RevOps Intelligence in Private Equity Firms

A study found a meaningful drop of six percentage points between the 10-year annualized return in 1999 and the comparable return in 2019.

— Private Equity's Mid-Life Crisis · Harvard Business Review

1. PEs need to accelerate value creation agendas

   The experiences of 2020 strapped a rocket to the value creation imperative: automate routine tasks, streamline reporting for smarter data analysis, and self-disrupt legacy practices regardless of the potential to rock the boat. — Ernst & Young
2. PE firms must seek new ways to improve returns

   Multiples for deals getting done today are at or near record highs. Analysis of hundreds of funds shows multiple expansion and revenue growth, not margin improvement, are by far the biggest drivers of PE returns. — Bain & Company
3. PE firms must generate more value on returns

   U.S. buyout multiples averaged 11.4x EBITDA, a record. General partners buying at these prices will have to generate more value to deliver on return expectations, in a highly volatile environment. — Axios
4. Financial controls among top concerns for GPs

   Portfolio companies expecting a revenue decline cited financial controls as their top concern about PE investor actions, followed by tighter talent policies and excessive operational scrutiny. — Deloitte Insights

Private equity firms broke two records in the first half of 2021: they generated over $500 billion worth of deals and propelled mergers and acquisitions to an all-time high.

— Financial Times

1. Buy and build is powerful, but hard to pull off

   In 2004, add-on transactions accounted for about 43% of PE deal volume. By the end of 2020, the share reached nearly 71%. Mediocre integrations turn deals that might have been transformative into slow-growing add-ons. — Bain & Company
2. Successful acquisitions require solid foundations

   Buyers need robust IT, a strong balance sheet, repeatable models, and networks set up for expansion. PE firms are often buying someone else's starting point, with poorly integrated prior acquisitions. Go in with eyes wide open on costs and revenue potential. — Bain & Company
3. Winning at PE integrations

   Poorly managed integrations can erode investor returns. Leading PE firms approach integration planning with the same discipline and rigor they use in deal sourcing and diligence. — McKinsey & Company

1. Breaking down departmental silos is an imperative

   Employees who reach outside their silos to find colleagues with complementary expertise learn more, sell more, and gain skills faster. Most executives recognize the importance, but struggle to make it happen. — Harvard Business Review
2. Silos are the enemy of effective marketing

   More than half of marketers say fragmented or siloed data is their biggest barrier to an accurate, integrated view of complex customer journeys. Nearly 48% use no formal attribution strategy. — Treasure Data
3. Teamwork across functions is fundamental

   The failure to align commercial teams, operations, processes, and systems around the customer causes revenue and margins to leak through air gaps and handoffs in the customer journey. — Revenue Enablement Institute
4. Collaboration pays

   Firms with more cross-boundary collaboration achieve greater customer loyalty and higher margins. — Harvard Business Review

60% of businesses will transition from intuition-based to data-driven GTM strategies by 2025.

— Gartner

1. PE needs to accelerate its move to data science

   Data science brings together statistics, econometrics, data engineering, and computer science to provide better insights and predictions. The future of PE is one where data science is fully integrated into deal investments and firm operation. — West Monroe
2. High-quality data eliminates uncertainty

   Poor data quality is a common reason business initiatives fail. PE buyers are more likely to invest in data-driven businesses that demonstrate they care about quality, which drives higher valuation multiples. — Middle Market Growth
3. AI to become a deal driver in PE

   Experts expect AI to continue to be a deal driver for PE firms and their portfolio companies, including the use of data analytics to identify value-enhancing synergies among prospective targets and business models. — Financier Worldwide

Digitalization of a business ranked as a critical component of the value story and divestment thesis in the last major exit for 52% of respondents.

— EY 2021 Global Private Equity Divestment Study

1. Digitalization drives higher deal valuation

   51% of PE firms regard AI as a critical value lever for portfolio companies over the next 18 to 24 months, and for 45% of digitally focused firms, digital analytics is the top priority for portfolio development. — Ernst & Young
2. Accelerate the transition from analog to digital

   Digital-assisted due diligence is rapidly becoming table stakes. Yet despite widespread digitalization, many PE firms still use highly labor-intensive, paper-driven processes. — Bain & Company
3. Early adopters move into the digital world

   Only the largest, most sophisticated private market firms are capturing real value from digital and analytics. Leading GPs are hiring data scientists, building proprietary data platforms, and integrating algorithmic tools into deal sourcing. — McKinsey & Company
4. Define a business strategy for a digital world

   The time has come for PE to embed a digital strategy throughout the deal cycle, from origination and due diligence through value creation and exit, as well as within the infrastructure of the firm itself. — Ernst & Young

By 2025, 75% of the highest growth companies in the world will deploy a RevOps model.

— Gartner, May 2021

1. Private equity's next frontier for value creation

   Design and manage PE portfolios as a business ecosystem. One large fund generated $550 million in cumulative savings over five years through cross-portfolio coordination; in sophisticated arrangements, operating profit can increase 15% or more. — Harvard Business Review
2. PE needs a new formula for revenue growth

   Complex technology-enabled selling systems have changed the basis for generating revenue growth, pressuring organizations to launch operating models where marketing, sales, and service work as one revenue team with a single common purpose. — Revenue Enablement Institute
3. RevOps strategy can solve PE challenges

   There was a 55% increase in revenue operations adoption from 2018 to 2019. Across all industries, consistent revenue growth is a challenge for 78% of B2B companies; a well-executed RevOps strategy helps solve it. — LeanData
4. RevOps generates faster organic revenue growth

   The growing relationship between revenue growth and firm value has made RevOps critical for PE investors who need faster organic growth to justify purchase multiples exceeding 13x EBITDA. — Forbes

1. Deliver greater accuracy in predicting future growth

   RevOps brings visibility to leading and behavioral KPIs that translate over time to lagging KPIs like revenue and ARR, making the entire marketing, sales, and customer success funnel measurable and predictable.
2. Create focus on business goals

   Go-to-market teams focus on their KPIs: generating leads, closing deals, and expanding accounts.
3. Optimize staff hiring

   Talent is evaluated on outcomes, so the most productive team members are retained and new members ramp up faster.
4. Accelerate processes with greater insight

   Critical insights and removed roadblocks let teams move faster. A predictable model gives organizations the confidence to invest in high-growth initiatives.
5. Optimize the technology stack

   Alignment strengthens team performance and produces considerable savings on unnecessary technology expenditures.
6. Align all teams on a single set of revenue metrics

   Marketing, sales, and customer success are treated as stakeholders, so every initiative has a measurable impact on the full funnel, from awareness to expansion.
7. Centralize data into a real-time single source of truth

   Information from marketing, sales, customer success, supply chain, human capital, technology, and finance is consistently mapped, fueling real-time insights that generate confidence.

1. Generate real-time data to track revenue processes

   Robustly capturing buyer interactions as they happen lets teams dynamically adjust deal strategies, forecast predictions, and sales rep actions, while freeing sellers from manually tracking interactions.
2. Leverage insights into revenue pipeline and performance

   Bookings and revenue are lagging indicators. Full transparency into actions and interactions provides decision-time insight into which activities to prioritize, and how and when they are executed.
3. Deploy digital workflow automation solutions

   RevOps solutions capture interactions automatically and intelligently map them to accounts, opportunities, and contacts in the CRM, giving sellers and managers visibility into how deals are tracking.
4. Gain full visibility across all lines of business

   A standardized, shared view of performance across regions and functions enables easy analysis of deal health, forecast probability, and buyer interaction, driving smarter decisions and targeted coaching.

Based on the 2021 Forrester report "Revenue Operations and Intelligence Delivers Predictable Growth," the vast majority of organizations have only reached the "aware" stage of RevOps adoption. The leaders are already generating over 10% more revenue and 95% greater forecasting accuracy than their competitors. Using both independent and third-party commercial insights, Cortado Group identified key characteristics of companies at each state of maturity.

1. 1
   Create a RevOps strategy

   The cross-functional plan and alignment of objectives used to design and mobilize a RevOps program: a KPI map, budget, and data strategy. The outcome: effectively allocating people, time, and money.
2. 2
   Design the process

   Develop the end-to-end processes required to support the go-to-market functions: a customer lifecycle map, operational deployment plan, and internal service level agreements. The outcome: doing the right things the right way.
3. 3
   Bring together the RevOps team

   Create the team structure and enablement required to execute the strategy: roles and responsibilities and cross-functional team workflows. The outcome: the capability and capacity to execute.
4. 4
   Plan data design

   Identify the data required to monitor, understand, and optimize all phases of the revenue cycle: a data definitions catalog, data supply chain design, and storage design. The outcome: a solid foundation for accurate data across the enterprise.
5. 5
   Build the tech stack

   Identify the software, security, and network required to execute the strategy: a technology roadmap and budget, and an agile delivery methodology. The outcome: collecting, processing, and securing data.
6. 6
   Optimize analytics

   Processes that optimize revenue data and analytics for executive-level decisions: a data visualization plan, executive dashboards, and forecast and pipeline analytics. The outcome: go-to-market decision making with confidence.