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How does PE ownership impact sales performance?

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Private equity (PE) firms often acquire and manage portfolio companies with the goal of improving their operational efficiency and profitability. One of the key areas that PE firms focus on is sales performance, as it directly affects revenue growth and cash flow. But how does PE ownership impact sales performance? What are the benefits and challenges of PE-backed sales strategies? And what are the best practices and metrics to measure and optimize sales performance under PE ownership? In this article, we will explore these questions and provide some insights and tips for sales leaders and professionals working in PE-owned companies.

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Karthik Subramanian

Director GGM @ Cognizant | Enterprise Architecture, Large Deal Solutions

1 Benefits of PE-backed sales strategies

PE firms typically have access to large amounts of capital, expertise, and networks that can help portfolio companies scale up their sales operations and reach new markets. PE-backed sales strategies may include investing in sales technology, training, and incentives, expanding sales channels and territories, acquiring or partnering with complementary businesses, and launching new products or services. These strategies can help portfolio companies increase their customer base, retention, and loyalty, as well as enhance their competitive advantage and differentiation.

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Karthik Subramanian

Director GGM @ Cognizant | Enterprise Architecture, Large Deal Solutions
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Few benefits are - capital injection can lead to new innovations, product enhancements, expanded product lines, etc. And companies may also benefit from the experiences of PE's to identify new markets / optimizing channels.

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2 Challenges of PE-backed sales strategies

However, PE-backed sales strategies also come with some challenges and risks that sales leaders and professionals need to be aware of and prepared for. PE firms often have high expectations and pressure for portfolio companies to achieve aggressive sales targets and milestones within a short timeframe. This may require sales teams to adapt to frequent changes in sales processes, systems, and goals, as well as deal with increased workload and stress. Additionally, PE-backed sales strategies may involve restructuring, downsizing, or merging sales teams, which can affect sales culture, morale, and performance.

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Karthik Subramanian

Director GGM @ Cognizant | Enterprise Architecture, Large Deal Solutions
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Restructuring/ downsizing is not limited to sales teams - but also presales / delivery / support etc , as it limits sales to only sell that can be delivered rather than to innovate .

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3 Best practices for PE-backed sales performance

Sales leaders and professionals need to take certain steps to maximize the benefits of PE-backed sales strategies and overcome challenges. It is important to communicate clearly and regularly with the PE firm and other stakeholders about the sales vision, strategy, and progress, while also aligning the sales team with the PE firm's objectives and priorities. Additionally, a robust sales performance management system should be developed and implemented that defines, tracks, and rewards key sales performance indicators and metrics. Furthermore, leveraging the PE firm's resources can help access new opportunities, technologies, and partnerships. Lastly, investing in continuous sales training, coaching, and development can enhance the sales team's skills, knowledge, and motivation while fostering a culture of learning and improvement.

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4 PE-backed sales performance metrics and KPIs

When measuring and optimizing the impact of sales strategies on a portfolio company's financial performance and value creation, sales leaders and professionals must rely on relevant and reliable sales performance metrics and KPIs. These metrics and KPIs should capture both the quantity and quality of sales outcomes. Common examples include revenue, margin, customer acquisition cost (CAC), customer lifetime value (CLV), customer satisfaction, and retention. Revenue reflects the top-line growth and cash flow of the portfolio company, while margin measures its profitability and efficiency. CAC shows the effectiveness and return on investment of sales and marketing efforts, while CLV indicates the long-term value of a customer. Customer satisfaction gauges the quality and loyalty of the customer relationship, while retention tracks the stability and growth of the customer base.

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5 Tips for optimizing PE-backed sales performance

Using metrics and KPIs, sales leaders and professionals can monitor and evaluate PE-backed sales performance, and identify areas of strength and weakness. For optimal performance, they should set SMART (specific, measurable, achievable, relevant, and time-bound) goals and plans that align with the PE firm's objectives. A balanced scorecard approach incorporating both financial and non-financial metrics should cover different aspects of sales performance. Analyzing data across different dimensions can inform decisions and actions. Regular reviews with feedback sessions should recognize high performers, address issues, provide guidance for improvement, test strategies, measure outcomes, and use best practices to optimize sales performance.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How does PE ownership impact sales performance?

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1 Benefits of PE-backed sales strategies

2 Challenges of PE-backed sales strategies

3 Best practices for PE-backed sales performance

4 PE-backed sales performance metrics and KPIs

5 Tips for optimizing PE-backed sales performance

6 Here’s what else to consider

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