A Comprehensive, Phase-by-Phase Strategic Guide for Executives Driving Sales in a Buy-Build-Grow Strategy
Written By: Gerald O’Dwyer IIThe PE Guru — Blackmore Partners, Inc | December 6th, 2024
In a private equity-backed buy-build-grow environment—especially within complex, engineering-driven manufacturing sectors such as aerospace and defense—executives responsible for commercial leadership play a pivotal role in shaping and executing the sales strategy. As companies evolve through the ownership life cycle, the sales approach must continuously adapt to align with evolving investment objectives, integrate new acquisitions, refine cross-functional processes, and ultimately prepare for a successful exit.
Below is a comprehensive, phase-by-phase guide that outlines the key considerations at each stage of the ownership journey. It highlights which metrics to track, critical functional partnerships to establish, the planning processes to implement, and the guiding questions to continuously ask—ensuring that sales efforts drive sustainable value creation for the enterprise.
Setting the Context and Cultural Foundation
Origins and Acquisitions:
Consider a manufacturing company originating with a base competency in precision engineering for the aerospace and defense sector. Over time, multiple acquisitions expand capabilities, product lines, and geographic reach. This creates a complex, multi-site environment that must be integrated from a commercial standpoint. Executives must navigate:
- Legacy operations with limited scalability.
- Newly acquired product lines that broaden customer bases and service offerings.
- Diverse regional footprints that introduce varying market dynamics.
Cultural Evolution:
Many of these organizations begin as family-run, technically adept entities. Initially, sales processes may be more ad-hoc and reactive, focusing on fulfilling customer orders rather than proactively shaping demand. Over time, the goal is to professionalize sales operations—standardizing processes, leveraging data analytics, and developing a proactive, value-added selling culture. The executive’s job includes driving a shift from “we make what’s asked” to “we advise, innovate, and deliver what the market values.”
The Ownership Life Cycle and Its Impact on Sales Strategy
Phase 1: Acquisition/Entry
Context:
Early in the private equity lifecycle, investors establish an overarching investment thesis. Here, sales leadership must confirm the market potential, define core capabilities, and begin aligning go-to-market activities with growth objectives. The objective is to set a clear baseline and ensure commercial strategies support the PE-backed vision from the outset.
Key Sales Priorities:
- Establish baseline commercial KPIs (e.g., current customer concentration, segment-level revenue).
- Validate the market thesis, ensuring a strong understanding of addressable markets and competitive landscapes.
- Begin harmonizing sales processes, tools, and reporting structures across acquired entities.
Metrics to Watch:
- Revenue by Segment & Customer: Identify dependency on major accounts and opportunities for diversification.
- Baseline Gross Margin per Product Line: Determine where pricing adjustments or operational efficiencies are needed.
- Win Rate & Pipeline Quality: Assess effectiveness of the current sales approach and data integrity.
Cross-Functional Alignment:
- Finance (CFO): Confirm financial baselines, working capital constraints, and realistic revenue targets.
- Operations (COO): Understand capacity, lead times, and production limitations that impact sales promises.
- Executive Management & Sponsors: Align on strategic priorities, investment horizons, and growth targets.
Questions to Ask:
- Are the current customer segments and account mixes aligned with the investment thesis?
- How accurate and reliable is our pipeline data, and do we need better CRM tools or reporting systems?
- Can we optimize pricing or identify immediate cross-selling opportunities among newly integrated entities?
Phase 2: Stabilization and Operational Improvement
Context:
Once the initial integration is complete, the focus shifts to operational excellence. The goal is to move from a reactive, order-taking mentality to a more structured, data-driven, and scalable sales function.
Key Sales Priorities:
- Standardize pricing models, discounting rules, and contract terms across the enterprise.
- Implement or upgrade CRM systems to improve pipeline visibility and forecasting accuracy.
- Train the sales team to embrace value-added selling, solution-oriented conversations, and proactive outreach.
Metrics to Watch:
- Gross Margin & Contribution Margin by Customer/Segment: Identify profitability levers.
- Sales Cycle Length & Conversion Ratios: Track improvements in efficiency.
- Sales Rep Productivity (Revenue/Rep): Establish accountability and performance benchmarks.
Cross-Functional Alignment:
- Operations & Supply Chain: Ensure accurate demand forecasting, align lead times with sales commitments, and collaborate to improve on-time delivery.
- HR/People Ops: Develop sales training programs and performance management systems aligned with long-term strategic priorities.
- Quality & Engineering: Streamline quoting, ensure technical accuracy, and continuously improve product offerings.
Questions to Ask:
- Which process bottlenecks limit our ability to close deals faster and improve margin?
- How can we capitalize on cross-site capabilities to increase share-of-wallet with existing customers?
- Do our incentive structures align with desired sales behaviors and strategic objectives?
Phase 3: Growth Acceleration and Scale
Context:
With stable operations, attention shifts to accelerating revenue growth. This may involve capturing new markets, enhancing the product portfolio, and establishing the company as a premium player.
Key Sales Priorities:
- Pursue strategic account management: deepen relationships with top customers through tailored solutions.
- Explore new markets or adjacent verticals, leveraging improved production and engineering capabilities.
- Introduce solution-based selling—offering integrated services and products that differentiate from commodity offerings.
Metrics to Watch:
- Revenue Growth Rate (Organic & Cross-Selling): Monitor top-line expansion trends.
- Customer Lifetime Value (LTV) & Customer Acquisition Cost (CAC): Ensure growth investments yield profitable returns.
- Segment Profitability & Market Penetration: Validate that growth aligns with the strategic roadmap.
Cross-Functional Alignment:
- Product Development/Engineering: Collaborate on new solutions that proactively solve customer problems.
- Marketing: Run targeted campaigns, bolster brand positioning, and ensure a steady flow of high-quality leads.
- Finance (CFO): Align on pricing, capital allocations for expansion, and ROI thresholds.
Questions to Ask:
- Which market segments and regions offer the highest growth potential and strategic fit?
- Can we bundle products and services across the acquired portfolio to create unique value propositions?
- How do we ensure that as we scale, our processes remain efficient and our sales data remains clean and actionable?
Phase 4: Preparation for Exit
Context:
As the private equity sponsor moves toward an exit, the priority is to ensure that sales operations appear stable, scalable, and attractive to potential buyers—be they strategic acquirers or secondary investors.
Key Sales Priorities:
- Demonstrate consistent revenue and margin growth.
- Showcase strong, diversified customer relationships and repeatable sales processes.
- Present robust CRM data and forecasting methodologies that instill confidence in potential buyers.
Metrics to Watch:
- EBITDA & Margins: Stability in margins indicates a resilient, scalable commercial model.
- Customer Diversification: A broad, balanced customer base reduces buyer-perceived risks.
- Forecast Accuracy & Win Rates: Evidence of disciplined, data-driven sales management.
Cross-Functional Alignment:
- Finance & Accounting: Ensure transparent, audit-ready sales reporting and revenue recognition.
- Legal & Compliance: Standardize customer contracts and address any liabilities.
- Executive Management & Board: Align on a compelling exit narrative that emphasizes commercial strength and future potential.
Questions to Ask:
- Are we presenting the right metrics and stories that resonate most with prospective buyers?
- How do we highlight the scalability and repeatability of our sales engine?
- Have we replaced ad-hoc practices with documented, standardized, and proven sales playbooks?
Building a Flexible, Evolving Sales Plan
- Diagnostic and Alignment (Acquisition/Entry):
Action: Conduct a thorough sales audit—segment customers, analyze pricing, assess pipeline health, and review CRM capabilities.
Deliverable: A baseline sales strategy outlining initial KPIs, target segments, and immediate improvement opportunities.
- Operational Sales Excellence (Stabilization):
Action: Develop a standardized sales playbook, implement CRM protocols, create pricing frameworks, and establish a monthly review cadence.
Deliverable: A performance scorecard for the sales team, alongside a structured training program to raise the commercial skill floor.
- Strategic Growth Roadmap (Acceleration):
Action: Define key account strategies, expand into new segments, align marketing campaigns with sales goals, and set aggressive yet achievable revenue targets.
Deliverable: A strategic growth plan linking sales objectives to innovation, market entries, and organizational capabilities.
- Exit-Readiness (Pre-Exit):
Action: Clean the CRM data, finalize customer contracts, build compelling sales narratives, and standardize forecasting methodologies.
Deliverable: A polished investor presentation and data room demonstrating stable revenue streams, healthy margins, and a scalable go-to-market engine.
Strategic Thinking: The “Why” Behind the Process
- Evolving Metrics: KPIs must mature as the company progresses through the ownership life cycle. Early phases focus on establishing baselines, while later stages emphasize value creation, scalability, and presentation for prospective buyers.
- Cross-Functional Dependencies: Sales success is a team sport. Strong ties with finance, operations, marketing, HR, and product teams enable the commercial function to deliver on promises, maintain profitability, and continuously adapt to market shifts.
- Cultural Transformation: Transitioning from a family-style, reactive sales culture to a disciplined, data-driven one requires consistent leadership. Executives must champion process improvements, communicate the rationale behind new metrics, and celebrate incremental wins.
- Risk Mitigation and Value Enhancement: Systematically questioning assumptions, refining processes, and enhancing cross-functional collaboration reduces risks and elevates enterprise value. By the exit phase, the company can present a scalable, proven commercial system that commands a premium valuation.
Conclusion:
For executives in a private equity-backed buy-build-grow scenario, guiding the commercial function through each life cycle stage is critical to unlocking enterprise value. By aligning sales strategy with broader corporate objectives, evolving KPIs and tactics at the right time, and fostering strong cross-functional partnerships, leaders position the company for sustained growth, operational excellence, and a compelling story for potential buyers at exit.