Many business owners overestimate the current value of their business, and underestimate the potential value of their business. They have a great solution – potentially the “best kept secret”. But they’re missing the ingredients that fuel transferable value and make their business irresistible to potential buyers.
A meaningful deal in today’s market requires more than a great idea or novel solution. Strategic investors are looking for businesses who have proven their ability to create demand, dominate a category, diversify revenue streams, and consistently grow revenue.
Aspirational hot tech investments are a thing of the past. Today’s founders and their teams – particularly those in technology and innovation – must prove that their solution is useful, valuable, and scalable.
This interactive panel conversation between experienced entrepreneurs, growth advisors, and deal-makers from Authentic and Orchid Black explores the path to maximum value creation in today’s market.
Key Takeaways
- Develop a consistent set of metrics to measure portfolio companies against every quarter.
- Consider implementing OKRs or a similar process for increased visibility across portfolio companies.
- Leverage your existing technology stack (such as Salesforce) for efficiency gains and better tracking data.
- Partnerships can provide access to new markets and customer segments, facilitating faster growth and scalability.
- Sales and marketing alignment is crucial for creating a seamless buyer’s journey, ensuring that both teams work together to understand and address customer needs effectively.
- Utilize data-driven methodologies, such as A/B testing, to gather insights and refine strategies based on real-world performance rather than assumptions.
Links & Resources Mentioned
- Orchid Black: Reach out to start a conversation
- AI Readiness Part 1: Yellow Blinking Lights Ahead
- AI Readiness Part 2: Is Your Business Ready?
- AI Readiness Part 3: Is AI Ready For Your Commercial Use?
Full Webinar Transcription
Introduction
Jennifer Zick: We’re going to give all of our guests just a little moment to roll in and get through the Zoom links. So welcome. If you are planning to join us for a conversation on value creation, you’re in the right place. My name is Jennifer Zick. I am the founder and CEO of Authentic® and we’re just delighted to host all of you today. Looking forward to a great conversation with these panelists who we will introduce shortly.
In the meanwhile, I just want to set the stage by sharing with you a little bit about this webinar series. If you haven’t joined us in the past and tell you a little bit about who the host is today. Authentic is a national organization of fractional chief marketing officers. We work with growing businesses typically between 5 million and 100 million in annual revenue. And for these small and mid sized businesses, we come alongside them as marketing leaders to help them Overcome Random Acts of Marketing® and confidently take the next right step toward healthy growth.
So we realize that whenever we host a webinar, we have an audience that includes people in a lot of different roles and a lot of different types of companies. And your role may or may not fit within the definition of the typical kinds of companies we work with. But no matter how you’re coming into today’s conversation, whether you’re an investor, an entrepreneur, a member of a growth team, or working in large enterprise and interested in this topic, we just hope that today we can offer a few nuggets that’ll be helpful and tangible and that you can take back and activate.
So with that, we want to kick things off today by getting you introduced to our wonderful panelists who have stories to share and experience in this area. So I’m going to start with my friend Jim La Palermo, right beneath me on my screen. Jim, hi, thanks for joining us.
Jim LaPalermo: Hey Jen, thanks for having us. And by the way, congrats on the recognition on the Inc 5000. That’s just amazing. Thank you to you and your team. So Jim LaPalermo, based in Chicago, about 30 years of high tech consulting advisor and go to market experience, spent 13 of those years back in the nineties with Intel and doing a lot of demand and category creation efforts there. 13 years with Price, Waterhouse and Accenture, with high tech clients helping them co create new products, revenue streams, strategies. And I’ve also been an investor and a founder and also part of venture capital and private equity. So have seen the stories, participated in the stories that we’re talking about. I also sit on two not for profit boards. So it’s good to be here and look forward to the conversation.
Jennifer Zick: Thanks so much, Jim. Steve, coming over to you. Thanks so much for joining us today.
Steven Horwitz: Well, Jen, great to be here. I work out of St. Pete, Florida. I’m currently in Colorado, though, enjoying the cool weather. I am with Orchid Black, and we’re a boutique consultancy that focuses between the private equity folks and the founders who are on their journey. We’re growth consultants. Myself, I’ve got 35 years of executive leadership, value creation, growth consulting in software tech services, spanning enterprise, mid market, and many different solution segments.
Our team, Jim and I have worked together going back 20 years now. So our team is all ex operators, hands on in the skill positions either developing strategy, operating, running sales, et cetera, et cetera. So we are happy to be here and thank you.
Jennifer Zick: Yeah, thanks, Steve. Over to you, Peter.
Peter Zaballos: Hi, I’m Peter Zaballos, and I’m a fractional CMO at Authentic. And prior to that, I was a member of the management team of a number of high growth technology startups. Three of the companies I was at, we went through IPOs, and I spent six years as a CMO of a large public company in Minneapolis. It was a cloud based supply chain platform. So I’ve been involved a lot in the early stages of companies, but also in the more mature stages. And I spent seven years with three partners running a really successful venture capital firm out of Seattle. And I’m primarily based in Seattle.
Market Dynamics & Deal Cycles
Jennifer Zick: Great. Thank you so much, guys, for joining us today. For our listening audience, you might be wondering why a marketing consulting firm is focusing on a topic of value creation. But really, the concept of driving value and healthy growth in businesses is at the heart of what we do at Authentic. We’re not in the business of just coming up with the next fancy marketing campaign or just driving top line revenue through engagement tactics.
We’re in the business of helping companies scale in strategic, sustainable ways that create transferable value. Because ultimately, that’s why businesses exist. So I’m really excited about this topic today and excited to dive in. And I’m going to start, Steven, with you. I want to tee this up by just having your perspective and then getting your colleagues’ perspectives on the state of the market as it relates to deals. What are some of the dynamics happening in the world right now around, around private equity, venture capital investment, and overall deal cycles?
Steven Horwitz: Yeah, I could give you some. We’re in the market a lot. We talk to a lot of people. So one thing I could say is that just finding quality deals is harder. There’s a lot of companies that are contemplating exiting a lot of founder based businesses in our ICP world. Getting from here to there is hard. So what we’re seeing is those who’ve made a good investment in proprietary deal flow, where they’ve built their networks, they’ve built their relationships, they seem to be getting better opportunities, but it’s hard. And then once you get into the process, I think since we all know the days of free money are over.
So while there is always an aspect of financial engineering, depending on what kind of deal you’re putting together, it’s really rolling up your sleeves and then working with the targets, your port goes to drive value. So I’m seeing more of a focus on, well, how are we going to do that? Because we’re not really structured as a fund necessarily, except for the biggest folks too, to support our port goes in that manner.
Jennifer Zick: Peter, what about you? You’ve spent a lot of time in the SaaS and technology space, consulting and working directly in that space. There’s been a lot of change in deal dynamics in that market over the last couple of years. What do you think are some of the drivers and what are some of the important kinds of lessons learned right now for those in that space?
Peter Zaballos: I think that if you, there is a thin layer of investment taking place where the investors will take a leap of faith on is there a business here? And that tends to be people with pedigrees from companies the investors have already funded. And you’re kind of a known quantity. I think the bar has gone up really high on Series A investments or pre seed investments and having to demonstrate that you understand you’ve got product market fit, that you understand you can sell this and you can sell it repeatedly.
It’s almost like back when I was in the venture business in 2004 to 20 1011, series A was where you found product market fit and series B was where you started to scale. And I think that’s all moved back. So if you don’t have traction, if you don’t have a pipeline and you can’t demonstrate pipeline velocity early, it’s going to be really hard to raise money.
Jennifer Zick: Absolutely. And would you say, Jim, I’ll take this angle with you, but would you say that we’ve moved from a space where you maybe could have gotten backing for a strong hypothesis in the past, but now you’re going to need to have some proof points behind that. How are you seeing that play out in the conversations you’re having with growth companies?
Jim LaPalermo: I think Peter and Steven kind of nailed the key thesis areas. I will just say that, you know, the word risk comes up quite a bit now. And I think the free money comment Steven made is spot on. So you really have to have a capability, not only a demonstrated capability, but the proven metrics along the way that are stress tested.
Jennifer Zick: Yeah, absolutely. And we all experienced the wild waves of the pandemic era and the aftermath of that with pent up demand and then the trickle down effect of that. And I think as I’ve been listening to people in the deals marketplace, I’m hearing a lot of we need to let a little bit of dust settle and see who’s got real growth, like what was just driven by the dynamics of the pandemic and what’s driven by a solid business case and a fit to the market, an ongoing fit, not just a circumstantial fitness. So it’s an interesting time for sure.
Steven Horwitz: Jen?
Jennifer Zick: Yeah.
Steven Horwitz: If I could just add, I want to go to the opposite side of that question. Right. So there’s the investor perspective. It’s a great opportunity for those who are thinking about doing a transaction in the future to prepare accordingly. Because if you know you’re going to have more scrutiny and all those processes, whether you’re raising capital, you’re selling your business, whatever the case may be, they’re incredibly time consuming.
It’s hard to do that and run the business at the same time. So if somebody’s got a time horizon, I want to be in the market in three years. Better to start early and start thinking about defending. How are you going to defend one’s position? Because at the end of the day, what Peter said is if you can’t prove that it’s going to radically affect your valuation, whether you can do a deal or whether you can do a deal at all.
Value Creation Challenges
Jennifer Zick: Absolutely. Well, Jim, back over to you. In the big picture, you’ve worked with a lot of different kinds of businesses at a lot of different stages of growth. And now as an advisor to growth businesses, where do you see some common pinch points? Where businesses and entrepreneurial teams struggle to unlock value in their business, even if they’ve got a great concept? Where do they get stuck?
Jim LaPalermo: So what I’ve observed as an operator and an advisor is there’s a number of tendencies and patterns that we particularly look for with clients on alignment and goals and within their operating model, there’s this notion that value is not about chasing multiples, you know, it’s about creating that transfer of value and it’s also about building a business that attracts the best buyers and stress tested, as I mentioned before, against really good due diligence. And that’s something we do really well. I also feel that and have seen and experienced now that B2B selling of products, it’s changed a lot. It’s gotten very, very complex. And it’s not the same selling model of build it, promote it and they will come.
I’m observing a new dynamic in the market. Maybe it’s not so new, but buying as a service is becoming more of a key capability. Most firms have not adopted this capability. They have not adopted buying as a service for new categories and demand creation or unique differentiation or even a bit of ip. They don’t have a clear path to that and they don’t have a methodology around buying as a service in terms of bringing that forward. Also, I believe I’m seeing more and more of this notion of how do you combine that notion of buying as a service?
Through accelerating and scaling out innovation and innovation across not only the product, but innovation across your selling model, integration of your capabilities and innovation scale around your selling methodology and your team. So, you know, this whole operating model and go to market model is, is really getting revisited through these dynamics in the market. I think in particular with artificial intelligence coming into play here, how you gain insights, how you leverage that within your product development, how you leverage that within your selling methodology and also within this buying as a service criteria. I think all of this is really important and sometimes it’s not really well thought out in the process.
Jennifer Zick: Well, I’ve definitely observed a lot of commentary through my LinkedIn channel of entrepreneurial and sales and marketing consultants and advisors talking about the death of the old sales playbook. The last couple of years have challenged most go to market and sales approaches and tactics and infrastructures. And so I think many among our clients and even in our own business, we’re revisiting the way that we’ve done things before is not going to be the way that we need to do things now or necessarily in the future.
So Peter, from your vantage point, having worked inside of high growth businesses and leading marketing and advising into those early stage and fast growth businesses, where do you see founders, owners and entrepreneurial teams get stuck when it comes to value creation? What are the hamstrings?
Peter Zaballos: At the fundamentals, do you have clarity and precision about the category that you are chasing? And do you have clarity and precision on the messaging you use to connect to your prospects? And this is hard because you’re in a bubble inside your company, you’re spending 24 hours a day, seven days a week thinking about this with your own vocabulary. And even if you have customers, you’ve had plenty of time to sort of indoctrinate your customers with your own vocabulary. And the people that you really need to connect to are the ones that have never heard of you, but who are super relevant as your prospect. And understanding the words they use to describe their problem that you’re going to solve is critical, because those words have nothing to do with your product.
I would tell my teams back when I was leading marketing organizations, your job is to know what is that prospect? Typing into Google at 03:00 a.m. because they can’t get to sleep because they got this problem at work that’s keeping them up. And those words are everything to do with their business, their problem. And we have to figure out how to create a journey for them that gets them from typing those words into Google about them to finding out that we’re the best solution to that problem.
So in a lot of cases, an early stage tech company is going to be, we used to call it breathing their own exhaust fumes. Like, you’re living this problem and this product day in and day out. And it’s easy to put it in the market and then struggle to see it grow because you just lack that clarity and precision around what is the problem we’re solving. How do we uniquely solve it? And do those words resonate with our prospects?
Jennifer Zick: Yeah, what a great point about defining market fit. How you think about that internally is different than how it needs to be articulated externally. And that entire go to market messaging alignment is so critical. And the targets change over time, too. I even think about the questions they used to be typing into Google and still are starting to migrate to being typed into AI. So how do we start? We talk about great marketing. While all the tactics and technologies and trends are always changing, great marketing is always who do we want to matter to? Why should we matter to them? How do we enter their natural habitat? And when we get there, how do we build trust and connect the dots between how they define their needs and where we meet them? At that point, the targets keep moving. So it’s a challenge for sure. And like you said, I love that, breathing your own exhaust. I’ve always said it’s hard to read the label when you’re inside the bottle.
Peter Zaballos: Yeah, that’s a good point.
Jennifer Zick: Steven, what about you?What have you observed are some of the value limiters inside of entrepreneurial growth businesses?
Steven Horwitz: I’m going to pull a thread of what Peter said. I often talk to founders or these growth companies, and I ask, where’s your plan? Like, what’s your strategic plan? What are the big ideas working backwards? And 95% of the time I get a budget. And I just literally had a call with the CEO of a really good $6 million growing 40% year over year making money, and he’s thinking about the future. And I’m like, where’s your plan? And he goes, oh, our CFO does that. I’m like, your CFO does your strategy plan? And he’s like, he goes, no, it’s our budget that is an indicator. You’re living inside, you’re being hyper focused. And oftentimes what that reveals to us when you step back and look at the big picture, is the language.
Choices are really important, but many solutions need to be sold through networks and partners, and it’s not a direct sale. And you could try as hard as you want to make it a direct sale. And just historically, it’s a really hard thing to do, which is why building these strategic partnerships, especially in the tech solution space, are so critically important. And how you look at that is hard when you’re in the day-to-day pipeline and trying to close the next deal and looking at the next month, next quarter, as opposed to maybe taking a step back and looking at the bigger picture.
Jennifer Zick: Bigger picture. I agree with everything you just said there about the entrepreneurial journey and what planning looks like needs to evolve. And if you’re not an experienced entrepreneur who’s been through scale enough times to understand that progression, you might not know where you are on that journey.
Steven Horwitz: Absolutely. It’s hard. It’s, you know, here’s the thing. I think there’s a lot of smart people, like our industry’s got a lot of smart people. It’s not about being that smart. It’s about having gone through the learning lessons of what didn’t work and helping form your opinion going forward. So that experience really does help you to not make the same mistake again.
Jennifer Zick: That’s right. And that’s something I really appreciate about both of our business models at Orchid Black and at Authentic is that we recognize the significant impact that wisdom can bring to the table. And not just one person’s realm of experience and knowledge and the wisdom of those experiences, but the collective. Which is why your team has a collective of growth leaders, and our team has a collective of cmos. We call it our mind share. Because the world is changing so fast. There’s not a single one of us that has all the answers. But if you bring all of that wisdom together, you can make some real strides in unlocking where those triggers are.
Steven Horwitz: It’s really interesting, just an anecdote on that. We’re working on a deal now that a bunch of partners looked at, and I could tell you four people looked at it and had four very different opinions on the growth strategy. None of them were wrong. They were all good ideas that were very different from what the founder had in mind. And that sort of agitation, if you will, is, you know, sort of good discourse for everybody.
Product-Market Fit and Growth Acceleration
Jennifer Zick: Yeah, for sure. Peter, coming to you with this next topic. You’ve done a lot of leading teams through early stage startup and trying to find that product market fit, and then the hypothesis stage and the proof stage, all of those stages. So for founders and their teams listening in today, what does it mean to accelerate growth through product market fit? Can you really break down what product market fit means?
Peter Zaballos: Well, it means that you’ve identified a problem so precisely, and you identified the audience that has that problem so precisely, that when you present your solution to them, you’ve got an almost frictionless path between that initial introduction and a sale. So probably the easiest way to measure whether you got product market fit is to look at pipeline velocity. So everybody strives to build a big pipeline, but unless you’re looking at the conversion rates within that, and you can tell when you got product market fit, because you got really great pipeline velocity, sales cycles are shrinking, conversion rates are going up.
That’s probably due to having good marketing, but it also means that that product is essential. And at two of the tech startups I was at, I eventually worked my way into leading sales organizations and I discovered that, like, I nailed my numbers, but it wasn’t because I was a good salesperson. It’s that we had literally the only product in the world that could do what we did. And I was a good order taker because we had people lining up to buy these things. So when you have that, you’ve got good product market fit. And this is really important now, because for reasons we’ve talked about, nobody buys anything unless they have done all the research before they talk to a salesperson.
And selling has totally changed, because if they, ideally nobody would talk to a salesperson. I’ve never met a prospect that says, I really enjoy talking to salespeople. They would buy it online even if it costs ten figures. They would buy it online if they could. So the relationship between marketing and sales has completely changed in the past five years. And it is a total team sport that begins from the very first touch and continues all the way through to the contract, where marketing and sales have got to be super closely aligned because you’re going to be co solving problems along that buyer’s journey. So what does it look like when you’ve got good product market fit? Your pipeline velocity is really strong and it’s a product of a collaborative effort between sales and marketing.
So that at every conversion point you’re trying to understand how do we move that conversion number up? Is it better tools for the salespeople, post contract delivery, but pre contract signature? What does the decision making team look like for that contract? Are we touching all of those people in the right ways, with the right content along the way? But I think that a good product market fit today like never before says sales and marketing are working really closely together from the very beginning to the very end.
Jennifer Zick: Absolutely. I want to get under the hood on an example you gave there and then give time for some of these colleagues to chime in too. But I think it’s probably a pretty distinctly unique opportunity when you find yourself in a company that has such a dominant market fit that the orders just flow in, right? I would wager a bet that most of the folks listening today are working in businesses that have a pretty competitive ecosystem. They might even be sitting in a more commoditized position.
So when you’re in a business that has a relevant solution for the market, but competitors are looking pretty similar, how important is differentiation in product market fit and that focus we talk about? How do you help? How do small businesses think about differentiation when the solution might be quite similar to something else in the market?
Peter Zaballos: I think there’s a couple of different ways you can do that if you are giving them the benefit of the doubt. Let’s say that it’s a highly competitive market, but you’ve come up with a new approach to solving that problem. It’s easy or not easy, but you can differentiate yourself by positioning the incumbents as legacy providers who can’t. And back when we were in the venture business, we would look for companies that both had architecturally constrained competitors.
So the system architectures weren’t designed for today’s customers and the business model was constrained where we could sell more affordably than they could. And so one way is to understand how novel your offering is, and can you architecturally position yourself stronger or business model wise position yourself stronger? But you need to. This goes back to clarity and precision on the category you’re shaping. If the category you’re going after has you positioned as one of eight equivalents, you’re going to have a really tough time, especially if you’re new to the market.
So if you get really precise about why are you the better choice and how does that manifest itself in things your product does that your competitors can’t do that matter, or the business model you bring to those customers is dramatically favorable to the incumbents or your competitors, then you can create messaging and marketing around that to go and exploit those advantages. So I will bring this back to you. Got to have clarity and precision on the category you’re shaping and why your position in it makes you superior to the incumbents.
Jennifer Zick: And then you have to deliver on that. It can’t be aspirational. It has to be real, because like you said, sales and marketing working together and delivery to actually fulfill that customer experience. So, Jim, real quickly over to you on this point. How have you seen that market fit? Focus and differentiation add value when it comes to deals and, you know, overall value in the business.
Jim LaPalermo: So one of the exercises I like to do with founders that are tech forward is interview them individually sometimes and ask them questions. Tell me, give me the narrative. Tell me the narrative around the problem. You’re solving the solution. Why choose you? Why that solution? Why now? And sometimes I get different answers from each of the founders or a different articulation from each of the founders.
And I also sense sometimes in terms of this market fit, they have a product, they’ve credentialized it, but they haven’t credentialized it with the thought of partnerships or ecosystem in which to quantify and qualify. Something around the lines of a scalable model, where there’s a little bit more predictability, where it’s a little bit more leveraged, because they’re working 24 hours a day and they’re just keeping up with the current cash flow, and they don’t have the capabilities to look outside of the jar. So I think we’re all saying the same thing. It’s very hard, it’s very challenging. But the fundamentals of these conversations and these problems exist across the board in terms of market fit.
Marketing Strategies & Value Creation
Jennifer Zick: Absolutely. Steven, moving over to you. But before I tee up the question, I want to speak to our attendees. I forgot to mention, folks, that there is a Q and A feature. There’s a chat. Ignore the chat. There’s a Q and A feature where you can put in a question for any of our panelists or all of us, and we’ll try to carve out some time toward the end of our conversation to make sure we can answer at least a few audience questions. So make note of that. And Steven, over to you.
Let’s talk a little bit from the investor side of things. If I’m listening today, and I’m leading a fund, how can I think about value building resources for my portfolio companies? What kinds of resources are really essential for helping companies create value, and particularly around finding this market fit and focus?
Steven Horwitz: Yeah, it’s a great question and I’m going to tie in a little bit of thought on the last question to that as well. So all funds have constraints with some manner in how they staff their organizations. They’re really big firms with a lot of AUM and they’ve got plenty of management fee. They can invest in lots of highly skilled resources that they can apply across their portfolio.
Vista is a great example at the top end where they’ve got literally a whole consulting company that services their portfolio. But the reality is that’s not most funds, and most funds have got, they’re really good at developing a thesis and going out and doing due diligence and putting deals together, where the challenge is that how do you then provide that oversight or that engagement model to go drive the business and maybe even getting more hands on.
We know there’s the concept of operating partners, however, but you need operating partner specialists, so there’s not one operating partner that typically can do everything. So finding the right roles of building a consistent sales methodology across your portfolio and the metrics that you’re capturing or on product market fit, what are the quantitative and qualitative impacts and outcomes we’re having on the business? If everybody’s trading on speeds and feeds and things like that, can you go stake out the ground to the a qualitative and quantitative impact you’re having on the business that helps with differentiation, and especially in those where you’ve got ongoing support or ongoing engagement to develop those solutions, great opportunities for differentiation.
So when I think about it at the PE level, what are the big themes that I need to have access to over the next three to five years? I probably need some AI competency. I really need to understand where the best opportunities to apply AI within my business are. I probably need some overall selling marketing strategists, all the things that Peter has been talking about, of that alignment, of that go to market strategy and making sure I could apply that across my portfolio.
The other thing I would add in here, because there’s a lot, is make sure you have the right tools. Are you measuring the right things, especially when you’re in a portfolio approach and you’ve got different dashboards coming in. Peter, you could appreciate that back in your old days. Can you get consistent views of the data so you’re better making those decisions? And I guess I’m close to finding good partnerships. If you can’t go hire five, half a million dollar a year people with 30 years experience, is there another way to go find a team of people or a fractional approach like our collective business models?
Jennifer Zick: Yep, absolutely. Peter, what would you add to this idea of how PEs can bring the wisdom of value creation into their portfolio companies?
Peter Zaballos: Well, I think the idea of having a common set of metrics that you can look across your portfolio at. We used to do quarterly business reviews with a consistent set of metrics across each portfolio company. And one of my partners was a former CFO and he’s like, teams that mis forecast tend to miss forecasts. And once you start seeing a trend across quarters with a company, then, you know, like if they’re missing forecasts, there’s something wrong with product market fit, there’s something wrong with the leadership team, or is there a gap?
So I think it is really important to have a consistent view across your portfolio of how these teams are doing. That said, probably the best experience I had as a leader was sitting on boards as an investor, because the CEO doesn’t have to do anything you say if you get the CEO to do something, it’s because you influenced them and caused them to understand that the direction you want to nudge them in is a direction that they believe in. It also implies that you’ve got a relationship with the CEO where you can have a real dialogue about, look, this is not working, and how do we figure this out together? Because you can’t just say, we’ve decided that all of our companies are going to do x because most of the CEO’s, the way they got that job is by having their firmly held convictions about how they’re going to run their business. I do think it’s an important, consistent set of metrics.
You have to really understand how do you influence and cause directions to change based on your ability to have a conversation?
Jennifer Zick: Yeah, for sure, Jim. In terms of today’s audience, those listening in, some are probably backed by PE or commercial capital of some sort, and others are still running independently and self funded. But there may be leaders listening in today who know, like we might have some blind spots. We’re stuck inside this. I know I can’t read all the labels. I know I haven’t done this at scale before. There are a lot of different kinds of experts that leaders can tap.
Tell me a little bit about Orchid Black, your team, and the different kinds of leadership capabilities available to entrepreneurs that can bring that outside expertise alongside them on this journey and how they can find that. Right. Expert perspective.
Jim LaPalermo: Sure. So I think everyone that’s on this call knows that building a startup is a war on your confidence. And maybe everyone would agree that confidence comes from past experience and it’s not always transferable to what you’re trying to do. And that confidence is sometimes borrowed. So how do you make that determination as a founder or a port company within a PE firm?
I’m working with a PE firm right now that is looking for that partner, and it’ll probably be us. Actually, it is us where we can bring that due diligence around a lot of these areas that we just talked about here and sort of get them to step out of knowing that, well, we can’t do this due diligence, and our portfolio companies are not able to get to this model of that value that we talked about at the front end. So we’re going to need some friends maybe to help us that have seen the movie before. So I will call this the process early on of doing a value creation assessment. Right. Let’s look at this business and sanitize this across all these different areas that we’ve talked about with people that have done it and people that have experienced this from different dimensions or different experiences, and that could range from product development to revenue generation to how do you leverage partnerships? How do you scale this up in a way that’s attractive to buyers? And I think we bring that collective capability.
I also see a lot of founders and firms that are stuck with this notion of, well, I should be able to get some commercial paper now, I should be able to raise some cash. And they’re being turned away because they cannot show that predictability, right. They do not have the tools and capabilities, and they don’t want to put sunk costs into that because there’s no guarantee. If I bring on a few people for a couple hundred thousand dollars a year, or can I even do that, will I get that return? Will I get that end result? Will I get that outcome? So we find that we’re a really good fit for those firms that are struggling with those problems. Some are emotional. They’re not just qualitative, quantitative. They’re like, I can prove that I’ve done this. I have a product, I have a credentialed client. I know I can get to this channel. I know I can get to this velocity.
Well, time is not your friend right now and cash is hard to come by and hold. Times are longer. So I think we understand that problem and we’re sensitive to it, and we can bring some collective capabilities to different gaps to fill in a cost effective, capital efficient way to solve the problems.
Jennifer Zick: I love the use of the word confidence. We use that in our describing what we do, helping businesses overcome random acts of marketing to confidently take the next right step toward healthy growth. And so in our swim lane, which is exclusively marketing and growth, we also are leveraging assessments and tools to help gather out of the business everything it knows about itself, overlaid with the perspective of being there, done that a couple times.
Here’s where we think we can help move the needle and fill some of these gaps. So yeah, I appreciate that I need to keep us moving. I know we could talk about any one of these questions at length because each of them is a topic in and of itself. But
Peter, over to you, to the guests in the room who know that they’re in a position where they really do need to start refining their market fit and focus, maybe they don’t have a budget for external resources and I experts right now to bring to their table, how do you advise that they start on that process? Where’s the starting line? Or what are the first few steps?
Operational Efficiency & International Scope
Peter Zaballos: Well, step zero, I think if the business has a sales force, you have to sit down with the head of sales and map the buyer’s journey from the first touch all the way through to a completed sale and agree on the stages, especially the stage when you hand off the opportunity for marketing to sales, what are the stages that signify increased confidence? This thing is going to close and have complete agreement on that together and agree that this is a team sport because the marketing and the sales.org are going to have different technology stacks and different operations people running them. And having this agreement on deal progression enables the marketing Ops person and the sales ops person to develop the automation.
So you got visibility all the way through from beginning to end and clear handoffs of information. I would say the next part of step zero is the two of you then need to meet with the CFO. Because the CFO needs to look all the way through that pipeline and not just say the salesperson has committed for the quarter, but to look two quarters out and say, and the marketing pipeline I see gives me confidence that we’re going to be able to hit the sales target one and two quarters beyond the current quarter. So if you’re going to really try and take this on at a gold standard, it’s having complete partnership with sales all the way through to the close and having the CFO have confidence that numbers that get reported in the marketing pipeline translate to sales in the sales pipeline and that translates into revenue.
And how you fill that pipeline is with clarity and precision around the category like we’ve been talking about. And you understand the words that your prospects are going to resonate with and speak to the nature of the pain they feel and how your product can address that pain. And from there it’s crafting content journeys like HubSpot did the world a big favor when they sort of evangelized this whole idea of a buyer’s journey.
And the three stages of a buyer’s journey, awareness, consideration, conversion. And one of the few decent things Google has done for the world is interpret page intent. So when Google could tell, is this a page that’s about awareness? Are you trying to educate somebody to help them understand what problem they have? Or is this a page that’s conversion, but it’s presented at the awareness stage. Google will suppress the search relevance of a misplaced page in that journey and reward the relevance of a page that’s placed properly in that journey.
Now you’ve got Google rewarding you for authentically trying to educate prospects, help them make a decision about the right choice of solution and help them choose your solution. All of that is about content journeys and optimizing those content journeys. And that is going to help you understand where do your prospects find out their information about solving the problems you’ve got and how do you tap into those. So if you’ve developed these high performing content journeys, you’ve now created the basis for pipeline velocity because the people that filled the form out saying I want to talk to a sales rep have done their research. They really want to talk to the sales rep because they really want to buy your product. And then you’ve helped craft all the content that will accelerate the conversation from an SDR who’s just trying to figure out, is this a relevant prospect to assign contract?
So the message should come through loud and clear. You have to partnership with, you have to partner with sales, you have to have the CFO trust both your numbers and then you have to have clarity and precision around your, your category and your positioning and then create the content journeys that brings those prospects to your salespeople.
Jennifer Zick: Yeah, well, Peter, you have such a track record for being a data minded CMO and driving operational alignment and excellence like, you bring that like really analytical layer of proof to the customer journey. Whereas I sit a little bit, I tend to be a little more toward the brand experience side. That’s kind of how I start, by seeing the world. And so if you’ll humor me while I step into a panelist role for a moment, I want to speak on this topic a little bit from what I see from the big picture across authentics clients, because we’re working across all kinds of industries and business types and models, we talked a lot about technology on today’s call, but we work with traditional businesses and manufacturers and distributors and consumer brands and other things.
And I, I should no longer be surprised, but I still remain surprised when I have initial prospect conversations with successful business leaders who scaled to a certain point but have never gotten a clear, defined, documented, aligned message agreement in their company about their market fit and focus. They really have grown despite themselves without having any clarity internally, sales is responding to anything coming their way. So I love to come back to some of the very basics of great marketing in terms of start with purpose, get clear about that. Why does your company exist and what is the world changing, life changing purpose you’re on this earth, what is the impact you’re here to make? And therefore, who do you want to matter to and how will you matter to them? And in terms of picking a fit and a focus, I wanted to speak to some of the questions I’m seeing trickle in from the q and a.
I think a lot of founders get nervous about market fit and niche focus focusing down because they’re afraid they’re going to lose revenue. Because the story for a lot of entrepreneurial businesses is that they’re founder led, they’re sales driven, they’re still testing market fit, and they’ve got all these capabilities that could be relevant. And so they’ve said yes to any opportunities that come their way and they become a business kind of by default with this, you know, broad reach. So I think it’s, I think we need to speak to the reality that for a lot of growing entrepreneurial businesses, getting to fit and focus can feel scary because it can feel like you’re cutting off potential revenue streams when in fact healthy, sustainable growth.
The kind of growth you’re talking about, Peter, that can be operationalized and accelerated, can only come with that kind of fit. So there’s this like kind of scary moment in the evolution of business where you have to say no to a lot of things you could solve in order to say yes to what is going to drive that healthiest, and I say happiest kind of growth for your business. And Steven, it looks like you might have a comment on that.
Steven Horwitz: Yeah, I was going to say part of that is all revenue is not the same.
Jennifer Zick: That’s right.
Steven Horwitz: Right. So you’ve got to go look at sales expenses. Right. There’s marketing expenses, but there’s a sales expense on every deal. There’s lifetime customer value. Is it strategic and taking the step back to look at that and prioritize them and saying no, listen, I’ve made the critical error of having customer led development where by the end of the journey they were the only buyer for the product because they so influenced what we were building. I say that tongue in cheek. We sort of got out of that. But that’s part of taking the step back and constantly measuring where you are against whatever North Star you’ve identified for yourself.
Jennifer Zick: That’s right. Because value isn’t only about revenue, it’s got to be about profitability and replicability. That’s not even a word. I just made it up. Something you can replicate, something you can scale.
Steven Horwitz: Just one more thing. For those of you, if you go back to the sales methodologies that have all been around after 50 years, because they all came out of Xerox and IBM in the sixties, and you go look at how you evaluate prospects and clients. There’s always these questions about long term and short term value. You’re going to get a margin hit right now or a revenue hit, and then there’s always a balancing act. So we can learn a lot from being more observant of the opportunities we’ve got ahead of us.
Jennifer Zick: Good points. Well, we’ve got some questions I’m going to try to package up from the audience to get as much answered as we can. Rick was commenting on a dovetail from your conversation, Steven, on budgeting with the question of do you advise clients to use flexible budgeting or zero based budgeting in terms of being flexible and nimble in responding to what’s working, what’s working as you go? So let’s start there.
Steven Horwitz: Great question. I’m going to give you the consulting answer. It depends on the client and the nature of their business. But there is value in zero based budgeting for certain businesses, especially as your engineering teams and your teams are getting bigger once in a while. Good discipline is go take a hard look and start from scratch. I came out of distribution many years ago.
We did zero based budgeting every quarter. We also lived on basis points, so we had to have that discipline to go look at it. But look, in general, budgets are made to be broken. Who amongst us has ever hit a budget solidly on except public companies who have the ability to manipulate their balance sheets? So you’ve got to be agile with it. Now, you can’t change your targets every month, but they’re basically meant to be a little bit fungible. So I think, again, it depends on the environment.
Jennifer Zick: I’m sure there was a related budget question. Oh, thanks, Steven. And a related budget question from the audience for you, Peter. Someone was asking about, okay, we agree we should probably find our market fit and focus, and we’re probably going to need to invest in creating some new assets to support that. But we’re still testing that. How do we invest our marketing budget appropriately so we don’t, if it doesn’t work this fit that we picked, we don’t have to recreate ourselves all over again and look flaky. How do you manage resourcing and the investment in your go to market entire approach?
Peter Zaballos: Yeah, that’s a super awesome question there, because you’re driving the car and you need to rebuild it while you’re driving it in a lot of cases. And the one thing that is phenomenal about marketing today is it’s never been a better nerds paradise. It is to the point you made earlier, Jen. Yeah, I am biased towards data. So the way you can test this is by testing this, you can come up with what you think is your revised ideal positioning statement and messaging framework and then just start experimenting at the top of the funnel. Do a b test and see does that choice of words and that framing of the problem result in more click throughs, you know, more session times.
So you don’t have to be reinventing yourself. You know, in a a stark way, you can be iterating yourself to this new identity and this new messaging just by doing AB tests and looking.
You’ve probably got money pages where, you know, most of your traffic is coming through that converts to revenue through a dozen different routes. So start a b testing on those. Start at the top of the funnel and just work your way all the way down through form submission and test. And the valuable part of having a messaging framework and a positioning statement is that it is going to evolve. The foundations of it probably aren’t, but the terms are going to change because people’s vocabularies change, the market changes.
I’d say build the muscle around experimentation and data driven experimentation. And then you can apply that to refining your messaging and your positioning and your identity. But it pays dividends on all the other stuff you’re going to be doing to drive revenue and increase velocity.
Jennifer Zick: That is sage advice. So when a business leader comes to the table with a new idea about the niche we’re gonna attack, we don’t need to reinvent everything about the brand and launch an all new website and all new sales collateral the next day. We can step into it and make sure that we get that confidence behind it before we go further. That’s good, good advice. Well, we’ve got time for one more question from the audience and Ashley was asking, and I’ll just lob this out to all of you, about any ideas on resources or tactics for driving operational efficiency for portfolio companies.
Because of course we know that value is not just growth, value is also creating efficiency and reducing cost and waste. So any suggest, I mean, this is a new topic, so we could have a new webinar on this, but any quick ideas on best practices there?
Steven Horwitz: There’s some low hanging fruit. Typically most companies are using Salesforce for their CRM and other solutions. There’s opportunities to get leverage there. The marketing tech stack, there’s opportunities there to get some leverage on best practices. So those are some easy things in trying to put some parameters around those types of resources.
Jim LaPalermo: The other area, if you kind of squint, here’s an answer, but are you open as you look at efficiencies in your operating model to be a little bit more creative and not risky, but a little bit more creative in looking at new ways to do this, which is perhaps a different channel, perhaps some partnerships, perhaps you haven’t. I’m going to talk tech for a second. You have an architecture that can fold in the to another architecture and a playbook and a play. So depending upon the type of expertise you’re looking for and the type of problem you’re trying to solve, you can skin a cat in a couple ways on efficiency and still look at it from a growth angle as well.
Jennifer Zick: Good advice. Well, I would like to. Oh, Peter, did you have something to add there?
Peter Zaballos: Oh, I was going to say, having a consistent set of metrics that you measure your portfolio companies against every quarter. And in some cases, like the last full time job I had, Kleiner was an investor and they basically made us these OKRs. And ultimately there was value in that because all their portfolio companies did that. So they had a consistent way of looking under the covers. How were these numbers being hit? But I would say, look carefully at what you are measuring each of your portfolio companies against across the portfolio, so you got consistent metrics there. And then do you take a step, next step, and say, we’re using OKRs or some other methodology so you can get a little bit more visibility across each company.
Jennifer Zick: Great. There was one quick question from the audience that I think might be worth addressing. Somebody who’s listening in from. I think it was. I don’t have it open right now asking, do our firms work internationally? So I’ll answer for Authentic to say, we’re based here in the United States, but we have served clients in most of the United States and in seven different countries. And when that makes sense for us is usually when a client is looking to grow or establish a market serving the United States. So having a CMO to help lead that go to market strategy from this vantage point, something that we are happy to do. So, Steven, what about for black or black?
Steven Horwitz: Sorry, we’ve had multiple international engagements, so we’re open to that, obviously, depending on the nature of the project.
Jennifer Zick: Okay, great. Well, as we send out the recap of today’s webinar with the recording, we’ll also make sure that we include access for those of you who want to reach out to Orchid Black and understand more about their capabilities or Authentic so that you have a portal to connect. But I just want to thank our panelists again so much for investing the time, sharing your wisdom and experience, and just, it’s always a delight to be in the room with all of you.
So thank you for being with us here today and for all of you attending. I hope that you got at least one little nugget that’s going to be useful in your role and for your team. And just know that we’re cheering you on in healthy growth and value creation. So get out there and be awesome. Keep shining. Go create and build some real value. All right, everybody, take care. Till next time.
Interested in learning more about how to build brand equity to prepare for an exit? Check out this blog post where we share four key value drivers.
