A lot of the traditional PE firms have great Portfolio Support teams. Many of the professionals are former CEOs. Here is one example about a PE Operating group:
“To enhance our own operational capabilities, we’ve developed relationships with over 100 senior industry executives, or Operating Partners, who act as independent advisors to Advent and the companies in which we invest. These executives, typically former CEOs, work alongside our sector teams and management to support the development of businesses through their industry knowledge, operational know-how, leadership experience and contact networks. As chairmen or supervisory board members, they help drive the growth and improvements that generate higher sales and earnings at our portfolio companies.”
Those are certainly great people to have on the Board for bigger companies.
But a key role that will add addition 5x-10x value creation is the Chief Revenue Officer (CRO).
While the CEOs bring a lot of leadership and strategic know-how and very senior contacts in their network, the CRO will bring additional hands-on know-how and contacts that are closer to sales and the full revenue cycle.
For know-how, the CRO is typically more hands-on in understanding the following (more so than many CEOs unless they have a Sales Management background):
- Go-to-Market Strategy or GTM
- Engineering an optimal Sales Process
- Revenue Management Processes (i.e. Pipeline Management, Account Management, Forecasting Accuracy, Customer Success, etc.)
- Building a “repeateable, predictable and scalable” Sales Machine
- Build Sales Playbooks with the right Motions
- Designing an optimal Sales Org Structure
As for the “Contacts & Network”
- Attract the top Sales Managers with top track record to lead teams
- Recruit the A-players and best Sales Reps whom the CRO knows
- Also, recruit top Sales Operations & Enablement candidates
- Sales Development Rep Managers – SDR Team Managers
- Attract the top CMO or VP of Marketing executives
- Recruit Marketing Operations experts
- Also – Marketing Automation professionals
These are the types of value creation backgrounds that impact the Sales Excellence and Profitable Revenue Acceleration directly, thus complementing the CEOs who are currently helping PE firms at a higher level and on more strategic initiatives.
The Operating Partner who is a former CRO can help the PE fund get money-on-money multiple that is even higher than the typical 3-5x in Growth Equity PE (and certainly higher than the 2-3x for many PE deals) and will help achieve a higher IRR than just the 30-40% range. CROs will directly impact the profitable sales growth (i.e. specifically one that is economical/profitable, and maintains good unit economics unlike many of the VC deals that are focused only on rapid growth) will produce more revenue as well as a higher multiple.
What else, what are some other ways that CROs can deliver a significant impact to PE portfolio companies? And how else to they complement the CEOs that are typically in the Operating Partner roles?