the year and how long it took to get to exit, the buyer may come back and say: timeout, we gave you a multiple based on the time of the year, and now because things have changed, it is actually a lower multiple.
You want things to go smoothly. You want the exit to happen as easy as possible.
## Operational Leverage
Scale means:
– Your gross margin holds
– Operation costs do not balloon
– Incremental revenue drops to EBITDA
– You show more profit
This means you are more efficient over time. You are doing things better inside the organization.
Buyers are willing to underwrite operational leverage—not hype.
It is amazing how many times going in and looking at an organization, their forecast is absolute hype and probably never going to happen.
## The System Stress Test
Ask yourself: if revenue doubled in 12 months, what is going to break?
Red team exercises are a phenomenal way to get a feel for how your business is operating.
A red team exercise works like this: go inside the organization and say we are going to run a playbook and see what happens. Run a scenario over the next hour, two hours, five hours, two days—whatever the timeframe—and say what breaks.
If it breaks, how do we fix it? If it did not break, how do we catalog it and build out an SOP?
If you have chaos, shoot for clarity. If you have clarity, make sure it is documented.
The comfort blanket for an investor purchasing a business is predictability in and around the entire business. SOPs are not broken. People are not getting fired randomly. Random people are not getting hired. There is not a ton of churn.
Buyers assume volatility means a discount in your multiple.
## Founder Involvement Is a Red Flag
If growth requires you to be around for sales approval and key decisions, the business is not scaling.
You are locked in. You are not allowing your management team or director team to do what needs to be done. They are dependent upon you.
Scale requires leadership and a bench of individuals that can absorb complexity without bottlenecks.
You could leave for a month, three months, six months, and find the company runs the way it should.
## Revenue Quality, Not Revenue Quantity
Buyers and investors are looking for:
– Recurring revenue
– Contracted revenue
– Diversified revenue
– Low churn revenue
That becomes scalable with few surprises.
Lumpy revenue that depends on a bunch of decision-making and relationships inside and outside the organization becomes channel risk. These become the dings and dents and hiccups along the way.
## Scaling vs Sprawl
Scaling means the event happens with very little oversight. You have management and people involved making decisions.
Sprawl means chaos. Sprawl means extra work needs to be put in place. Sprawl means controls are broken.
If a deal requires a bunch of new processes, you are probably in sprawl. Customized projects and events make it very difficult to scale.
## The CAC to LTV Ratio
Investors want to see predictability. They look at the numbers and margins.
One way they do this: cost of acquisition (CAC) divided by lifetime value (LTV).
They are looking for a ratio of about three to one. If you put $1 into marketing cost of acquisition and get $3 out, most people say that is awesome. Anything above that becomes better for you.
If you spent $100, you should see $300 back on the lifetime value of that client.
You want consistent closing processes, consistent marketing processes, and clean attribution to the way leads come in and get sold.
## Run Like an Institution, Not a Personality
You want to prove your company runs like an institution—not a personality.
This means:
– Documented processes
– Standard operating procedures
– KPIs
– Meeting cadence
– Clear accountability
When I consult with people, five things we look at right off the bat include standard operating procedures, job descriptions, and org charts.
The more you can say here are the rules about how the company runs without having a lot of cleanup, the more you have a well-organized, well-run machine.
## Common Founder Mistakes
### Hiring Before Clarity
I heard somewhere: no description, no position.
Sometimes managers and division heads say we just need to get some bodies in here and fix the problem. But they are building the airplane as they fly it.
There is no description of why we need this person, what they will do, what their core function is, what the acquisition criteria is, or what we will pay them.
Buyers see this as future margin compression. They will discount because they will have to let people go—or you will have to do it before the sale.
### Waiting Too Long to Start
Some places do a sprint per quarter. Some do a 90-day sprint. Whatever you name your process, it should focus on one key ingredient that needs the most help and will give the most lift with the least damage.
Look for options and levers that move your business the easiest and fastest—not always the hardest.
The mistake is waiting too long. Someone will say: we are two weeks into the quarter, we will wait for the next one. You are going to wait 10 weeks to take advantage of a window of opportunity?
Things change. Opportunities go away. You may end up implementing the wrong thing.
If you are going 90 days, 90 days could start today, next week, or next month. Part of your strategy is to define when those 90 days start.
## This Week’s Action
Figure out which 90-day sprint you are going to put in place. Decide if there will be one or two sprints. Decide who is on the team.
Define what success looks like.
If you are possibly going to sell in five years, four years, three years, or two years—take your number of years and multiply by four. That is how many sprints you have left.
Not all of them will succeed. There may be success or failure. If you need nine sprints, that is just over two years of work.
Start now.
—
📊 **Free Framework Assessments:**
– [SCORE Framework (Exit Readiness)](https://scottsylvanbell.com/score-framework)
– [SCALE Framework (Operational Readiness)](https://scottsylvanbell.com/scale-framework)
– [SELL Framework (Revenue Quality)](https://scottsylvanbell.com/sell-framework)
– [DRIVER Test (Execution Capability)](https://scottsylvanbell.com/driver-test)
🎙️ **Listen to this episode:**
Apple Podcasts: https://podcasts.apple.com/us/podcast/episode-16-growth-vs-scale-what-buyers-actually-want-ep-16/id1876771297?i=1000750045672
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YouTube: https://youtu.be/j-nvu8zussw
Podcast Transcripts:
Welcome to episode number 16: Growth vs. Scale — What Buyers Actually Want.
When you understand a buyer’s acquisition criteria, you can plan accordingly. If you’re considering selling in two, three, four, or five years, one of the smartest moves you can make is to study what investors and private equity firms actually look for—and model your business around that.
Here’s the truth: you can be growing fast and becoming less valuable.
Growth is going from $10 million to $12 million in revenue with significant added cost, effort, and complexity. You’re pouring in more fuel to make the engine run faster.
Scale is going from $10 million to $12 million without proportional increases in cost, complexity, or founder involvement. Revenue increases, but overhead and chaos do not.
Many founders confuse growth with scale. They say they’re scaling when they’re actually just spending more to grow. Buyers know the difference—and it affects your multiple.
Buyers want repeatability. They want defendable margins. They want a machine that works without heroics. Growth is attractive only when it proves there is a scalable system underneath—not a founder sprint.
Growth without structure gets punished. When revenue increases but operations, systems, and controls don’t keep up, buyers see future cleanup costs. That cleanup shows up as a lower multiple, tighter terms, slower diligence, or even a failed deal.
Scale shows up as operational leverage. Gross margins hold. Operating expenses don’t balloon. Incremental revenue drops to EBITDA. Efficiency improves over time.
If revenue doubled in 12 months, what would break inside your organization? That’s a system stress test. Run red team exercises. Simulate scenarios. Identify weak points. Document fixes. Build SOPs. Turn chaos into clarity and clarity into documentation.
Predictability is the comfort blanket for investors. They don’t want volatility. They don’t want constant hiring and firing. They don’t want inconsistent margins. Volatility equals discounts.
Founder involvement is another red flag. If growth requires your approval for key sales, pricing decisions, or operational moves, the business isn’t scaling—it’s bottlenecked. Buyers want leadership depth and a bench that absorbs complexity without relying on you.
Revenue quality matters more than revenue quantity. Recurring, contracted, diversified, low-churn revenue scales. Lumpy, relationship-dependent revenue creates channel risk and valuation dings.
There’s also a difference between scaling and sprawl. Scaling means revenue increases with structure intact. Sprawl means complexity explodes—custom projects, ad hoc processes, inconsistent delivery. Customization without framework makes scaling nearly impossible.
Investors look at metrics like customer acquisition cost divided by lifetime value. A common benchmark is a 3:1 ratio. If you spend $1 to acquire a client, you should expect $3 in lifetime value. Strong ratios signal scalability. Weak ones signal fragility.
Buyers want institutions, not personalities. That means documented processes, SOPs, KPIs, meeting cadence, job descriptions, org charts, and clear decision rights. Clarity reduces risk.
A common founder mistake during growth is hiring before clarity. No description, no position. Adding bodies without defined outcomes leads to margin compression and future restructuring. Buyers see that and discount accordingly.
To build scale intentionally, think in 90-day sprints. Choose one key lever per quarter that produces the most lift with the least risk. Not everything can be fixed at once. If you’re three years from selling, you have 12 sprints. Five years gives you 20. Not all will succeed, but each builds structure.
Don’t wait for the “perfect” start date. A sprint can begin now. Waiting for the next quarter wastes momentum.
Your responsibility this week is to define your next 90-day sprint. What lever improves scalability the most? What does success look like? Who owns it? What metric proves it worked?
Step away to think. Turn off your phone. Get out of the office. Clarity requires space.
Buyers don’t want growth that depends on adrenaline. They want scale that runs on systems.