Today, we chat with
Ross Engelhardt, a leader in digital performance improvement who has a track record of launching, scaling, and patenting numerous successful software ventures across the globe. His expertise spans both the technical and financial aspects of digital transformation, which makes him a sought-after authority on how companies can use digital innovation to drive value. The interview before you is full of insights about boosting company valuations through digital investments, implementing new technologies, and so much more, so pay close attention.
Driving valuation
Joy Wallet: How can digital investments drive higher company valuations, and what financial metrics should executives focus on?
Ross: Digital transformation can significantly boost company valuations, with revenue multiples increasing to as much as eight times following a successful shift to a digital business model. These compelling returns are highly attractive to both executives and investors. However, the journey to achieving this is complex and requires focused attention on several key financial metrics.
Three critical metrics stand out: recurring revenue, revenue growth, and EBITDA margins. Valuations typically peak when approximately 80% of revenues are recurring, providing greater predictability and stability. Additionally, sustained top-line revenue growth is crucial during the transformation process. It's not enough to simply reduce costs— growth must remain at the forefront. Lastly, EBITDA margins must either remain stable or improve, ideally by 2–3%, as successful transformations often introduce higher costs of goods sold. Balancing these metrics effectively positions businesses to maximize value creation during digital transformations.
Private equity and digital innovation
Joy Wallet: How can private equity firms leverage digital innovation to enhance the value of their portfolio companies?
Ross: Private equity firms are fundamentally driven by their mandate to deliver shareholder value, and digital innovation has become a critical lever in achieving this. The challenge for PE firms is twofold — they must create enough value within the holding period to sell the asset at a profit while also leaving ample opportunity for the next investor to continue driving growth.
Digital innovation acts as a continuous engine of value creation by enhancing product offerings with cutting-edge technology, ultimately driving top-line revenue, improving market stickiness, accelerating speed to market, and reducing operating costs. These improvements make portfolio companies more competitive and boost customer satisfaction and long-term loyalty. By strategically deploying digital capabilities,
private equity firms position their investments for sustainable growth and higher valuations upon exit.
Financial challenges
Joy Wallet: What financial challenges do businesses face when implementing digital strategies, and how can they overcome them?
Ross: One of the most common challenges businesses face is striking the right balance between a customer-centric focus and sustainable financial outcomes. Over the years, the mantra has been to prioritize the customer — offering them the best experience across channels in real-time. While this remains important, it should not overshadow business strategy. Too often, we see companies over-investing in shiny digital solutions that cater to customer demands but fail to deliver measurable business value.
To overcome this, executives must ensure that their digital investments align with long-term business objectives. One effective approach is to conduct regular validation and recalibration of digital initiatives, utilizing pre-defined objectives and key results (OKRs). For example, if a digital trial program is failing to impact customer acquisition, it’s time to reassess or pivot. Discipline in prioritizing investments based on measurable business impact ensures that companies do not overextend themselves in non-value-adding innovations.
Balancing act
Joy Wallet: How should businesses balance digital innovation and cost control to ensure sustainable growth?
Ross: Balancing innovation with cost control requires experimentation with a disciplined approach. While building a robust business case is essential, it can only take you so far. To achieve sustainable growth, businesses should embrace a “test-to-invest” mindset. This means defining clear thresholds for experimentation based on factors like customer impact, market size, and regulatory considerations. If an initiative is small enough, encourage agile testing. However, for larger, high-impact opportunities, ensure cross-functional steering to maximize both the potential upside and cost efficiencies.
Cost control is not about stifling innovation but ensuring that resources are deployed in areas that yield the greatest return. Leaders should be willing to pivot quickly when initial results don't align with expectations, rather than continuing to invest in initiatives that don't support sustainable growth.
Securing funding
Joy Wallet: What advice would you give to entrepreneurs about securing venture capital versus bootstrapping their digital ventures?
Ross: Bootstrap as long as you can. Early capital can help accelerate product-market fit, but organic growth should be the priority. Venture capital is best seen as a tool to scale a business that has already demonstrated market traction, rather than a necessity from day one.
When the time comes to raise funds, be strategic about how you will use the capital. A well-thought-out multi-year growth plan that outlines specific funding requirements for go-to-market strategies, R&D, and customer acquisition is essential. Clarity on how each dollar of investment will drive future growth will not only help you secure funding but will also ensure that capital is deployed effectively.
Managing personal risk
Joy Wallet: As someone who’s launched and scaled successful ventures, how do you approach personal financial risk when investing in new projects?
Ross: I prioritize deeply understanding the market and the venture’s ability to capture wallet share. Equally important is evaluating the founding team — they need to exhibit a near-fiduciary duty to the business, putting the company's success above personal gain.
Additionally, I make sure to understand the intentions of fellow investors. Knowing what drives their participation helps ensure alignment of interests. Financially, I operate under the assumption that any venture could be a total loss, and I ensure that such a loss wouldn’t compromise other investments or opportunities. Wherever possible, I prefer to self-fund through other assets, which allows me greater control and mitigates external pressures.
Building financial literacy
Joy Wallet: For individuals looking to enhance their personal financial literacy, what is one takeaway they should know based on your work with private equity and investors?
Ross: Learn to read and understand financial statements. Each line item reflects a part of the company’s business model and operating strategy. The ability to translate day-to-day operations, strategic decisions, and innovations into financial metrics bridges the gap between operators running the business and investors assessing value. Mastering this skill allows you to approach
financial literacy with an investor's mindset.
Finding joy
Joy Wallet: What brings you joy in life, both professionally and personally?
Ross: I truly enjoy helping clients drive meaningful change. Whether it’s a take-private, a carve-out, or a full-scale business model shift, there’s real-world impact — new jobs are created, emerging leaders are empowered, and teams feel a shared sense of pride in building the future. There’s a multiplier effect when businesses reinvent themselves, and it’s exciting to be part of that transformation.
On a personal level, I enjoy spending time outdoors with my family, playing music, and helping others build their dreams. I also dedicate time to pro-bono consulting, which allows me to contribute to new ventures and support entrepreneurs on their journey to success.
