“Trust the Process”: How to Drive Portfolio Growth Through Pipeline Performance

Sean Moran

To accelerate sales productivity, portfolio companies can learn from their sponsors. Top performing funds have a deliberate and well-oiled business development machine that generates and qualifies opportunities before burdening the organization with low probability targets. Portfolio companies, unfortunately, are more likely to have poorly managed pipelines and sluggish sales processes that hamper growth and increase costs. The lessons learned from their sponsors can be applied to the portfolio companies in a systematic way, driving sales productivity and enterprise value. In other words, portfolio companies should heed the advice of a popular Philadelphia sports axiom: “trust the process” – and the outcomes will follow.

Adding even one strong company to your private equity firm’s portfolio can be an arduous process. Bain & Company estimates that about 30% of deals considered make it to the investment committee, and about 1 to 2% of all deals considered actually close. Given these odds, firms need a disciplined and strong pipeline management process to manage PE deal flow and ensure that funds can remain attractive to limited partners. Similarly, portfolio companies must apply a data-driven lens to pipeline prioritization (which deals to focus on with limited time), conversion (which activities drive wins), and tracking (how you’re doing and where you can shift resources to improve).

Ultimately, firms can increase the speed at which their portfolio companies add to the top and bottom line by improving pipeline performance using a simple equation: increasing one or more of three factors (volume, the quality of opportunities and win rate) and decreasing the length of the sales cycle. At middle-market companies, bottlenecks often exist in several, if not all, of these areas. Each of these factors can be improved by running analytics on your company’s CRM data or historical customer database, which can provide insights on where the specific bottlenecks are, and show you how to repair them through targeted sales force effectiveness initiatives.

On the flip side, some companies fall victim to “death by reports”: They tend to overcomplicate the pipeline management process, making it hard for sales reps to focus on what’s important. Instead of focusing too much on the amount of interesting information and insights you can collect, focus instead on the specific, custom actions you can drive through this analysis. For example, don’t rely on field reps to crunch the numbers in a market report. Instead, tell them exactly who to call on, roughly how often, and which value messages will resonate to get an optimal mix of volume and quality of opportunities. In the cluttered world we all live in, the field reps will appreciate a more targeted approach and being able to focus on what they do best: sell, not run analytics.

To impact the win (conversion) rate of the pipeline and reduce the sales cycle length, many companies need a more supercharged, standardized approach to moving priority accounts at the top of the stack through the pipeline. To do that, force your account team leads to plan from the mindset of the customer. What are their operating models, needs and pain points relative to your offerings, and how do these vary for different decision makers in the purchase process? Map out those relationships as well as your current strengths and the customers’ needs. Knowing which value messages will resonate, who should deliver them and how will lead to a clear engagement plan with timing and milestones. Then, create weekly local objectives tied to clear (and sometimes non-obvious) actions to deliver.

Trust the process. It often takes one to three years, given sales cycles, to realize the full benefit of these pipeline processes. Get to work now and maximize your company’s performance.

About the Expert

Sean Moran is an Associate Principal in ZS’s Chicago office. As a leader in ZS’s private equity & middle market growth practice, Sean focuses on leading broad scale projects to drive organic growth. He has partnered extensively with private equity firms and their portfolio companies in the middle market. Sean’s extensive expertise encompasses a dedicated focus on client organizational change, program management and tactical, pragmatic execution. His approach typically includes: assessment and prioritization of growth strategies holistically and within key segments, detailed understanding of customer needs (“Voice of Customer”), segmentation, designing and sizing the commercial organization to scale, performance management, and key supporting programs to drive results, such as talent management, incentive compensation and reporting. Over the past 10 years, Sean has partnered with small, medium, and large organizations within a range of industries including industrial markets, energy (oil and gas), and technology and services. Sean holds an MBA from the Kellogg School of Management at Northwestern University, and a bachelor's degree from the University of Illinois at Urbana-Champaign.