Inquire Before You Acquire A Six-Step Process For Private Equity Investors


When our private equity clients are evaluating a potential acquisition, they want to know why a sales team is making its numbers: Are they a top-flight organization, or are they the beneficiaries of happy accidents? Often, the investment thesis converts to a successful outcome, or it does not, based on the capability of the sales team.


At SBI, there are six specific things we look for when evaluating a sales team’s impact on an investment thesis. Each should be governed by a hierarchy of strategic alignment. That means there should be a documented corporate strategy that leads to a product strategy, which, in turn, leads to a marketing strategy and a sales strategy. Often, we find a well-articulated corporate and product strategy but a marketing and sales strategy that is underdeveloped. This results in a growth forecast that lacks credibility, which elevated investment risk.


A sales strategy is required but it is not enough. There also needs to be an operating plan that details how the sales team is going to execute the strategy. Our work over dozens of PE-sponsored projects has produced six elements that should be in any such plan. Careful probing of each will tell you how likely the growth forecast is going to be met inside of the investment time horizon.



Segmentation comes in three forms: market, account and buyer. At the market level, a sales team needs to understand the addressable market and how its competitors go to market. At the account level, a sales leader need to know which accounts will generate the most revenue in the least time. Among buyers, the team should understand how different individuals make purchase decisions.


Too often segmentation stops at the market level. This is a problem because it is very difficult to allocate sales resources at the market level. Sales resources need to be assigned to accounts, not markets, and need to target buyers in those accounts. Investors would be wise to ask management for a list of accounts ranked by potential, top to bottom, richest to poorest. This list should be cross-referenced with the sales rep stack ranking report, listing the reps best to worst, top to bottom, based on revenue production. The top sales reps should be on the top accounts. If not, a reallocation of resources could unlock trapped potential.



Sales teams need to be doing three types of planning: revenue, budget and data.


The revenue plan explains how a sales team is going to make its number. A sales leader should be able to explain how many leads the team needs to convert into opportunities, how many of those will become proposals, how many of those will be signed, their average deal size, and the length of the sales cycle.


The budget plan simply says how much money sales needs to meet its goals, and how those funds will be allocated. Sales expense is largely impacted by headcount; however, items such as training, technology, travel and others need to be estimated as well.


The data plan consists of three types of data, which allow a sales leader to connect behavior to results. If a team doesn’t show the right behavior, a leader can’t drive the right outcomes. Activity leads to results and behavior drives activity levels. The data elements are:


  • Behavioral indicators. This information will tell you how much time reps are spending with clients, how many calls they’re making, how many inquiries they’re responding to, etc. A board member should work with management to identify which behaviors lead to the desired outcomes. This is harder than it seems and is highly situational.


  • Leading indicators. These include the size, shape and velocity of the pipeline; the yield on each demand generation dollar; and the speed upon which management replaces underperformers with new recruits. This is an improvement opportunity for private equity investor-led boards, most of which don’t focus enough on leading indicators and spend too much time looking backwards.


  • Backward-looking indicators. These are metrics such as how many deals a team is winning vs. the competitors, pricing elasticity, the length of a sales cycle, the average deal size, the number of new products sold, etc.



There are two processes that dictate how a sales team engages with its target market: the prospecting process and the sales process.


Until the sales team closes 100 percent of their deals, they will need to generate new opportunities. Top quartile sales teams reject ad hoc prospecting and embrace a formal, constantly inspected prospecting process. The outcome this drives is a reduction in end-of-quarter revenue surprises. If a few deals push, and a few always do, the sales team has plenty of pipeline and can substitute revenue easily.


Sales process refers to how a sales team manages its opportunities. Many resources are expended to get a lead, and convert it to a sales opportunity, and, therefore, each sales opportunity should be managed as if it the team’s personal reputation was at stake. Private equity investors have an opportunity to spot upside where others don’t see it by inspecting the degree of customization in the sales process. Too often, the process isn’t customized to the individual prospect’s buying process. Instead, a generic sales process, such as solution selling, is being used. These old, legacy sales models don’t work as well as they once did. Switching to a custom-built sales process results in three outcomes: 1. improved win rates, 2. shorter sales cycles, 3. increases in average deal sizes.


Organizational Design:

These four areas can reveal the strength of the sales organization’s talent program.


  • The interview process. Often hiring managers don’t have a profile of an A player. They can’t hire A players if they don’t know what they look like.


  • A documented hiring process that looks into the past, present and future. Take the guesswork out of the hiring decision.


  • Case study-based selection. Move away from theoretical selection and embrace job simulation. Place the candidate in the job and ask them to perform.


  • References. Tell your candidates you want them to arrange for interviews with their former bosses. As a sales leader, you should conduct these interviews against the scorecard of an A player. The reference should rate the candidate from one to five on each of the competencies, and should be quizzed on the answers.



There are four things that separate above-average execution from average execution:


  • Enablement. Sales enablement means getting the right content into the hands of the right buyers at the right time in the right channels. A board member would be wise to engage in a buying process and have the sales team sell directly to them. Witnessing the sales process firsthand often reveals hidden opportunities for quick wins.


  • Adoption. We have witnessed sales leaders who look and sound great in the boardroom but nothing is happening in the field. Board members should practice skip-level management and engage directly with the sales team and determine if the processes and tools are being used.


  • Forecast/Pipeline Management. Garbage in/garbage out plagues many sales teams. Ask if there is one system of record, who owns it, and what are the data sources?


  • Reporting. Which tools and data are being used to manage reporting?



When we are engaged by a private equity investor, one of our first meetings is with the sales operations director. The reason we prioritize this is because sales art needs to be replaced with sales science and this happens in the sales ops department.


The biggest mistake we see is a lack of a sales operations strategy. The head of sales operations should be proactive and predictive, not reactive and backward-looking. Too often, we see sales ops as a dumping ground for the work no one else wants to do. This represents an opportunity for the savvy private equity investor. The sales operations director is to the head of sales what the CFO is to the CEO.


To our private equity clients, these gaps aren’t necessarily red flags. To the contrary, they create opportunity. If a potential acquisition is completely mature in terms of its sales and sales processes, there may not be much a private equity firm can do to create value. But companies that are missing some of this infrastructure have the potential to become dramatically more valuable after it is put in place.


The New Buyer's DNA Decoded

In this edition, we present practical advice from CEOs, heads of sales, marketing, finance and HR. We take a look at how to adjust the hiring profile, demand generation programs, forecast and pipeline management process, sales management coaching cadence, sales methodology and the big deal inspection process.


Matt Sharrers

Studies and works with the top 1% of B2B sales and marketing leaders who generate above average revenue growth for their companies.
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Matt is arguably one of the industry’s most connected, and physically fit, sales leaders. He “lives in the field.” As a result, he is the foremost expert in the art of separating fact from fiction as it relates to revenue growth best practices. Because of Matt’s unique access to the best sales talent, private equity investors tend to turn to him first when they need to hire remarkable leaders to unlock trapped growth inside of their portfolio companies. Matt’s recent engagements include work commissioned by private equity leaders Permira, TPG, Bain Capital and Hellman & Friedman.


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