This is Part 3 of our series on EOS and Exit Planning. Read Part 1 | Read Part 2
Two businesses. Same revenue. Same EBITDA. Same industry.
One sells for 4× EBITDA. The other sells for 6×.
What’s the difference? Intangible capital.
As Barry Fay puts it: “So much of a company’s value is based on intangible capitals. Two businesses with the same EBITDA can be valued wildly differently because of these factors.”
Buyers don’t just buy financial performance: they buy the underlying assets that produce that performance and will continue producing it after the sale. Much of that value lives in four types of intangible capital.
1) Human Capital: Your People and Culture
Human capital is the collective capability, engagement, and alignment of your team. Buyers assess: Do you have the right people? Are they engaged? Will they stay after transition? Is there a strong culture that attracts and retains talent?
How EOS Builds Human Capital:
EOS creates human capital through several interconnected practices. The concept of “Right People, Right Seats” ensures you have people who fit your core values (Right People) and excel in their specific roles (Right Seats). This isn’t just about hiring: it’s about honest ongoing evaluation.
The People Analyzer tool by EOS forces leadership to assess whether each team member truly shares the company’s core values and whether they’re succeeding in their role. This creates clarity and, over time, a team of A-players who are both culturally aligned and functionally excellent.
Core values aren’t wall decorations in an EOS company: they’re hiring filters, performance standards, and cultural anchors. When everyone operates from shared values, you get alignment that buyers can see and feel.
Regular Level 10 Meetings create consistency and engagement. When teams meet weekly with clear agendas, open issue-solving, and accountability, people feel heard and invested. This shows up in retention rates and team cohesion. Both are signals buyers value.
What Buyers See: A business where the team will continue performing because they’re engaged, aligned, and in roles where they excel. Lower turnover risk means higher multiples.
2) Structural Capital: Your Systems and Processes
Structural capital is the knowledge, processes, and systems that exist independent of any individual. Buyers ask: Are key processes documented? Can operations scale? Is the business data-driven? Does tribal knowledge live in people’s heads or in accessible systems?
How EOS Builds Structural Capital:
EOS addresses structural capital through disciplined documentation and data-driven operations. The Accountability Chart creates organizational clarity: Not traditional org charts showing hierarchy, but clear accountability for functions and roles. Buyers can immediately see who owns what.
Documenting core processes is a non-negotiable EOS practice. The company identifies its handful of core processes (usually 5-8) and documents them at a high level. This isn’t about creating thick procedure manuals; it’s about capturing the essential “how we do things here” so operations can run consistently and scale reliably.
The Scorecard brings data discipline. Each leadership team tracks 5-15 key numbers weekly. Over time, this creates a business that runs on metrics, not gut feel. Buyers see predictability and management sophistication.
Identify-Discuss-Solve (IDS) creates a systematic approach to problem-solving. When issues arise, there’s a documented process for addressing them. This prevents problems from lingering and ensures organizational learning.
What Buyers See: A business with documented playbooks, clear accountability, and data-driven operations. This isn’t dependent on the owner’s tribal knowledge and it can be transferred, scaled, and improved by new ownership.
3) Customer Capital: Your Market Position
Customer capital encompasses your customer relationships, brand strength, recurring revenue, and market position. Strong customer capital means buyers see stable, diversified revenue that will continue post-transaction.
How EOS Builds Customer Capital:
The Marketing Strategy component of the Vision/Traction Organizer forces clarity on target market, ideal customer, and messaging. The 90-Day Rocks system ensures marketing and customer initiatives actually get executed, not just discussed. Strong execution on customer strategy helps build retention and recurring revenue. Both are valuable to buyers.
4) Social Capital: Your Reputation
Social capital is your reputation, community standing, and external relationships. While less directly addressed by EOS than the other three, companies running EOS often see social capital improve as a byproduct of better operations, engaged employees, and consistent execution. EOS firms often have reputations of great places to work, which is a testament to improved social capital.
How EOS Builds Social Capital:
When your business runs well, treats employees fairly, delivers consistently to customers, and operates with clear values, reputation improves.
The Cumulative Effect
Here’s what matters: EOS wasn’t designed to check boxes for exit planning. It was designed to help businesses run better. But “running better” happens to mean building exactly the intangible capitals that drive higher multiples.
You can improve EBITDA and still have a business that’s difficult to sell if these capitals are weak. Or you can have solid EBITDA and strong intangible capitals that command premium multiples.
EOS builds both. Philip Pfeifer, another experienced EOS Implementer, captures this well: “As the saying goes – What gets measured gets done. My clients use a business operating system like EOS to get clear on what they want and then they go about creating that. Measuring and creating as they go. In the process they become the entrepreneurs and leaders they always wanted to be. And when that happens they begin to enjoy entrepreneurial freedom. Exit or pre-exit doesn’t matter. It’s a way of life.”
Phillip speaks not only from his role as an EOS Implementer, but from his experience as a fifth-generation entrepreneur and a successful founder with a notable exit. That’s the real story here. EOS helps you build a better business and become a better leader. The exit value is a natural consequence, not the primary goal.
In our final post, we’ll explore why private equity firms may want to use EOS-run companies as platform acquisitions.
Next in this series: Why PE Firms should consider running their platform company on EOS
#EOS #ExitPlanning #BusinessValuation #IntangibleCapital #EntrepreneurialOperatingSystem #FractionalCFO
