Private Equity: When Growth Stalls

Private Equity: When Growth Stalls

Private equity managers and their investors love talking about the good deals. But for every success story, there is the one that did not go so well. After 12 months of Covid there are a lot more problem children.

So what to do? How do you get these businesses in shape to grow or sell? How to take advantage of the post-Covid market recovery? Often these businesses are light on sales and marketing capability and their strategic thinking is focussed on product not customers. Here is how to rethink the customer strategy and light the rocket fuel. 

 

Every Portfolio Has A Problem Child

Despite the attention given to pre-deal due diligence some businesses in the portfolio will do less well than hoped. It maybe that due diligence assumptions don’t stand up in the cold light of day, or the Covid/Brexit whammy has stalled revenue. And no one saw it coming.

Assuming you don’t have a complete dog, you will be very concerned with straightening out your problem business. Executives need to diagnose the cause of a stall and turn things around fast, as otherwise the company stands little chance of ever returning to healthy top-line growth, consuming value.

It’s tempting to blame stalls on external forces (covid economic meltdown for instance) and conclude that management is helpless. There may be plenty of underlying reasons for poor performance but with post-covid market recovery in sight you will want to take action now.

Taking Action

Our experience is that many problem child businesses lack depth in sales and marketing and may instead be focussing too heavily on the product and technology. As a result they are not customer focussed and lack resilience when circumstances change. Equally they are unaware of the rapidly changing customer opportunity. 

We suggest you intervene quickly to review the market and customer feedback, think strategically about customer value, and implement a sales and marketing plan. This may identify process and talent issues which need to be addressed.

There are 6 elements in a recovery plan.

  1. Customer and Market Review
  2. Value Proposition
  3. Sales and Marketing Blueprint
  4. Process and Tools
  5. Talent
  6. Innovation

1. Customer and Market Review

Customers and entire markets have been destabilised by covid and Brexit. While there will be a rebound during 2021 the shape of demand and delivery will change.

Our approach is to talk individually and in depth with all the major customers to understand where customer value lies. Often B2B businesses will have between 10 and 50 primary clients accounting for up to 90% of sales. This means it is likely that no more than 50 client individuals decide the fate of the business, so understanding their needs and concerns is a top priority.

Many Private Equity backed businesses operate in niche markets because they have carved out an entry point with specialist solutions. These niches may grow fast and be well remunerated. To grow further they need to reach a wider customer base competing with established players. While retaining the agility of a small business they need to square off against sophisticated competitors and knowledgeable buyers by improving processes and professionalism.

2.Value Proposition

The customer value proposition describes the trade off that every customer makes when purchasing. What is the benefit delivered against the cost in effort, risk, and cash? Many Private Equity backed businesses are surprisingly unclear about the value they deliver and how this varies by client and is changing over time.

It is not the case that customers get everything they want, but it is the customer who defines the value not the business. This means we need to work with the customer to understand their needs and create a solution that works for them, and for the business. As an extreme example Ryanair, a low-cost airline is recognised as having very poor customer service but is successful commercially because the bundle of benefits outweighs the disadvantages.

Defining the customer value proposition gives focus and direction to the business, enabling resource prioritisation and breathing life into the sales and marketing blueprint.

3.Sales and Marketing Blueprint

Private Equity backed businesses often lack strength in sales and marketing and this impedes demand generation and fulfilment. Once we fully understand customer needs and have defined the value proposition, we can plan how we will increase demand by reconnecting with customers, presenting our case for distinctive customer value and building deep customer relationships.

The approach will vary by business and market, but it is critical to define the plan with clear 100-day milestones and KPIs. Our hands-on experience will support the internal resource, provide coaching and connection to expertise where needed.

It is a fact that sales capability is often weak, possibly focussed on the founder’s relationships and lacking processes, rigorous sales funnel management, and appropriate reward.

4.Process and Tools

Small businesses looking to grow often find that internal processes are poorly defined and lack support from leading edge tools such as CRM software and KPI dashboards. To professionally and consistently manage sales and fulfilment these processes need to be mapped and strengthened. A useful initial approach is customer journey mapping where the customer experience is examined at each stage from initial awareness, through sales and support to use of the solution. Importantly the customer defines their perception of the experience, not the business. So this is not a desk exercise.

5.Talent

A talent assessment is inevitable in a Private Equity interaction because time and performance are of the essence. As businesses grow the demands change and there is a premium on top flight skills and professionalism. We often find that incumbent talent is weak in sales and marketing and there will be a challenge to determine whether the quickest route to value is to upskill the existing staff or to replace. The initial approach is to review the strategy, improve processes and provide coaching to upskill and assess potential.

An associated challenge is to ensure leadership is aligned with the customer value agenda. Customer centricity starts at the top and should be visible through leadership behaviours. We would expect leaders to spend significant time with customers and cascade this through dynamic and uplifting internal communications which show where the heart of the business lies.

6.Innovation

Often small businesses have an entrepreneurial background, and this agility helps young businesses find profitable niches. As businesses grow their focus on meeting the needs of larger segments becomes important but requires discipline. Firstly a market appraisal will confirm the financial opportunity and therefore the resource that can legitimately be allocated. Best practice in developing the solution includes defining the Customer Value proposition, and using Sprints supported by Customer Co-creation. This methodology builds a solution jointly with the customer ensuring that value is delivered first time.

Taking these actions quickly will equip the business to transform from Problem Child into a Rising Star and avoid a fatal nosedive.

 

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 commercial due diligence, and post-deal when issues emerge with sales and marketing effectiveness, affecting planned growth and value creation.

We are a small business, so you deal directly with the principals who do the work. Because we are pragmatic and down to earth with real-life experience of running businesses we are empathetic with management and this ensures our recommendations are accepted and acted upon.

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 recognised as a customer experience thought leader.

 

BeyondCuriosity is a specialist customer strategy consultancy for private equity, innovation, and growth

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

 

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