Four Conversations Private Equity Should Start Now to Spark Portfolio Revenue Growth in 2024

June 7, 2024

In 2023, the private equity market faced significant headwinds, characterized by reduced exit volumes, diminished values, and elongated holding periods. As operating partners or members of value teams in this challenging environment, it’s vital to pursue innovative strategies that enhance portfolio revenue growth beyond the usual tactics like bolt-on acquisitions and team enhancements.

Understanding the Current Landscape

The downturn has necessitated a reevaluation of growth strategies. The typical paths to enhance value and prepare for eventual exits are no longer as straightforward or as effective. This calls for a deep dive into what made each portfolio company (portco) attractive in the first place and finding ways to amplify those attributes.

Four Conversations Private Equity Should Start Now to Spark Growth in 2024

As we look towards 2024, here are immediate actions to consider for jumpstarting growth. The emphasis is on being proactive, resourceful, and adaptive to the evolving market conditions. Through these approaches, the goal is to navigate the downturn not just with resilience but with a forward-looking growth mindset.

1. PEG Level: Plan/Invest in a Robust Marketing Program

Option 1: Consider establishing an internal Marketing Center of Excellence (COE). A majority of PEGs have aspirationally added this to their roadmap but have yet to execute on it. Whether it’s a time or resource constraint, they’ve never moved to make this a reality. 

  1. Look around your PEG at the people and resources available to you. This has to be prioritized by multiple stakeholders to create, plan and execute. It will take a bit of a lift to get this off the ground, but will also create an incremental steam of revenue.

Option 2: Partner with specialized agencies. If the lift to build internally is too high, you always have the option to partner with an agency that will kickstart this for you. Even if you don’t plan on working with an external resource in the long term, learning the process and closely watching how they operate will level your PEG up and help determine if the ROI is worth it or you build it yourself.

The goal is to enhance your marketing capabilities significantly, thereby driving growth and visibility.

  1. Research, run due diligence, and meet with agencies that speak on the level of business growth, organic growth, value creation, and revenue. They should have some insight into the private equity goals for each company and a longer term approach (1-3 years holding period).
  2. Avoid traditional agencies that go after quick wins, vanity metrics, AI driven content, etc. They will be hesitant to share data/progress, focus more on execution and reactive tasks than proactively collaborating on prescriptive strategies to reach business outcomes.

2. PEG Level: Integrate Marketing into Your 100-Day Plan

From the outset of any new acquisition or strategic shift, marketing should be integral to your 100-day plan. Whether it’s during audits, due diligence, or strategy formulation, a dedicated marketing section ensures focus on growth and brand building.
Existing 100-day plans revolve around Due Diligence, Legal, Finance, HR, Communication, Culture, and Operations. It may lightly touch on marketing as part of the operations section, it rarely delves deep enough to have a good plan of action or immediate actions before you’re meeting with shareholders again.

Adding a real growth marketing deep dive as part of your 100 day-plan can:

  1. Work with fellow operating partners to go through your current 100-day plan template to build out a specific section for marketing.
  2. Get an idea of how the company has reached their current revenue level (most of the time through founder led or product led growth) and how marketing can become a major growth lever for the future.

3. Portco Level: Identify existing marketing plans, strategies or needs at your portcos

Adding marketing to the first 100-day post acquisition plan is a perfect lead in to engaging in marketing conversations. But most of these conversations are more necessary for your current portcos in year 2-3-4-5 of their holding periods.

Many PEGs leave the portco marketing functions to the existing team, not really getting involved. But the main questions / topics that need to be gauged through conversations are:

  • Existing team makeup / strengths & weaknesses / expertise covered
  • Quarterly & Yearly plans / Go-to-market strategies built out
  • Vendors being used – how many, coverage areas, contracts in place, etc.
  • Metrics being actively tracked – goals, KPIs, visuals, strategic narratives shown through data
  • Marketing/Sales/Product alignment, communication cadence, and knowledge sharing

Regularly discuss marketing strategies with your portcos. Alignment between your goals and their execution is critical. These conversations should focus on how to best utilize financial resources to achieve tangible business outcomes.

  1. Meet with all portcos under management about marketing.
  2. Even a casual conversation can open up discussions around efficiencies, money in/money out, revenue generation, sales tactics, channel ROAS, and business outcomes.
  3. Ensure the budget is being spent in a way that rolls up into your vision for the portco and focus on growth/higher exit multipliers.

4. PEG / Portco Level: Standardize Your Metrics and Build a Dashboard/Visualization

How many times have you heard “data is the new oil” in the last 6 months. This is becoming a non-negotiable. The better organized your data is, the fewer data points you’ll need to look through weekly or monthly. You need a high level dashboard and some consistent figures throughout your portfolio. Establishing a systematic dashboard for tracking key metrics and KPIs across your portfolio can offer profound insights. This tool aids in consistent performance tracking and highlights areas needing attention or adjustment.

Gaining access to your portco’s data will help decision making, planning, and growth of the business.

  1. Map out your quarterly and yearly goals and establish what you need to track to gauge how you’re pacing to plan
    • Volume Goal
    • Efficiency Goal
    • Leading Metric
    • Lagging Metric
  2. Start to inventory what you currently can see and can’t see with each portco
  3. Build a consistent view of data trends across companies you invest in

By adopting these strategies, you position your portfolio companies for a more prosperous 2024. These steps build upon the foundational attributes that made the portcos attractive acquisitions, thus driving growth even in a downturn.

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