How Leaders Of Investor-Owned Companies Can Avoid The Chopping Block

By Atta Tarki


If you are in a leadership role at an investor-backed company, you are about to find out that your investors now require drastically different skills from you. I’m not referring to shifting gears from growth into cash preservation mode. If you haven’t managed to do this by now, your investors would have already run out of patience, and you would have run out of a job. Management teams of private equity and venture-capital-backed companies, in particular, are likely to go through a new round of shakeups. This is how you avoid being next on the chopping block.


Why Leaders At PE And VC-Backed Companies Are The Most Exposed

Private equity and venture capital investors typically need to close out their funds every three to 10 years and provide a return to their investors. Funds that are scheduled to close out in the next three years, therefore, don’t have much time on their hands to position their portfolio companies as attractive investment opportunities.


Depending on how your sector is exposed to the downturn, it will take one to two years before revenues return to pre-COVID-19 levels. And this just brings you back to where your firm needed to be in early 2020, not where it needs to be in a year or two. Compound this with declining EBITDA multiples (the method used to value a business), and you have a perfect storm. You can’t simply grab an umbrella this time; you need to build a shelter.


The Rules Were Just Rewritten

In the past, the common rule has been that if you are meeting your revenue and profit targets, you are doing well. Your investors are no longer measuring your ability to help them succeed based on your past performance, though. What was required to succeed in the past few years was very different than what will be needed in the next few years.


What your investors are starting to focus on is catching the upside once the economy picks back up. This all means your investors want to make sure you won’t miss a beat when the music turns back on.


Prove That You Won’t Miss a Beat

The good news is, there is plenty you can do to convince your investors you are up for the challenge. Your investors are not expecting immediate results. They know the economy is retracting, and it’s difficult to grow revenues right now. However, they are double-clicking on your sales processes. In other words, they want to know if your sales team is doing the right activities that will lead to the right results once the economy picks back up.


Make Every Sales Rep Your Best Rep

Now, engage your sales team to understand how your top salespeople differ from your average reps in the following regards:

  • Meeting Quantity: How many meetings do they take per month? How do they source these meetings? Do they use a more personalized approach to reaching out to and engaging with prospective leads?
  • Meeting Quality: Who do they meet with? Do they focus their time on a specific type of customer persona?
  • Meeting Performance: How do they behave differently in the meetings? For example, do they ask more questions before pitching a solution?
  • Lead Nurturing: How do they engage with customers outside of formal settings? For example, do they engage with key customers informally through other mediums, such as LinkedIn and Twitter?
  • Other: In what other ways do your top reps behave differently?


The key here is to avoid linking their success to personality traits. Instead focus on behaviors, since these can be trained, tracked and improved. Your principle should be “if you can’t measure it, don’t improve it.” Sales pipelines normally take six to nine months to materialize, and you’ll initially need to focus on activities you can track objectively. Relying on revenues as a measure of success too early will demotivate your team and derail the process.


And Finally, Ask Yourself Which Mistakes Will Be Forgiven

We all know that change is painful for most people. You’ll have plenty of naysayers who will try to convince you that inaction is a safer bet than trying the wrong solution. They might argue that if you use an aggressive approach, you’ll “burn these leads.” They might even say you are wasting budget on activities that don’t yield immediate results.


But you have to ask yourself: “Which mistakes will our investors forgive a few months from now?” Once the economy picks back up, your investors will want someone who can aggressively grow company revenues to pre-COVID-19 levels and beyond. Will your investors be more inclined to let you lead this effort if you didn’t take any action, or if you’ve tried a number of initiatives they agreed to, but a few of those initiatives didn’t work out? And remember — choosing to do nothing will still be viewed as a choice.


If your answer is the latter, neutralize the naysayers by securing buy-in from top management and investors that you’ll either “do it right or not at all.” Get your management to weigh the options of doing nothing versus doubling down on a few processes that work for your best salespeople. Be honest about the fact that change will be tough and that it will take months before you see any real results, but if they want to catch the upswing in the economy, this is the right path to take. And have them agree that you’ll have their full support once you roll out this initiative. Then recruit a few of your top sales associates to run a short pilot and iron out the wrinkles in the new process.


Once you’ve taken the measures above, make it clear to your team, especially the naysayers, that as much as most of us wish we could return to the pre-COVID-19 days, the only available path is forward.


This article was originally published on Forbes.



Atta Tarki is the founder and CEO of ECA and the author of Evidence-Based Recruiting (McGraw Hill, February 2020).



Atta Tarki
CEO & Founder

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