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Five Key Priorities for Operating Partners During Economic Uncertainty

How GTM-focused operating partners can help drive sales and revenue growth

Five Key Priorities for Operating Partners During Economic Uncertainty

Today, an operating partner with real-world, battle-tested go-to-market (GTM) expertise is a key success factor for every private equity fund wanting to generate alpha for limited partners.

This is especially true when revenue and profits are at risk at many portfolio companies during economic uncertainty. Despite a challenging market backdrop, sponsors still want their portfolio companies to grow revenue or reduce the probability of losses. Driving sales and revenue growth is where GTM-focused operating partners create real value, so how can they help companies accomplish these goals during economic slowdowns?

This section of the report originally appeared in the Summer 2023 edition of Middle Market Executive.

Illustration by Jay Vollmar.

Here are five key priorities that operating partners should focus on:

1. Building a Winning Sales and Revenue Growth Team

Every operating partner knows the most important key to success of your portfolio is talent. When we are in an economic slowdown, it’s a good time to prioritize the following areas to retool your team. First, identify the optimal structure/design for an effective GTM strategy for your companies, and determine the key roles and the right team size necessary for optimal customer coverage.

Driving sales and revenue growth is where GTM-focused operating partners create real value.

Next, invest in strengthening the sales teams and recruit additional sales talent (A-players may now be open to discussing new opportunities during a reset). Finally, reward your star employees and enhance your compensation and incentive strategy. During a reset, review and optimize the right sales compensation programs and incentives for motivation and retention, especially for top talent.

2. Refocus on Customer Experience

It’s important for operating partners to work with your portfolio chief revenue officers (CROs) to double down on the customer experience and retention. After all, net revenue retention is a key performance indicator for success of your investments.

Here are some strategies to consider: Emphasize that “customer experience” is a core principle of the entire sales organization, make customer calls a priority for every CRO, approach renewals as a 365-day sales cycle (not just calling them a few weeks before the renewal date) and focus on driving up-selling and cross-selling opportunities. Sales teams must also proactively communicate with customers to increase retention and reduce churn, as renewals are not guaranteed in the current economic climate. Finally, prioritize customer success and retention efforts, as acquiring new clients can cost up to five times more than retaining existing ones.

3. Retool a Repeatable Sales and Marketing Engine

During an economic downturn, we have some limited luxury to “slow down to speed up”—i.e., assess and retool your sales strategies to prioritize opportunities that drive growth more effectively and tailor these to each individual portfolio company.

Operating partners can help ensure your portfolio companies’ “pipeline creation” (including lead generation and outbound prospecting) strategies are effective and correctly measured (on percent of pipeline contribution) and help ensure alignment/ interlock across these teams. Note that building an effective demand generation team is harder and takes more time than it should—a downturn presents a particularly good opportunity to invest time in this.

Related content: Dissecting Go-to-Market Strategy

Finally, reengineer and optimize the sales process where necessary to ensure effective repeatability, scalability and predictability. Implement or improve automation to better enable sales and marketing— even at a very tactical level, assess how to improve campaign management or lead scoring to increase conversions. Improve your case studies on the website and let them do the “proof of concept” for you.

4. Re-Focus on High-Probability Selling

Operating partners who are former CROs can help your portfolio companies’ sales managers get in a better rhythm with their sales teams to point their reps to the “high probability” opportunities in the pipeline. Sales managers must coach the reps during regular one-on-one meetings and teach them how to inspect opportunities correctly.

Operating partners can help portfolio companies’ sales managers create individual development and coaching plans for their sales teams to train them on more effective selling and pipeline management strategies from start to finish of the sales cycle.

Portfolio companies can also invest more time during the downturn to optimize the process for higher-propensity account segmentation and assign the tier-1 accounts (or territory management) to the right reps for optimal selling.

5. Build Relationships with Portfolio Company CEOs and CROs

As private equity firms look to help their investments navigate uncertain economic times, it’s more important than ever for operating partners focused on GTM to build stronger relationships with the CEOs and chief revenue officers at middle-market portfolio companies. These leaders play a crucial role in driving sales and revenue growth, and working closely with them can help operating partners unlock more value.

Operating partners should invest time in the relationship and build trust. Make sure your CROs know that you are there to help them, and work collaboratively and jointly to support them. Make sure they know you care. As Theodore Roosevelt purportedly once said, “People don’t care how much you know until they know how much you care.”

If you are an ex-CRO with battle-tested experience, then you have credibility with your portfolio company executives. They will know that you’ve been in their shoes, so you can offer them coaching and mentorship to help them see around corners.

Be their sounding board before board meetings. If you have smaller middle-market companies in your portfolio in the $20 million to $100 million revenue range, offer them support before board meetings. They can share their slides and updates to get your perspective beforehand.

Collaborate on strategy: Working collaboratively on sales and revenue growth strategies can help align priorities and ensure that both parties are working toward the same objectives. By involving CROs in strategy discussions, operating partners can also gain valuable insights and expertise.

Related content: Prioritize Marketing After the Deal Is Done

Prioritize communication: Regular communication is key to building strong relationships with CROs. Operating partners should offer regular check-ins to be aligned and to work toward the CRO’s goals. (But don’t push; instead offer a lot of value and let them come to you.)

By building strong relationships with CROs, operating partners can help unlock significant value and position their investments for more success in the long run.

In today’s economic climate, it’s crucial for operating partners to not only prevent portfolio companies from becoming paralyzed by the downturn but to also help executives create opportunities to drive sales and revenue growth effectively. You can help your investments gain an advantage over their competitors and ultimately perform better in the long run. Taking a proactive, strategic GTM and revenue growth approach to navigating the downturn is key to successfully delivering returns to LPs.

Zorian Rotenberg is an operating partner at Charlesbank Capital Partners, where he specializes in tech GTM, sales strategy and revenue growth.

Middle Market Growth is produced by the Association for Corporate Growth. To learn more about the organization and how to become a member, visit www.acg.org.