How customer and employee feedback improves Private Equity due diligence

How customer and employee feedback improves Private Equity due diligence

The lifeblood of future growth is customers and employees. Private Equity firms need to ensure that an acquisition company’s customer base is still going to be buying when the deal is done, and that the internal structure of the company is configured to support customer-centric goals.

Collecting customer and employee feedback as part of the due diligence process allows thoughtful investors to avoid trouble when post-deal your investment funds evaporate and value creation stalls.

By analysing the dynamics of an acquisition company’s relationship with its customers and employees, business leaders become armed with the actionable insight necessary to make an informed investment decision and reduce risk.

 

The benefits of collecting customer feedback

Showing customers that your organization cares about them and is working to actively improve its service offering, is not to be underestimated, and the renewed engagement can in itself pay for the research exercise. However there are several other distinct benefits of collecting customer feedback as part of the acquisition due diligence process:

#1. Develop an Action Plan for Sales and Marketing

Provide the management team with a clear sales and marketing blueprint that builds growth and value, improves sales processes, customer experience and profitability. Establish clear KPIs so management and the board can monitor performance. 

#2. Develop an intimate understanding of your customer base

Gain a deep understanding of the needs and unique characteristics of an acquisition company’s target customer population and employee base. Often sales are concentrated in the hands of relatively few buyers and establishing trusted client partnerships is critical to resilience. Identify the factors that ultimately lead a customer to purchase and capitalize on them with more effective marketing communications, sales engagement and service delivery.

#3. Identify opportunities for innovation and growth

The adage that 80% of a product’s value is derived from only 20% of its features reigns true. Take the guesswork out of growing an acquisition company’s service offering by asking its customers which features and services they value most, and which are missing from the value proposition.

#4. Understand the competitive landscape

Careful probing can confirm who the players are to watch in the industry and why they are dangerous. Markets are increasingly discontinuous and buffeted by external forces such as Covid and Brexit. Looking ahead and assessing resilience is critical to sustained growth.

#5. Solidify your market position

By understanding the strengths and weaknesses of an acquisition company in the eyes of its most important asset, leadership teams can emphasize the aspects of a product or service that are performing well and actively improve areas of weakness before they impact performance.

#6. Gather baseline metrics and determine KPIs

It’s difficult to understand the revenue potential of a target acquisition company without comprehensively understanding where it stands in the eyes of its customers. By collecting baseline measurements of a company’s other key performance metrics, investors can take strategic action and track improvement over time.

The benefits of collecting employee feedback

If customers are a company’s most important asset, its workforce is an extremely close second. The “outside-in” perspective provided by customer feedback is critical for reliable future revenue predictions, but the employee experience absolutely should not be ignored. There is a strong correlation between employee experience and customer experience. Customer feedback paints the picture of future success, but employee feedback provides the paint. Similar to leveraging the voice of the customer in the due diligence process, there are many benefits to collecting employee feedback:

#1. Understand the culture of the organization

Through employee feedback, systemic cultural issues within an organization can be brought to light and resolved. Employees who are unsatisfied with their leadership or work environment are ill-equipped to provide an exceptional customer experience. Key employees may be essential to future growth and must be retained.

#2. Identify operational inefficiencies

Organizational silos and poor process design inhibit employees from having effective interactions with customers. By mapping the journey from problem to resolution, an investment company can empower employees to put the customer at the core of every decision-making process.

#3. Alignment toward the corporate mission

Customers want to do business with companies that align with their values and make them feel good about their purchase decision. Identifying the degree of alignment among employees around a common customer-centric culture and shared values will encourage employees to promote their employer and take pride in their work. This helps build a distinct external brand which adds to value-creation.

#4. Encourage transparency

Like customers, employees want to know that their voice is being heard. Collecting employee feedback prior to investment provides employees who are “in the trenches” interacting with customers the confirmation that they play an active role in the growth of the organization.

Invest in a successful future

By investing in a customer and employee feedback review as an essential part of the due diligence process, investors reduce the risk involved with every investment transaction.

This outside-inside approach provides a 360-degree view of an acquisition company and the blueprint necessary for success after the acquisition is complete.

 

About BeyondCuriosity

BeyondCuriosity is experienced at undertaking customer and employee reviews for Private Equity backers of mid-cap businesses and VC funded start-ups. We operate quickly and cost efficiently with appropriate discretion both pre-deal as part of DD, and post-deal when issues emerge with sales and marketing effectiveness, affecting planned growth and value creation.

We bring a pragmatic approach based on strong thought leadership and commercial experience. Our reports are clear and action orientated and if required we can provide hands-on support and coaching in customer strategy, innovation, sales and marketing.  

About the Author

Chris Little is a leading practitioner of deep insight, customer centricity and innovation co-creation. Chris brings the voice of the customer directly into organisational strategy and marketing programmes. He works extensively with mid-cap and start-up businesses and their funders to develop sustainable growth and strengthen their sales and marketing capability.

Before founding BeyondCuriosity Chris held senior positions in marketing and strategy for major corporates and was COO of a financial services digital start-up.

Chris writes and blogs on insight, innovation and business strategy and is a customer experience thought leader.

 

BeyondCuriosity is a specialist insight agency for private equity, innovation and growth

To learn more call Chris Little 07957686366 chris@beyondcuriosity.com

Beyond Curiosity

 

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