Private Equity

Four Areas of Go-to-Market Execution for Profitable Growth

Striking the Right Balance Between Growth and Profitability

The tides have turned. The market is no longer rewarding growth at any cost. Investors are rewarding companies that balance growth and profitability.

Alexander Group’s research shows that companies balancing growth and profitability have a 1.4X better enterprise value ratio than those that deliver top-line growth alone.

Deal and operating partners are working with their portfolio companies to strike the right balance between growth and profitability. They are collaborating with their marketing, sales and service leaders to retool for the current market environment.

Four Areas of Execution for Marketing, Sales and Service

1. Re-segment, retrench, refocus: in recent years, commercial organizations absorbed unprecedented levels of investment to win share. As growth slows, they have excess capacity. Further, they are deployed against segments and geographies where growth has stalled, competitors are entrenched, or their position—“right to win”—is weak.

Pull back focus on speculative segments. Concentrate investments where the company has the greatest growth opportunity and right to win. Exit sub-scale geographies and walking away from customers where the unit economics, cost of sales or cost to serve is suboptimal. Leverage low(er) cost digital and indirect routes to market (e.g., channels) to maintain a presence.

2. Shift the resource mix: many companies are still geared to deliver enterprise value via top-line growth. Resources are misaligned with emerging profitable growth strategies. Marketing, sales and service resources are deployed against segments and markets that do not warrant coverage. Marketing spend is deployed against customers that the company will pull back from. Sales resources sit in geographies that should be covered by channel partners. Service is delivering a level of support to customers that haven’t earned it.

Audit resource deployment with new areas of focus in mind. Recalibrate prior to making incremental investments. Push productivity limits prior to the next wave of deployment.

3. Direct customers to the right channels: While promoting demos on a company’s website is a great practice, not all customers should receive a concierge experience from a high-cost technical resource. There might be a mid-market prospect in the same building where a seller has a call with an enterprise client. While it would be logical to schedule an in-person meeting, the in-person (and subsequent follow-up) may not be worth the value. Getting customers to transact digitally or to leverage self-service post-sales channels is difficult, but the impact on operating costs is dramatic.

Analyze the cost of sales and service by segment. Leverage these insights to direct customers to the right channel – indirect (partners), high-touch direct (e.g., lead generation representatives, field sales, live customer support) or digital (marketing automation, e-commerce or inside sales, self-service portals). Train commercial team members on modes of engagement by segment. Use communication and promotional tactics to encourage customers to leverage the right channels.

4. Bolster Revenue Operations: according to a recent Alexander Group research study, high-performing revenue operations teams deliver 1.6X margin and growth. Companies that invest in data, reporting, process and tools get more yield from their marketing, sales and service teams.

Arm the business with the data and reporting needed to remain agile. Overhaul profit (and productivity) driving processes like pricing and discount management. Deploy enablement programs that speed new hire ramp. Increase the frequency and tighten the management of planning processes—all while keeping the organization closely aligned.

Maximizing enterprise value means striking the right balance of growth and profitability. Balancing comes down to execution. Arm your commercial leaders with prioritized, tactical plans to retool for profitable growth. Focus on segmentation, rebalancing of resources, leveraging the right channels and Revenue Operations.

To learn more or to receive a complimentary readout of Alexander Group’s Commercial Practices to Drive Profitable Growth and Valuation research report, please contact an Alexander Group Private Equity practice lead.

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