Increasing Portfolio Company Valuation with Sales Acceleration
Driving Sales Productivity in a Portfolio Company
In the first half of 2021, private equity (PE) deal volume increased nearly 22 percent relative to the previous year, according to an analysis by PWC. Subsequently, PE firms face significant challenges in the push to create returns from acquisitions purchased at high multiples. Compounding this challenge is the fact that many of these transactions involve companies that have already experienced one or two cycles through PE ownership. The potential returns that come from cutting excess cost have long since been exhausted. With competition for traditional PE deals rising and putting pressure on returns, PE firms are increasingly evolving into change agents for creating business value. Revenue growth through increased sales and marketing productivity are now the primary route to enhanced levels of profit and margin expansion.
For many PE firms, creating an engine that delivers predictable revenue growth often seems elusive. In our work with financial sponsors and operating partners, frustrations abound. Portfolio management frequently struggles to explain why company forecasts are missed. Business managers blame poor CRM data quality or conflicting financial information for their lack of progress. Root causes are poorly understood, and the path forward is seldom clear.
However, those who solve these sales growth obstacles reap considerable rewards. When installed and configured correctly, a well-running revenue engine not only fuels growth essential to enhanced levels of EBITDA, but also creates more predictable revenue. This revenue confidence elevates potential sale multiples and creates significant enterprise value. Consistent and dependable revenue growth emerges from a focus on developing the right people, processes, and tools. Based on over a decade of experience with PE firms and their portfolio companies, we’ve identified three critical factors for building this kind of predictable revenue growth engine:
- Increase Sales Team Agility and Customer Alignment
- Measure Sales Performance Gaps Relative to Excellence Standards
- Accelerate Skill Development to Meet or Exceed Selling Standards
Increase Sales Team Agility and Customer Alignment
Start by ensuring that every selling activity creates value for portfolio company customers. The actions of most sales teams are a function of their current habits and work experiences. Too many sales organisations lack clear definitions of selling excellence – agile actions that align with each stage of the customer’s buying journey. Enhanced levels of productivity come when the entire sales organisation adheres to buyer-aligned sales processes that have been intentionally and thoughtfully developed with optimal customer experiences in mind.
Well-crafted sales process definitions enable sales teams to quickly and accurately answer these essential questions:
- What are the needs of different buyer personas?
- How do these needs change as buyers move from early awareness of a business issue or opportunity to evaluating response options, searching and selecting vendors, and ultimately procuring a solution?
- How do we best prove our competitive differentiators and the value of our solutions?
- How do we quickly and dynamically align with different types of buyers to guide each to a purchase decision?
- Create a consistent selling approach aligned to each customer’s buying journey
- Isolate and minimise ineffective selling activities
- Generate more accurate forecasting through improved management rigour
- Introduce objective milestones and standards for pipeline management
- Increase sales team productivity and business results
How to Do It
Establishing sales process excellence begins with a collaborative consulting engagement in which stakeholders identify the customer buying journey, their needs, and the selling practices that drive the most value. The engagement should include development of a project plan, conducting discovery interviews, and planning how improved processes will be communicated to the team.
This scalable plan must:
- Inform sales professionals on modern buyer behaviour and preferences
- Create a framework in which each sales professional co-creates value with customers
- Provide sales professionals with the specific, actionable, and measurable activities for each stage of the sales/buyer engagement process
Formal sales processes deliver these outcomes by overlaying structure onto selling challenges. A codified approach provides guidance that frees sales professionals to place their focus where it is needed most: the customer’s challenge and value creation opportunity. It’s not surprising to learn that “representatives who adopt and are managed against a structured sales methodology are the ones who close their deals the quickest — accelerating revenue,” according to Accenture’s analysis of companies with $1 billion or more in annual sales revenue.
Selling processes must address the complete scope of sales engagement with customers, including pre-call planning, opening and positioning, consultative conversations, value analysis, follow-up, negotiations, and closing. The sub-components of each step will differ from one organisation to another because different products and services present different selling challenges. A sales process can always be modified. What is important is that the selling organisation has one and follows the guidance, delivering a higher quality customer experience consistently.
Measure Sales Performance Gaps Relative to Excellence Standards
Modern sales transformation initiatives leverage technology that guides progress and informs each stakeholder about that progress along the way. This approach begins by establishing baselines for activity and skill proficiency. These baselines enable managers to identify and prioritise opportunities to develop the sales organisation, so they can execute at a higher level of performance.
Measurement like this is increasingly important given that the average annual sales training spending per person has reached $2,326, according to the Association for Talent Development. Identifying specific performance gaps, and prioritising them against the company’s growth strategy, enables this investment to produce the most immediate returns. Effective measurement guides the training process as it unfolds. With proper assessment of sales team talent and skills, sellers discover where they need to focus attention and where their blind spots reside. Measurement serves each learner as much as it does for company leadership.
Through identifying sales performance gaps relative to excellence standards, success comes from:
- Guiding sales managers on who to coach, what to coach, and when to coach
- Informing leaders on engagement and reaction data for all aspects of the organisational change initiative
- Capturing real-time changes in operational metrics that align to growth strategy and quantify impact on desired business results
How to Do It
Sales organisations can identify high-priority opportunities for performance improvement and revenue growth by assessing the level of talent and skills in the sales team, and by evaluating organisational capabilities to support a high-performance sales culture.
Measuring talent and skills is easier once standards of sales engagement excellence are established, as this informs what competencies are required to execute dynamic, buyer-aligned sales processes consistently. Evaluating organisational factors that contribute to a high-performance sales culture requires analysis of supporting functions from marketing, operations, customer service, finance and administration, which can be collected from surveys and stakeholder interviews in each department. With these assessments, a clear picture emerges to show specific opportunities for development for revenue acceleration and growth.
Identify the selling skills that most closely correlate to the growth strategy of the organisation. Creating demand from newly sourced clients as a revenue driver requires a different set of skills than, for example, increasing conversion rates from an existing pipeline. Begin by understanding which skills have the potential for most immediate impact on your growth strategy.
Sales professionals, managers, and change leaders can leverage a range of performance tracking metrics to ensure the effectiveness of training and development. For example, a metric like engagement seeks to answer how learners are progressing through training, and how well it is being received and adopted to address high-priority skill gaps.
Evaluating the experience of sales training matters because it drives adoption. Measurements in this category can include net promoter score, course rating, confidence, qualitative sentiment, and commitment to change. Measuring experience gives leaders the information they need to make the adjustments that ensure skills will translate from learning to real selling situations.
Finally, measuring the connection of skill and process standards to improved business outcomes is critical to managing success. Training participants will be more committed to improved sales processes if they can see a clear line connecting learning to skills they believe will create success in their careers. Many use the Kirkpatrick Model to measure effect. With this approach, managers may gauge training effectiveness across four key areas: engagement, behaviour change, knowledge retention, and business results.
Accelerate Skill Development to Meet or Exceed Selling Standards
The third part of any revenue growth engine addresses how well the sales team can execute defined selling actions. Driving high levels of proficiency in interpersonal skills and ability creates a differentiated experience for customers when interacting with the selling organisation.
Additionally, pacing matters when driving skill adoption. The reason: quick skill adoption generates early results, which positions the PE firm to realise the potential value of the portfolio company faster. Moreover, accelerating skill adoption minimises the time out of market demanded during instructor-led sales training. Advancing this process will enable leaders to:
- Drive engagement that translates to revenue
- Reduce sales cycles
- Reduce sales team turnover due to higher levels of plan attainment
How to Do It
Accelerating skill adoption and performance requires coaching. When leaders commit to a consistent coaching cadence, they demonstrate their commitment to change and their vested interest in seeing sales professionals improve. Effective coaching means giving sales professionals guidance to embed best practices into their daily work. This approach to skill development ensures that the training survives into the field where skills can generate results. Choose a limited number of new skills, be specific, provide immersive hands-on training experiences with a lot of practice time, and equip your managers to coach to the desired skills.
Regular communication provides the coach with more visibility into things like pipeline assessment, deal qualification, future business forecasts, strength of sale analysis, and early detection of potential problems with a sale. This detail enables an in-depth measurement process, which leads to more predictable revenue streams. More importantly, measurement also leads to larger revenue streams. Research from Bain shows that metric-driven initiatives “increase profitability by as much as 25 percent over sustained periods” for sales organisations.
It is easy to see why this finding is true given that coaching instills a shared sense of achievement. As sales professionals see the measurable outcomes from coaching, they develop a greater buy-in to the value coaching offers. This buy-in is critical because it leads to engagement, and engaged employees “produce better business outcomes than other employees — across industry, company size, and nationality, and in good economic times and bad,” according to Gallup data collected from more than 195,600 US employees.
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