Elements of Value in Private Equity (Part III): Key Characteristics of Great Companies

[00:00:00] Sean Mooney: Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and realtime trends. I'm Sean Mooney, BluWave’s founder and CEO. In this special episode, we compile insights from previous conversations with some of the most thoughtful leaders in private equity, to highlight what many people describe as the elements of value they look for when evaluating whether or not to invest in a company across industries, geographies, and strategies.

[00:00:36] These business builders are sharing frameworks with our audience. Perspectives and lessons learned that fuel their ability to identify and build great businesses enjoy. First off, in episode 92, we hear from Nik Kapauan who shares Access Holdings research driven approach to investing. Nik delves into how breaking industries into their sub components helps identify the characteristics of a segment leader and clearly define, quote unquote, what good looks like.

[00:01:11] Nik Kapauan: As a classic consultant, I'll start off with an it depends answer and then go more towards things that we look broadly across the board. But one of the things that we. Really focus on doing here at access is taking a research driven approach to investing. So before we're talking to any individual target or well before sometimes years before deploying a dollar of capital into a given segment, we're deeply researching the industry.

[00:01:36] So market trends, customer behavior, value chain structure, competitive dynamics, institutional activity, really trying to understand and decompose entire value chains and then narrow down where the opportunity is. And then through all that research, we're doing a few things. So one is we're building our confidence that this is a segment that meets our criteria for an access investment.

[00:01:56] And it's got durable demand, persistent demand. It's sufficiently fragmented for a build and buy play, right? There's material synergies to density and densifying within regions. So we're thinking through kind of industry selection, but through that research process, we're also using all that data to, Define how we participate in the industry.

[00:02:16] Like, what are the characteristics of a segment leader in this space? And we're doing that through talking to experts by gathering benchmarks on businesses and the industry, looking at different business models and different types of businesses and seeing, okay, what works and then giving kind of some of the macro trends we're seeing in this space, what's going to continue working in the future.

[00:02:39] We believe that insight drives strategy. So the more you understand things like market trends and market structure, the winning strategy becomes obvious. In each of the industry segments that we're exploring from a research perspective, we define, okay, what does good look like in this industry?

[00:02:56] And often that's unique to a particular industry is there are certain type of And customer and segment exposure that you want or a certain kind of service mix, right? We want more exposure to service and maintenance type revenue versus install type revenue because you have less exposure to construction cyclicality or something like that, or Here are the key assets or capabilities that are critical for a business to be successful in this, certain kind of differentiated value proposition, or access to a certain kind of scarce resource, or access to certain kinds of talent and skill profiles.

[00:03:30] So we're building that perspective on what does good look like in this segment, what are the attributes of winners, and ultimately what is the vision for the type of business that we want to build that's going to be a category winner in this industry. So that's the, it depends answer, but I think generally across the board where we're also really trying to understand is we call it the growth formula.

[00:03:51] What's the growth formula for this business? What's the full potential of this business? A lot of the businesses that we're looking at are kind of service based businesses. They behave in some cases like airplanes, right? With expiring inventory. So we're looking at things like. What's your average utilization of your assets and what do we think we can get that to?

[00:04:11] And that asset could be a capital asset, like a piece of equipment that you rent out, or it could be a dog groomer that is running at or below kind of that full capacity. So we try to map out what's the full potential of this business, what are the different drivers of that full potential, and then how do we get that business to its full potential and expand that full potential.

[00:04:33] So what's the growth formula for that business is what we call it. What's the process that you invest a certain amount of growth capex or hire additional sales people or hire additional Capacity for a certain service and kind of see how do we build a system that predictably creates value once you put that capital into the business.

[00:04:52] Sean Mooney: I really like that It depends answer because it's the right answer in that you're not a hammer And everything's a nail.

[00:05:01] The one thing that I really appreciate about Access's approach here is first you're gonna do the hard work. Know which industries you wanna play in and intimately break those down into their sub-components to understand how the industries work. And then when you know how the industries work, then you can can say, for each one of these that you're interested in, here's the criteria for success.

[00:05:23] Let's go find those. Versus kind of broadly having these play doh molds that may or may not work in different parts of the world. So I think the way you described it as the right one, it's the hard way to approach private equity because it means you got to know before you need and know before you buy.

[00:05:40] Nik Kapauan: Exactly. And the more that you start looking at common business models, you start getting an idea of what works or doesn't work in this general category of business, but it's very much really understanding how do these businesses work fundamentally, how does this system work that drives this growth formula and then talking to as many businesses as we can, building our benchmarks database, just seeing through data.

[00:06:03] What works, like where are we seeing strong performance, if you take all your strong performers, put them in one bucket, all your medium and poor performers, put them in another bucket, there's going to be certain attributes in that strong performer bucket that you kind of generalize and be like, okay, businesses that have deployed this kind of go to market process generally fare better than others, it's gathering insight and using that to figure out What a winning strategy is, but it's also looking at, as many case examples of success that you can and kind of extrapolating for that.

[00:06:34] And I think both of those help us define, our ultimate vision for the type of business that we want to build in any given segment.

[00:06:41] Sean Mooney: Well, you portray there is also really important that it's not only the work, it's not only understanding the market maps, but it's getting the data and using the data to inform decision making and increase expected value, right?

[00:06:55] It's not going to be a perfect predictor, but it sure as heck makes it a lot more likely that you're going to be successful each time you're up at bat.

[00:07:02] In episode 93, Rob Conrad reflects on his early experiences learned during the financial crisis in his journey into the lower middle market.

[00:07:10] Through alternative equity partners, he highlights the crucial role of people alignment and bringing institutional processes to underlooked family owned businesses.

[00:07:21] Rob Konrad: I'll step back quick and I'll say one of the things that I think was formative in my investment experience when I was probably in my third year in the NFL, there's only so many plays you can run.

[00:07:33] Having some intellectual curiosity and wanting to get into business, I, with the connectivity through Syracuse, knew some GPs and was lucky enough as a young man to have some money in my pocket from playing football. And today, look, I'd love to co invest. I'd like to get involved in the business in some capacity down the road.

[00:07:54] If there's the opportunity, we'd love to co invest, maybe be board observer and learn the business. So I was able to do that for about four years. And this is a vintage year, probably 2008 24 I would say you throw a dart at the wall, whether it's in real estate and PE or what have you. And we had a lot of really good success to the point where essentially I started acting.

[00:08:17] I would call now is almost an independent sponsor where I use my own capital. Uh, sponsor a deal, pull some capital from some other folks and kind of how I got started off into the business. And with that, made some really good contacts and ended up being a gubernatorial appointee for the Florida SBA with their investment advisory council.

[00:08:38] And this was from 2008 through 11. So right in the heart of the financial crisis. So we go through. Senate confirmation, I think the first meeting we had, we end up getting rid of the executive director that was a previous appointee, hired an individual by the name of Ash Williams, who I believe is at JPM right now.

[00:09:03] I'll tell you, I've been around some great leaders from a coaching standpoint, Jimmy Johnson's of the world, and Ash just did an absolutely terrific job when we were with the SBA. I'll tell you, our first meeting, I thought I was signing on for the defined benefit plan, essentially the large Florida pension system.

[00:09:24] There were 30 investment initiatives to find benefit, to find contribution, Lawton Childs Endowment Fund, which was tobacco settlement. We had a, something called Florida Prime that was a money market fund for the municipalities that broke the buck on our first meeting. So from my standpoint, those four years were interesting, informative, and really just a wonderful and terrifying experience at the same time.

[00:09:49] Whereas we were the fourth largest pension system and things were going haywire, but it was there. And I talk about Ash only because he was just a tremendous leader at that time. If you remember, then CalPERS was running towards cash and you had major pension systems. You're dealing with firefighters and teachers and public employee money, and we're running away from risk assets left and right.

[00:10:14] Ash, I give him so much credit for this, planted his feet, and one of the best quotes I had ever heard, but said, look, we're not betting on the end of the world. It only happens once, and it doesn't really matter if we're right. Ha ha ha! Which I always thought was great. Stood steadfast, and we had a disciplined plan and invested through it.

[00:10:34] And for the next eight years, the plan Had been one of the top performing plans out of the major pension systems as a result of that. But during my time there, got involved in a bunch of different asset classes. I mean, we had Hamilton Lane at the time was our pension consultant. I remember spending quite a bit of time with Mario, who was heading HL at the time.

[00:10:58] Really got to see what great was, had access to all the major consultants, all the major managers were working through a whole lot of issues at the time we're trading billions of dollars of equity through 11 different broker dealers to kind of hide the other side of the trade from marketable alternative funds that would be monitoring what we were doing.

[00:11:20] So it was a really formidable time those years in that experience. So coming out the back end of that was really when we started growing alterna. To what we are today, and I would look back and say we were an independent sponsor. We had grown a multifamily office that we sold we had.

[00:11:40] A commercial finance factoring business, we had sold the paychecks and got to the point and had planned for some time to be able to create a lower middle market fund. And I'll go back to the pension system. You got to see what large institutional capital was doing, how they were competing against each other.

[00:11:59] I think I came to the conclusion. You either have to make a choice to be a great investor or to build a money management firm. And in my mind, those are kind of two different things. I wanted to be in a place where I could compete and play in gaps where you could bring institutional knowledge, capital structures, and processes to more inefficient markets.

[00:12:22] So had a lot of success in the lower middle market and launched Alternative Equity Partners Fund One, which we're about three years into right now. A lot of folks in the lower middle market for us, we are very much focused on business services. We like asset like companies. We are very focused on people and leadership.

[00:12:45] When you're at this end of the marketplace, you're investing as much in people as you are the companies. There are quite a few reasons to that, but we're big on alignment, whereas we'd like situations where there's heavy equity role. With founders or entrepreneurs. So we're all in the boat together, rowing in the same direction.

[00:13:05] We're all communicating. You have the same objectives that can talk through a little bit, how we effectuate that. Later, but we're looking for companies that may be overlooked, but more importantly, are looking for founders, family, business owners that have maybe reached their cap or their potential of either their balance sheet or their knowledge of the ability to, where they might know of three or four add ons that they would like to execute upon, but they've never done MNA.

[00:13:34] They don't have access to the capital markets and is a place that we can step in. They know that they can create a lot of value and, or there's the ability. The greenfield opportunities, there's a white space there, but they've never really institutionalized the business and brought in the systems and the processes and kind of top graded and build redundancy for the teams to prepare the company for robust growth.

[00:13:59] I'm sure it's a similar story to a lot of folks you've talked to on the show. And a lot of what you do in your business is providing some of those resources to help build out that redundancy and build those systems and processes for these sorts of businesses. So we look for those situations. We don't participate in a tremendous amount of widely auction deals.

[00:14:20] The deals we participate in are not widely marketed a lot of time proprietary deals, which are tough. They're deals that take a long time to get through kind of the gestation period. You're part counselor at times, part trying to walk the deal and the value proposition of why possibly selling half the company at a five or six X times and having us triple or quadruple earnings in the company might lead to a multiple expansion of 10, 11 times and why that's a benefit to that founder and the team that we've put together and it took a better part of three years to really identify and I couldn't be more pleased with The team we have together today, but I've been in that marketplace have been used to dealing in this space and frankly, enjoy it.

[00:15:08] You have to enjoy at this level in private equity, you really need to enjoy people. You need to enjoy working with leadership, developing leadership, and to some degree being a teacher with these groups. So a lot of things that we enjoy doing at our firm and to date have had. Part of the success doing

[00:15:29] Sean Mooney: and I love that and so much of what you say rings true from my experience in private equity What we see here in what you're talking about is so much of the artistry of the business that you're in Involves if you get the people right first, you know get your team right and then you give them some fuel to do the thing And you let them be the leaders they can be, but also give them leadership and partnership at the same time.

[00:15:54] That's a recipe for success, particularly when you combine it with kind of these lessons of tenacity and grit and resilience that we've talked about. Because even in companies, maybe not nearly as daunting from a life story perspective perhaps that you experienced. They're going through these trials and tribulations every single day and no doubt the experiences they've had as a world class professional athlete and teammate going through some of these really kind of acute situations, sounds like they've equipped you and your team well to kind of partner with these family owned businesses that are trying to NFL and what they do.

[00:16:35] Rob Konrad: We look at a lot of transactions, spend a whole lot of time reviewing. Obviously industries, companies, and founders. And we'll, we'll get involved from a value standpoint with, we love the situation, our first transaction bought roughly 55 percent of the company. The entrepreneur turned down a nine times deal for a five times deal with us where he was selling 90 percent of the company.

[00:17:00] He saw the runway and saw the value proposition of working with us. And we've done nine add on transactions and have, increased EBIT up. By a factor of six in the course of two years, I've had a really strong outcome there. And so it's again, going back to the people and having an understanding. It's that component of it that's really important from a teaching standpoint.

[00:17:26] There's a lot of folks that might have owned family businesses. Our second platform was a 30 year old business and the larger business. But as it relates to the needs of that particular company. They're very different, somewhat the same, but a thousand person company, a lot larger organization and from a integration standpoint and the overall organizational management, the redundancy and the top grading of the team has been a very heavy lift.

[00:17:59] But again, in the lower middle market, especially in kind of the secondary and tertiary markets, you got to get the people right. A lot of times, if you get in the situation and you get the people wrong, you get the leadership wrong. First of all, your team has to be able to step in and operate to the extent something goes wrong.

[00:18:19] We have that ability at our place. But if you're in some locations, it's difficult to recruit quickly a high top tier executive management or part of the ELT to come into a smaller business. So that's really a big part of it for us is making sure on the front end from a human capital standpoint that we're.

[00:18:37] Getting that part right. And then we have a pretty disciplined process of how to take that business and build that platform and get it to a point where I have a good buddy of mine. I'm sure you've seen, there's a lot of guys in private equity that come from the military. A good buddy of mine was captain of the Syracuse lacrosse team, but it taught me about one of the seal sayings, two is one, one is none, which is basically talking about redundancy for critical systems and.

[00:19:06] Critical missions always have a backup, always have redundancy. So things that we're always looking to do with the smaller platforms are to build that redundancy, to build that platform, to do the tech integration, digitally transform, make sure we have the ELT in place before you start trying to integrate and add on companies and indoor greenfield, you're setting yourself up for disaster.

[00:19:31] If you don't do those things first. So very much a focus of what we do when we're requiring companies uses. The people building that platform and executing on our investment thesis after that,

[00:19:44] Sean Mooney: you have this interplay clearly between your team, the operating resources you're bringing in the portfolio company, leadership team, and you're managing those to build a greater whole.

[00:19:55] Hi, this is Sean. Wanted to take a quick moment to tell you a little bit why BluWave exists. It's based on this whole notion that assessing opportunities and building business is really hard. We all know third party expert service providers can dramatically help, but at the same time, it's hard to know who's good.

[00:20:15] Usually leaving you, like I would do, and call friends and ask, Do you know someone who does this? Or just go the square peg round hole route. So after nearly 20 years in PE, I decided to solve my own problem and create a BluWave. Today, many hundreds of PE firms, thousands of portcos, leading public companies, private companies, All call BluWave to instantly get connected with the exact third party service provider they want that's pre credentialed by BluWave and perfectly calibrated for their need and really good.

[00:20:46] You too can give us a call or visit our website@BluWave.net. We're free to use and you can benefit the same way other top P firms do act the show.

[00:20:57] In episode 97, Casey Myers outlines his framework for evaluating companies. He emphasizes the importance of leadership, character correlation to pain, and addressing tech debt for durable smart growth.

[00:21:11] Casey Myers: We got to put it in context, right? So, I mean, Edison plays lower mid market, we're growth equity, first institutional capital, quite frankly, a vast majority of our CEOs are first time CEOs, founder, CEOs, and teams. And so, In that context, yeah, you've got your unit economics, you've got your, look, are they breakeven?

[00:21:31] Are they growing? All kind of the core things, which is kind of easy to quickly decipher, but I personally kind of look for two or three things over and over and over again. One, I'd look at the character of the leaders. I mean, look, at the end of the day, a couple of reasons. One, these are the people you're going to work with.

[00:21:50] So you have the right to be picky, to deploy the capital where you want to deploy it. You're going to spend a lot of time with these people. So what does that dynamic look like? And what does that character look like? But two, their character at the top, it's very difficult to measure culture. In pre deals and diligence, right.

[00:22:11] You can't tend to really understand the way that culture operates until you're sometimes many quarters into the relationship. I just firmly believe that the character leader at the top, especially these are founders and first time CEOs, it's permeated the organization, right. They have brought in talent that has stayed because they like that leader.

[00:22:32] That is a leader worth following. So. I think character for me is fundamental one. Fundamental two for me would be, and this goes back to the operator in me, call it product market fit, call it service addressable or obtainable market. But I look for correlation to pain. Is what the company is doing, buying, selling, deploying, is it solving pain for their customers?

[00:22:56] Are you selling something that's nice to have or something that is a must have? I think if you can kind of dig and press on that, as opposed to how big is the TAM, how big is the SAM? It really, for me, is about the correlation to pay. And so those customer interviews, client interviews, prospect interviews, those are the kinds of things that you spend a lot of time and can validate that.

[00:23:15] And then the third, I think, because we are in the tech space, tech debt is not something that's fun to kind of like jump into. A lot of founders don't appreciate and get this as a growth equity investor. A lot of these founders don't think like an investor. And so if you've dug too deep of a hole with tech debt.

[00:23:35] It's tough to get out of it at the same time as meeting the criteria and growth requirements that private equity is going to lay on you. It's not growth at all costs, but it's durable, smart growth. If you're trying to dig out of the tech debt bucket, it's just fighting against you from the get go. So that the tech debt thing is something I tend to push on a little bit.

[00:23:57] Sean Mooney: For our listeners who are outside of the world of technology and software, how do you define tech

[00:24:02] Casey Myers: debt? You built a product in some way, shape or form, right? Whether it's tech enabled services or like pure, pure self service software as a service product, and you've sold it into the marketplace and you've built that on some type of code base.

[00:24:18] But when you come into these founder led organizations, sometimes these are 10, 15 plus years old. And depending on what you want to do to expand back to that TAM and SAM and SOM, if you need to expand that, what are you going to do from a product and architecture perspective? A lot of these folks have built different stacks, different products, so now what are you trying to do?

[00:24:40] Consolidate code bases? There's a scalability to the architecture and code that fundamentally It's either something that these companies have already solved for, or it's something they need to solve for. Depending on how big that gap is and how big that chasm is, it's something that some private equity firms don't want to take on.

[00:25:01] Sean Mooney: It's such a great point. And I remember when I was in my investing days and doing kind of information data analytics companies, and then immediately we would go into the code and then you start saying, okay, A, is it organized or is it just kind of a rat's nest? B, is it notated? And then C is there like, if there are notes or any kind of ads in there, is it all in some language that no one in the company speaks cause they outsourced it all to some far away place or is it all in the beautiful mind of lull in the steam tunnels and like, lull has them over, you know, like just held hostage by having all of this swirling code in their mind and so.

[00:25:44] That always left an indelible mark on me. And so as we were kind of going through and building up our platforms and the AI behind it and everything, one thing we were really purposeful about was exactly what you're talking about. And then secondarily, we would regularly and still do regularly do tech diligence on ourselves.

[00:26:02] We'll bring in the groups that you all will hire to look at targets. And we said, no, come look at us. And like, it's just a check. Are we doing it right? Is it the latest and greatest? Can we do something better? Are we looking at the right KPIs? And anyone can do that. If you're a founder out there, if you're building a company, take that time to measure twice, cut once, do it right and build it with a thoughtfulness and an organization, knowing that you're going to want to get monetized some point in your life on this business.

[00:26:31] And that's going to be a big issue if you haven't done it right. All this is solvable.

[00:26:36] Casey Myers: It is. It all needs to be done. It's just a matter of timing. You have to think about it. It is just a risk barrier to scale, and we are in the business of scale up. So it's a question of how much risk you're going to take on to get them to be able to scale.

[00:26:53] Tech either needs to be a contributor to scale or a hindrance to scale, and it's okay if it's a hindrance, but it's a question of how big that hindrance is and whether you can get the return on investment. And ultimately, these are companies that you, that you want We're not going to own forever. We're not a whole co.

[00:27:09] So you have to pass those on and be a good steward of those companies and people and technologies. And so these founders, you have to think about when you're going to, how you're going to, where you're going to exit and what those individuals want. So it just goes back to kind of eating our own dog food too.

[00:27:27] Like who is our ICP? What is our ICP? We preach this to our customers and portcos, but the reality is we have to think about it for ourselves as well.

[00:27:35] Sean Mooney: One of the mantras we have here is like, so often the things that I would look at companies that go, you know, I always wish it was done this way, but historically, this is what we've done.

[00:27:45] And so I've tried my best to ban the word historically. And like everyone we bring in, we bring in talented people who have unique skills that we need. It's like, always look at what we're doing. If there's things that you say, I always wished it was done that way. It's like, no sacred cows, just let's do it that way.

[00:28:01] It was so liberating. And so I think our listeners who are listening to what Casey's saying is like, as you look at your own technology, your own workflows, processes, just take it on now. Just fix it. And then you'll be better for it Next up in episode 99, Jonathan Metrick from Sagard walks us through how identifying and obsessing over a superpower can create a competitive advantage.

[00:28:24] Jonathan discusses the importance of prioritizing resources on the strengths that disproportionately add value to customers. .

[00:28:33] Jonathan Metrick: I've spent a lot of my career in growth, right? So revenue acceleration, marketing sales.

[00:28:38] And I think one of the most interesting things around that I've seen now, especially working at a fund level, working across a portfolio is there's no one way to grow, right? And thank goodness for that, because if there was, it would be even more of a knife fight in Google, Facebook, or trying to hit folks at an event.

[00:28:57] And because there's no one way to grow, I think it's critical when I'm taking a look at a business as. You got to own something. What are you going to do better than all of your peers and your competition? And that can be a distribution advantage. It could be data. You could be winning on lowest price.

[00:29:16] You could win on your best brand. You've got to do something that disproportionately adds value to your customer that others can't. So owning something is the first and the second is then becoming obsessed with it. And disproportionately allocating resources, building a huge competent team around that, creating a flywheel.

[00:29:37] And typically the businesses that I see the superpower or the thing that they own is often. championed and obsessed by the owner or the founder or the exec team. They're really bought into, we are going to win this way. We're going to allocate resources to this and we're going to really kill it in this vector.

[00:29:58] And so that piece of identifying a superpower, owning it and then allocating resources to become the best at it is one of the key things I look at when evaluating businesses.

[00:30:09] Sean Mooney: For our listeners who haven't. Put the money to work for an MBA yet, save your money. Listen to what Jonathan said. That is it. You know, it's like there's so much you just very elegantly described there in terms of like being really good at something that creates moats and then constantly focus on that and get better and better and better.

[00:30:30] And so I think that is really, really well said. And I think for anyone in business, whether you're an investor, an operating partner, whether you're an operator, what Jonathan just said there is really, really well said.

[00:30:45] Jonathan Metrick: It's incredibly difficult to have the discipline to say no to things that are not your priority, your superpower, your spike.

[00:30:54] And that's really where the rubber hits the road. We're approaching 2025 and everyone's doing annual planning. And a lot of folks have lots of ideas, net new ideas to grow the business. But if you're going to allocate resources, It has to be in the area that's your superpower. Otherwise, you really quickly end up doing too many things.

[00:31:14] You're kind of peanut buttering your initiatives and your resources. So there's a discipline, even if you kind of have the strategy around it, are you actually following through with the discipline of choosing an area, doubling down on it and owning it? Or are you kind of watering it down as time goes on?

[00:31:30] Sean Mooney: It's another great point. And candidly, as I kind of look back on my career, I came up through the deal side of PE. So I was an investment banker, and then I deal side, but I never really operated. And so when I got into and founded BluWave, and I'm suddenly in the seat, you really, really tangibly feel the pressure, the constraint of allocation of resources in the, this kind of visceral feeling that you have these finite amount of chips.

[00:31:57] And you got to then kind of put them to your point as like, where are your strongest? And there's just a lot of things that you have to say no to. And I think somewhat naively in earlier parts of my career, you're working, you're collaborating with the management teams in your portfolio companies, you're like, yeah, let's just do one more thing.

[00:32:13] And then you could feel them like, no, like, like we can't do 15 things. We have to do three. And I think that's another great point in terms of not only say no, but then put your tips stacked in your areas of power versus. Maybe spending more time trying to address your weaknesses. Go where you're strong.

[00:32:31] Jonathan Metrick: Absolutely. People want to see you excelling at something. They want to look to you for something. I've spent a lot of time in my career in the marketing function. One of the pieces I would always say to my team is The hardest piece about marketing is choosing what not to say because you can't say it all.

[00:32:48] You could have 10 reasons why you're the best company in the world, but if people are giving you five seconds, well, you've got to choose one thing or two things to be known for. And that is difficult, right? Stripping out all the other extras and just being like, we're going to hang our hat on this.

[00:33:04] That's a difficult exercise, but the ones who do it, do it well and can scale.

[00:33:08] Sean Mooney: I really appreciate that. I've never really thought about that in terms of. Marketing or messaging or communications or sharing your value proposition. And as much as anything, like you're going to say one thing, you can't say everything.

[00:33:19] And when our head of marketing is listening to this, he'll probably chuckle because I'm regularly accused of saying, why use one word when two will suffice. And so

[00:33:31] Jonathan Metrick: conversation before this podcast, it was like, make sure you bring that up, Jonathan.

[00:33:38] Sean Mooney: So sometimes I get to turn the light back on myself, and I'm like, well, that one hurts. I feel it right here, but it's true. But maybe going to that, and we talk about, like, there's only so much any one person can do. One of the things that I've really appreciated about the evolution of this industry, of PE, maybe back from the late 90s, when it was more of, it was still really hard, but it was kind of a buy low, sell high game.

[00:34:02] I used to say like our value creation plan was upgrade the accounting system and add a salesperson. But now it's so much more multifaceted. There's transformation involved in PE firms are not only bringing capital and kind of strategic value, but a whole host of other kind of resources. It's we're pulling the oars together with the operating companies.

[00:34:22] Hey as a quick interlude, this is sean here wanted to address one quick question that we regularly get We often get people who show up at our website call our account executives and say hey i'm not private equity Can I still use BluWave to get connected with resources?

[00:34:39] And the short answer is yes. Even though we're mostly and largely used by hundreds of private equity firms, thousands of their portfolio company leaders, every day we get calls from everyday top proactive business leaders at public companies, independent companies, family companies. So absolutely you can use this as well.

[00:34:57] If you want to use the exact same resources that are trusted and being deployed. And perfectly calibrated for your business needs. Give us a call. Visit our website@BluWave.net. Thanks. Back to the episode. In episode 1 0 1, Lisa Aimes shares insights on Norwest's relentless prioritization in marketing and business. By focusing on key initiatives and lining sales and marketing efforts, companies can create predictability in sustained success.

[00:35:29] Lisa Ames: I would say a couple of things that have been consistent themes throughout my career. The first is ruthless prioritization.

[00:35:38] Sean, there's always more ideas than can be executed. And As marketers, I think we have it even tougher because nobody goes into CFO's office and says, Hey, I have an idea that we should execute for how to optimize our finance function. But almost everybody feels that they can do that with a marketer. We all fancy ourselves as marketers.

[00:35:59] And so I think as go to market leaders, we have to be hyper judicious about how we allocate resources and budget. And from a CFO perspective, we're always like the cost center as it is, or perceived as such, right? We have the biggest budget. And so when I see companies trying to spread that peanut butter too thin from a marketing perspective, trying to penetrate too many segments, maybe testing too many channels at once with limited budget.

[00:36:28] And then they wonder why they're not gaining awareness in the market, why they're not leading their category, why they're not driving new logos. I see this a lot, of course, not with our portfolio, but like in my past, I've seen companies struggle to make those tough decisions. About where to prioritize, it must be pressure from within.

[00:36:49] Maybe it's perceived pressure from the board, but it's like, we got to do more. We got to do faster. We got to do better. We got to spread the net wider. And I'm a fan of let's zero in on something that we can master. And once we master that thing, then we can fan out from there. And so to your question, I think the companies that can prioritize and especially the marketing teams that can prioritize, make the tough decisions, say no, potentially more than what they say yes to those kinds of companies, those kinds of leaders are in the best position to succeed.

[00:37:26] Sean Mooney: That's a really good one there, and maybe to double tap on that is, if you think about marketing right now, there's so many channels available to market, and there's different types of marketing, there's brand marketing, there's performance marketing, there's content marketing, you're doing all these different kind of attributes, and you really can Do it all.

[00:37:45] And then when you overlay the big question, which has always been in the world of marketing, is attribution. What role did you play? It's like the old line, like, I know half my marketing's working, I just don't know which half. And then it used to be that, well, now you can really find in digital, like, you can connect these things.

[00:38:01] But now there's all these, like, half the time, all the email things don't even enable cookies, so you don't know who's really even opening your emails. So you can kind of do everything. So how do you think about in this kind of constant, almost like cat and mouse changing game of marketing and not only the number of tools that are available to you, but, but also like, how do you measure effectiveness?

[00:38:21] How do you really look for that focus?

[00:38:24] Lisa Ames: Certainly from a board perspective, it's all about creating predictability in the business. And so if you can zero in as a marketer on the one or two channels that are your workhorses. And the one or two strategies and one or two audience segments, I think you're in a much stronger position to win because you're going to test and learn with that smaller purview.

[00:38:47] And then you're going to, as I said, fan out from there too often. I see companies, like I said, wanting to spread the peanut butter so thinly. And of course the attribution piece has always been a challenge. We've been talking about attribution since I was a little girl in marketing, which was a long time ago and nobody's really figured it out.

[00:39:09] So, I mean, yes, we have tools to do it, but you still have sales and marketing wars and fighting over who did what and not to get too deep into marketing here, but I'm always a fan, especially coming from demand based. That like we win together or we lose together. And so sales and marketing has to be in lockstep.

[00:39:26] They have to be aligned on metrics, goals, audience, like messaging. And there shouldn't be any such thing. And this is something I feel strongly about as a marketer and given the opportunity, thank you for the platform, Sean. I will say that if there's any deal that was ever close in the history of SAS and probably any business for that matter, that didn't have sales and marketing, both heavily involved.

[00:39:51] You show me one deal where sales did everything or marketing did everything. And granted, if it's a full like product led growth motion, maybe that's different. Or if it's a transactional high velocity sale, that's all done online. Maybe there's edge cases here, but when you're talking about an enterprise sale, there's no such thing as this one we're going to attribute to sales or this one we're going to attribute to marketing.

[00:40:16] Sean Mooney: It's so wise because it's like you said, attribution has always been the question. And so. Really good companies what they do is like they use the word and not or it's not sales comma marketing Yes, it's sales and marketing. They're symbiotic with each other. They go together One is doing one thing in support of the other and they kind of in orbit around each other

[00:40:36] Lisa Ames: Well, and my friend John Miller talks about like being a team and you're not gonna say well the goalie in a soccer environment won the game because there were so many other assists, there were so many other players.

[00:40:50] So I like that team analogy as well for helping folks realize you can't pin a deal on one organization.

[00:41:00] Sean Mooney: I think that's very well said, and for listeners, like, listen to what Lisa has to say here. This is spot on. That's all we have for today. A special thanks to all of our featured guests for rejoining. If you'd like to learn more about any of our guests or their respective firms, please see the episode notes for links. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcast.

[00:41:23] We truly appreciate your support. If you like what you hear, please follow five star rate, review and or share. I. This is a free way to support the show and it really helps us when you do this, so thank you in advance. In the meantime, if you want to be connected with the world's best in class private equity grade professional service providers, independent consultants, and ER executives that are perfectly calibrated for your needs and deployed and trusted by the best business builders in the world.

[00:41:49] Including many hundreds of the world's top private equity firms and thousands of high performing portfolio and independent companies, and you can do the very same Whether or not you're in private equity, give us a call and visit our website@BluWave.net. That's B-L-U-W-A-V-E and we'll support your success onward. The views and opinions expressed in this program are those of the individuals presenting and do not necessarily reflect the views or positions of any other persons or entities, including those referenced herein. No representations, warranties, financial, legal, tax, or other advice made herein. Consult your advisors regarding any topics discussed during this episode.

Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.

BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.