Investee sales and marketing arguably demand a factual, analytical approach in the same way as financial disciplines. It is the quarterly board meeting. Both investee and investor representatives are present. However, on this occasion there is a certain anticipation and something of an atmosphere. It is the fourth quarter in a row where the investee management team are reporting that the business will miss revenue targets – this time, by a significant margin.
In the meeting there is talk of imminent cost reduction and potential redundancies. Further discussion focuses on possible business wins – which may occur to reverse the financial predicament. Central, however, is the point that basedon current performance, there is now a real need for additional cash from the investor to meet forthcoming obligations. The challenges are very real.
Venture-funded businesses can have distinctive characteristics, where for example, an accelerated growth curve or a limited timeframe of opportunity to gain market share is evident. At the time of original funding the appropriate financial rigour is put in place, sales targets form an intrinsic part of business planning. Accounting professionals, regulatory compliance, summary reporting requirements, fiscal systems and responsibility are accepted as critical by all parties.
However, by contrast, detailed, disciplined and rigorous sales process and go-to-market methodologies in these high-growth, high-penetration investments are not always a structured aspect of the plan. These are skill areas often traditionally left to the capabilities and choice of the investee management team, based on their sector experience and history to date. Cost-based issues are invariably more heavily monitored than the fine detail and systemisation of processes utilised to generate sales revenue.
The new agenda
Venture businesses that experience the performance gap do so for many reasons, ranging from overambitious forecasting to ineffective sales leadership.
Today’s commercial markets are complex, shaped by completely different and challenging elements. The immediacy of the internet and resulting widespread knowledge have changed business dynamics. The capacity to replicate a business model is a real-time threat. Comparing price propositions and purchasing decision cycles can all occur in short account and therefore the penetration of a market demands highly-structured targeting and sales execution.
In high-growth, high-penetration investment businesses it cannot be left to a simple marketing campaign or initiative to counteract the impact of continuous change in the sales cycle. Today, data, knowledge, measurement, targeting and sales culture are essential to driving sales revenue achievement.
The parallel for this, in terms of monitoring an investee business, may be that of the hospital patient – whereby his welfare and condition is constantly monitored in real time. This proven approach leaves nothing to chance and vigilance is maintained throughout. Close monitoring, intelligence, data and direct action are all critical to survival.
Specialist sales and marketing due diligence across multiple investee businesses has demonstrated that there is a wide disparity in the adoption of core, proven sales and marketing principles. Revenue targets and return on marketing spend are utilised as generic indicators of performance, yet the detailed steps that indicate the true sales and marketing health of the business are often lacking.
Utilising a sales and marketing balance sheet
Viewing sales and marketing in terms of a basic balance sheet helps us move away from conventional areas such as message, brand and proposition and to look mechanically at the facts that are driving performance. Instead, it helps define the current status and condition of sales activity, prospects, customers, competition, staff, data, sales personnel, brand delivery and service, keeping these areas under constant review. In turn this can empower direct action within the investee business to undertake corrective steps in the form of a series of co-ordinated and targeted activities – in more detail, to carefully define the current status and scale of need and opportunity, the approach directly addresses and critically measures areas to include the following:
- Data-centric sales and marketing: A rigorous process to define by organisation and specific contact name details, all key decision-makers and influencers who have the opportunity to affect a purchasing decision in the chosen market. While building a comprehensive and well-maintained database sounds relatively obvious, it is typically one of the most neglected areas in market penetration. It is arguably fatal to pay lip service to this central process.
- Customer relationship management adoption: Ensuring cross-company utilisation of full relationship management applications that optimise the knowledge and information concerning every individual whether prospect or customer. This ensures the means to measure and maintain contact frequency across the whole prospect and customer base.
- Customer value tracking: The planned means of regularly discovering and acting on customers’ true perception of the performance levels of the investment business. For both the investor and investee, there are few better ways to understand the actual dynamic of a business than surveying the end-customers view of price, solution, service and market conditions. This is a measurable process that delivers exceptional commercial and investment insight.
- Total sales culture: For complete success – sales achievement cannot be the responsibility of sales personnel alone. Ensuring all employees engage in and understand their personal sales contribution and achievement is an imperative. There can no longer be just a sales department, but instead a cultural shift whereby all recognise that sales revenue generation is the daily imperative. Tools have to be deployed to ensure all personnel constantly share a complete sales ambition and that where appropriate the correct reward structures are in place.
- Core activity measurement: Today, social media has a place, as do e-marketing and similar tools. However, over the past five or more years, these components have arguably contributed to a softening in an approach which otherwise calls upon solid, outbound calling, contact and personal prospect visits to build revenue potential. For multiple investments, it is still true to say that all outbound activity in the business has to be carefully measured and reported every day, to ensure that a statistically high volume of contact is always being undertaken by those with the direct responsibility for generating sales.
- Sales pipeline validation: Future revenues are invariably only as valuable as the accuracy and validity of the actual sales pipeline of potential orders. This is an area that typically becomes highly polished for the investor and investee board meeting. Therefore, prior to any secondary or tertiary investment, it is critical to undertake a series of aggressive validations of the pipeline, in account-by-account detail, against a series of rigid measures.
- Comprehensive marketing audit: In a high-growth venture capital enterprise, the marketing budget is typically higher than that of the classic organic growth business. Often the budget has been designed this way to enable significant market penetration in relatively short account and to generate high revenue growth. However, the mix, message and expense through external suppliers can be highly variable. Full auditing of this complete dynamic and its execution is central to being able to recalibrate the effectiveness of the investment in marketing terms and thereafter achieve revenue growth.
- Competitor tracking: Thoroughbred monitoring of all competitor activity is a permanent requirement for successful sales and marketing. This means utilising sophisticated tracking and monitoring techniques that ensure competitor messaging, pricing, solution features and so on are tested, recorded and responded to. This further involves utilising anti-competitor strategies and communications techniques.
Longstanding, traditional businesses, which are not the subject of venture funding, often operate in relatively known market conditions, with comparatively stable pricing and competitors. As a result, many years can pass with relatively small degrees of variance in competitive business wins, losses or shift in market share.
By contrast, the venture-funded business is typically on a planned growth trajectory over time, having a far more acute need and opportunity to embrace a measured and scientific approach to market penetration. The principles outlined above do not ignore the need for creativity, design, messaging and marketing flair, as long as that is balanced with a total commitment to measure and act on the facts, knowledge, data and exact conditions of the business in its chosen space.
Today, ensuring an investment business maintains a healthy balance between the art of sales and marketing and the science of its measured execution is critical. Verifiable facts and knowledge need to inform and direct all activity. It is no longer acceptable for the number of sales visits undertaken in any given period to be undetermined. The forward sales pipeline needs constant, rigorous validation and maintenance. The customer must be understood and have a real voice. It is vital and not optional to own the ultimate contact database in one’s chosen sector, and the whole of the business must be part of a culture that sees and values sales as of paramount importance.
When these factors are aligned and acted on, there is true potential to change the balance of those that experience and thereafter need to fund the performance gap.