Private equity firms feel stress at the beginning of each quarter. You need your portfolio companies to make the number. As a board member, you are constantly asking yourself, “how can we accelerate our growth rate?” This post is focused on helping you accelerate growth in your portfolio companies. It’s difficult to grow revenue faster than your industry’s growth rate and faster than your competitors. The Revenue Growth Diagnostic interactive tool will help you determine if you are likely or unlikely to make your number.
Understanding Your Growth Levers
As a board member, the first thing you need to do is ask for proof. Said another way, you want to know what to inspect. Below are a few suggestions to help you leverage some best practices:
1. Documented sales and marketing strategy
When you ask to see a copy of the sales or marketing strategy, a physical document should be handed to you. If the company does not have one, this must be priority number one for you. These two strategies must be written in the context of the corporate and product strategy.
2. Studying The Wrong Data
Your team spends too much time reviewing internal metrics from the sales force. They ask for pipeline and forecast information. They like seeing things like quota attainment, revenue per head and compensation history. While helpful, this is an inward view. You should be asking for the outward view. Things like:
- Buyer Personas v. User Personas—this tells you who buys the product vs. uses the product.
- Number of Buying Processes—this tells you how in tune the company is with the customer. Different products and solutions have different buying processes. A company should know these and have them documented.
- Competitor by Segment and Product-this tells you how well the company executes against the competition by product and market segment. Win rates are only meaningful if you have a baseline.
- Big Deal Process-what does the company do differently to leverage the entire strength of the organization in support of the big deal?
- Prospecting Process-how does the company generate net new demand and at what rate?
Closing these gaps quickly will help you accelerate growth rates.
3. Ignore Marketing
You put too much weight on sales and not enough on marketing. This is a weak spot we often see in private equity. Marketing’s impact on revenue should be understood. In fact, marketing revenue attribution is usually a slippery concept. Everyone has a different point of view (and usually a different set of numbers). You should spend as much time with the CMO as you do with the head of sales. You may be able to accelerate growth by gaining an understanding of the sales/marketing relationship.
Sales excellence is 50% talent and 50% the performance conditions in which you place that talent. We don’t see enough time spent understanding the quality of the sales and marketing leaders. Or more importantly, understanding the organization’s Talent Strategy. Some things to look for:
- Scorecards by Role—ask to see a copy of a scorecard or similar document. This is not a job description. A scorecard breaks down the accountabilities and competencies of high performance.
- Documented Hiring Process- ask to see the documented hiring process. You should see a detailed workflow, including interview questions, a job tryout and detailed reference interview approach.
- New Hire Onboarding- ask how the company ramps new hires to make them productive. You cannot afford to have all your new hires not produce quickly.
As a board member, you are more objective. You should challenge your executive team on these items. You will gain clarity into the revenue plan and hopefully make this a part of your board meetings. I hope a few of these suggestions will help you ignite the growth plan. If you have others, include them on this post as your peers would love the help. For a complete list of other growth suggestions, you can visit this page.
Every quarter SBI conducts dozens of engagements on behalf of private equity firms. These engagements range from diligence, sign to close, to post close value creation work. This gives us unique insight into the before and after of deals across a wide cross-section of companies. We will aggregate and publish these insights on a quarterly basis. Download the latest issue: SBI PE Quarterly Update Q1 2017