LinkedIn Live: Maximizing Exit Value for PE Firms with Effective GTM Strategies
During Craig Group’s November LinkedIn event, Partner Brian Gustafson interviewed Libby Covington about the critical growth challenges and strategies for private equity (PE)-backed portfolio companies. The conversation, centered around organic growth and go-to-market strategy, offered valuable insights to operating and deal partners alike. Here’s a recap of the key takeaways:
The Need for a Robust Growth Strategy
The current high-interest-rate environment has shifted the growth dynamics for PE-backed companies. Traditional financial engineering alone is no longer sufficient to drive growth. For lower-middle-market companies, organic growth is now paramount. These companies must develop scalable, operational strategies supporting long-term growth beyond quick financial fixes.
This change has profound implications for the companies and their leadership. Operating partners, who focus on improving operational efficiencies, must now shift their attention to developing and executing go-to-market strategies that drive revenue growth. Covington noted that many operating partners may lack expertise in sales and marketing, making this an important area for outside expertise.
Common Growth Challenges for PE-Backed Companies
A recurring issue with many PE-backed portfolio companies is their reliance on founders who managed sales and operations without sophisticated strategies in the early stages of the business. This often results in companies that lack an integrated approach between sales and marketing. As market dynamics evolve, especially post-COVID, companies must integrate digital marketing and lead generation with traditional sales efforts. Unfortunately, many companies still neglect the critical investment in sales and marketing infrastructure, which can stall growth.
Covington also highlighted the common mistake of hiring a Chief Revenue Officer (CRO) to fix all sales and marketing problems. While the role can be beneficial, it’s not a silver bullet. Success requires a broader, team-based approach to sales and marketing strategy, one that considers not just leadership but also execution.
Selecting the Right Partner for Sales and Marketing
One of the key points discussed was the challenge of selecting the right partner to help with sales and marketing efforts. Some firms only provide tactical services, such as SEO, while others may focus solely on high-level strategy without the ability to execute. The ideal partner can offer both strategic planning and the necessary execution to ensure that the company is on a growth trajectory.
Another option that companies often consider is fractional leadership. While this can be a cost-effective solution, Covington cautioned that it often lacks the necessary team support to integrate sales and marketing functions effectively. Without the right team, even the best fractional leaders may struggle to make an impact.
The Importance of Objective Assessments
Objective assessments are paramount when evaluating a company’s go-to-market strategy. Operating partners, especially those unfamiliar with marketing and sales, may have limited awareness of the gaps in their current strategy. Conducting a thorough gap analysis allows companies to pinpoint areas for improvement without relying on ineffective solutions, such as simply adding more salespeople or generating more leads.
Gustason stressed that identifying the true causes of stalled growth requires an honest, expert-driven evaluation of the company’s current situation. Whether the issue is with the product, the market, or internal processes, identifying and addressing the root cause can quickly get a business back on track.
The Role of Commercial Due Diligence
Covington also underscored the importance of commercial due diligence during the acquisition phase. Many private equity firms focus primarily on financials and talent when evaluating a potential acquisition but fail to assess the sales pipeline and marketing investment. An early-stage evaluation of sales and marketing efforts is needed to understand the investment needed to professionalize the business and prepare it for growth.
For PE-backed companies, addressing sales and marketing gaps early can reduce risk, increase the potential for scalable growth, and set the company up for a more successful exit strategy.
Want to Hear More?
Organic growth has become critical, and companies must invest in integrated, scalable sales and marketing strategies to ensure their success. Listen to their entire conversation here.
