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PARTNERSHIPS THAT WORK:HOW PRIVATE EQUITY INVESTORS IGNITE PORTFOLIO REVENUE GROWTH

Guide for Private Equity Investors

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Behind every private equity backed portfolio company is an investor firm that provides the financial backing and other needed resources to make success possible, at every stage of growth.

Investor firms play a pivotal role in helping their portfolio companies navigate the path to growth and profitability. Private markets continue to grow. According to McKinsey’s 2020 Private Market Annual Review1, total assets under management for private markets reached $6.5 trillion last year, a new record high.

For investors, it’s a challenge to support multiple companies at various stages of stewardship from those just purchased, to those building value, to those preparing for an exit. It takes critical focus and an ongoing effort to prioritize their operational challenges and then align their sales strategies for proper execution.

When a portfolio company gets it right, the rewards are great, for both the company and you as an investor. Success with multiple portfolio companies will earn the best investors a strong reputation in the market and with executives who are looking for a valuable partner.

Building a book of healthy, profitably growing portfolio companies takes dedication and hard work from both sides. When a private equity firm and their portfolio company seals the deal, the real partnership begins.

1“McKinsey’s Private Markets Annual Review,” McKinsey, February 2020.

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THE CHALLENGES FOR PRIVATE EQUITY BACKED COMPANIES PARTNERSHIPS THAT WORK

For private equity firms, operational alignment within each portfolio company is critical. The capital investment and performance expectations for these companies are high.

Not only do these companies need to execute on their vision, but they also need to ensure that their message is right and that there's alignment cross functionally to enable the company to profitably grow.

How Private Equity Firms Provide Value

At this critical time of growth, private equity firms can bring value to portfolios by preserving what’s important and addressing functional gaps.

PRESERVING WHAT'S IMPORTANT:

Great private equity investors quickly identify and draft into where each portfolio company needs to focus. As a private equity firm, you’ll provide great value if you understand what the portfolio company leaders care about, how they meaningfully drive value and help them elevate what they do best in the marketplace. Proactive partnering will differentiate your firm in future deals, enabling you to earn the pick of the litter when multiple offers are on the table.

ADDRESSING FUNCTIONAL GAPS:

In addition to knowing what’s important to the portfolio team, investors add value by identifying and prioritizing the functional gaps that need to be addressed to generate profitable growth. Then investors help their portfolio company leaders define a strategic execution plan to address them.

As a value-added partner, investors can draft into the needs of the company to provide complementary capabilities that your portfolio company doesn't possess today and can’t achieve without you. Is the founding group good at setting the vision, but not strong at defining an operational strategy? If they’re in the manufacturing space, do investors have lean manufacturing expertise to help the company reduce costs on the manufacturing floor?

Timing and quick action is always critical. The sooner your company can align their solution with their customer’s greatest business challenges, the sooner they’ll see significant revenue growth. With an early focus on alignment and consistent communication of their value and differentiation, you’ll ensure that as portfolio sales teams grow, they’ll have a strong and consistent sales message to help new sellers get up to speed quickly and make a positive contribution to revenue.

A critical component all portfolio companies need to achieve profit is a value-based sales message. It is a catalyst to put execution behind your investment thesis, drive consistency around your message and enable the portfolio company to accelerate profitable growth.

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It's critical that investors help their portfolio companies build and execute a successful sales strategy that is both repeatable and predictable. And they must do it as quickly as possible.

While private equity firms are experienced across many verticals, their bandwidth to help with sales execution is limited. Few firms have dedicated resources to help portfolio companies focus on the critical elements of sales execution or act as a resource to help them define critical answers to these essential questions:

ESSENTIAL QUESTIONS TO ACCELERATE TOP-LINE GROWTH PARTNERSHIPS THAT WORK

SALES MESSAGING• What problems do we solve for our customers?

• How do we specifically solve them?

• How do we solve them better than competitors?

SALES PLANNING• How do reps build pipeline?

• How do reps achieve quarterly & annual quota?

• How well are we covering our territories?

• What are customers’ alternatives to us?

• How do reps build a negotiation strategy?

• What’s our proof?

• When we win, why do we win?

• How do managers inspect sales opportunities

• How do sales stages align with forecasting?

• How well are we covering our key accounts?

• How accurately do we forecast revenue?

• Why would someone want to work here?

• How do we hold people accountable for results?

SALES PROCESS• How aligned are the selling and buying processes?

• How do we ensure opportunities are qualified?

• What customer outcomes progress a deal?

SALES TALENT MANAGEMENT• What does success look like in a sales role?

• Why have we hired the wrong people in the past?

• Why do we lose key talent to the competition?

VALUE NEGOTIATION• What is our average discounting rate?

• What business issues do we anchor to?

• What is our definition of a “good deal”?

and pipeline?

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PARTNERSHIPS THAT WORKINVESTOR FIRST STEPS – POST ACQUISITION

You acquired a portfolio company for a reason. You’ve studied the financials, the product set, the market fit. You see this company's potential. Now it’s time to evaluate how to help the team get the work done and where their biggest areas of opportunity are to drive impact, growth and valuation accretion. Evaluation is the key first step to setting priorities and aligning for growth. Most portfolio companies have matured and have defined their strengths. It is still important to assess what has already been done and what still needs to be done in order to scale success.

Sure you have a good strategy, but do how do you operationalize that at the point of contact with current and potential customers? Investors can help their portfolio companies address growth challenges and drive alignment by providing guidance and enablement in these key areas of sales effectiveness:

• Ensure the entire customer-facing organization has a

sales message based on value and differentiation

• Ensure that the sales organization can efficiently

qualify, progress and close sales opportunities to

improve revenue predictability

• Provide a management cadence to focus the sales team

on the right accounts and the right activities to drive

more pipeline

• Develop success profiles and a hiring, onboarding and

coaching process to put the right team in the right roles

• Enable sellers to drive a value-based negotiation to

improve predictability and preserve necessary margin

Another important role that investors bring to the table is that of a leader, who can help their portfolio company evaluate multiple perspectives to triangulate the truth. As an investor, you have the unique position to offer your direction and guidance, while being an outside voice that enables tough decisions to drive company alignment.

Maybe the portfolio company’s message doesn’t address or prove how it solves problems. Maybe the company is communicating the right message but to the wrong customers. Maybe the company is hitting sufficient sales numbers but doesn’t know why or how to repeat that performance.

It’s the role of the investor to help your portfolio companies consider their own perspectives, together with the market perspectives to then validate what actually needs to be done.

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Private equity firms often bring in operating partners or advisors to offer support to their portfolio companies. In that role, an operating partner will have multiple portfolio companies that they are charged with helping in their sales efforts. Portfolio companies may need support across multiple functional areas, ranging from sales to marketing to finance. A focus on sales effectiveness will help portfolio company leaders drive alignment, adoption and reinforcement of sales initiatives that firmly support revenue growth and valuation.

The operating advisor may be functionally proficient but lack the bandwidth and in-depth knowledge to help a portfolio company with improving sales. Investors need the ability to customize the approach to their portfolio companies' unique needs. Consider an essential framework approach that will work across many vertical markets and support different sales motions at different stages of sales growth.

A great framework will enable you to support and treat each portfolio company – and its strengths and weaknesses – individually, while still providing a common way to execute and measure KPIs that are relevant to the company and its industry.

Here are some essential frameworks and the way they work to support critical operations:

Most portfolio companies see the biggest impact on revenue when they start with the messaging framework – for good reason. There’s nothing more critical than establishing an organization’s message and enabling their sales teams to articulate the value of it’s solution in a way that actually solves their customer’s problems.

Organizationally, when everyone is on the same page, portfolio companies can create alignment and have a consistent message about the problems the product solves. With a consistent message in place, you can establish an operating rhythm, which will make it easier for the sales organization to get in front of the right buyers, qualify deals and forecast sales.

Additional frameworks provide a stair step approach, creating foundational building blocks that can be customized to each portfolio company’s unique needs and requirements. Each framework provides the right mindset, processes, tools and content to set the foundation for success.

Together, the frameworks help build, create and support a strong, highly-tuned sales organization within each of your portfolio companies.

A lot of people are smart and have great ideas. They understand market positioning and customer acquisition. They get the big picture. But it bears repeating. You should never underestimate the power of a strong, highly-tuned sales organization.

OPERATIONAL SUPPORT PARTNERSHIPS THAT WORK

• Sales Messaging Framework to coach portfolio companies on how to deliver consistent messaging, positioning and differentiation of their value.

• Sales Operations Framework to help portfolio sales organizations align the way they sell with how their buyers buy.

• Sales Planning Framework to guide portfolio company sellers to better manage their territories and the accounts inside them.

• Sales Talent Framework to ensure portfolio companies hire the right people for the right roles and consistently retain top talent.

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POSITIONING YOUR FIRM AS AN ESSENTIAL PARTNER PARTNERSHIPS THAT WORK

Great private equity firms differentiate themselves by delivering more than financial capital. The great ones provide transformational capital as well. They know what’s important to drive equity value and financial engineering during their stewardship and at exit. The strongest private equity firms focus on transforming their portfolio companies, not just transacting. They have examples of how they have led successful transformations in multiple portfolio companies and they can clearly communicate how they do it differently and better than their peers.

Strong investors also provide value beyond the spreadsheet, focusing equally on the “softer” but important areas like company culture, talent development, and employee engagement and retention.

Great private equity firms know that supporting their portfolio companies means analyzing and focusing on the art and science of selling. They recognize that both art and science have the power to transform.

A transformational approach can help every investor firm:

• Provide a consistent approach to help multiple portfolio companies drive growth and profitability• Drive a consistent marketing message to elevate and support portfolio companies readying for a successful valuation

realization (exit)• Build a strong reputation that aligns with highly successful partnerships and attracts the next generation of high

growth portfolio companies

To be a good partner for your portfolio companies, it’s important to have the right partner for yourself. The right partner for your investor firm can help you increase the value of all your portfolio companies and establish your firm in the growing private markets space.

Messaging matters, not only for the portfolio companies you invest in, but also to build your firm’s position as a market leader. Your entire investor firm has exposure to owners of portfolio companies every day, as well as stakeholders who are putting funds into those businesses. If your entire team can communicate consistently about what makes you different, what makes you better and what value you bring to the marketplace, you'll distinguish your firm as a market leader.

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HOW FORCE MANAGEMENT CAN HELP

We specialize in executing a growth strategy at the point of sale. We have helped numerous investor firms increase productivity and grow the value of their portfolio companies by driving improvements across key sales and marketing disciplines. Our customers include some of today’s fastest-growing, business-to-business, high-tech portfolio companies.

With our Command Series, we’ll partner with your portfolio companies to build a road map that enables them to consistently articulate the value and differentiation of their products and services. Our process creates value by improving sales productivity and forecasting accuracy. We’ll also help define the right talent for the right roles, so portfolio companies see the strength of their sales organization as a competitive advantage.

• Increase the value of your portfolio companies. • Accelerate business growth and time to realization. • Establish your brand for successful acquisitions in the future.

Force Management can help you drive growth, profitability and valuation for your portfolio companies and position your investor firm as a market leader.

Force Management understands what your portfolio companies need. We’ve worked with private equity backed companies in all stages of growth. We can help you, as an investor, support portfolio company sales strategies and align teams for growth.

RECENT WORK WITH PORTFOLIO COMPANIES

• Increased bookings 60%• Improved quota

attainment to 70%• Cut ramp-up time for

reps in half

• 8 quarters of nearly 100% forecast accuracy

• 1000% growth in book-ings in the first 4 quarters after implementation

• Acquired by Salesforce for $1.35 billion

• Year-over-year growth in conversion rates

• Growth in multi-product deals• Significant decrease in

discounting• Value Negotiation training paid

for itself within one quarter after training

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© Force Management 2020 | www.forcemanagement.com

Support successful partnerships in every stage of growth. Realize

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