New Private Equity Report: A Clear Business Case for Adopting a RevOps Strategy in PE

You’ve likely heard of revenue operations — aka RevOps — but have you deployed the discipline in your private equity firm, yet? RevOps is new on the scene but expanding rapidly as more firms realize the significant business advantages — including the ability to generate more revenue from an acquisition to an exit.

Leading organizations, analysts, and publications are sharing insights on RevOps adoption and results:

  •         3x revenue growth generated (Source)
  •         69% increase in revenue benefits (Source)
  •         59% improvement in win rates (Source)
  •         53% increased net-dollar retention (Source)
  •         38% more revenue generated in 27% less time (Source)
  •         30% reduction in GTM expenses (Source)

Why RevOps?

Today results at private equity firms are rosy for the most part. Many are enjoying faster exits at higher multiples since the pandemic. But those are just the upbeat forecasts.

In fact, the industry is in a state of flux due to a multitude of issues — including rising concerns around the need to break from the status quo and move to a more mature approach that optimizes revenue generation.

This means that instead of merely relying on organic increases in exit speeds, multiples growth, and sales prices — all of which have likely reached their peak, according to some analysts — private equity firms need to focus on revenue generation.

To achieve this goal, firms need to optimize revenue at every step of the customer lifecycle with all the companies in their portfolios. To pivot in this direction, they need a sophisticated centralized revenue operations.

Early Adopters Reaping Rewards

Many private equity firms performing the best in today’s increasingly complex environment  have already embraced RevOps and its intelligent, AI-driven, data-centric capabilities. RevOps-enabled private equity firms are poised to achieve the highest level of revenue from each investment versus leaving money on the table. With its clear potential to advance private equity beyond the status quo, it’s no surprise that RevOps is predicted to be the future of private equity revenue generation.

The following graphic illustrates the rise of RevOps based on data from Forrester. It shows that the vast majority of organizations have only reached the “aware” stage of RevOps adoption. However,  RevOps leaders are already generating over 10% more revenue and 95% greater forecasting accuracy than their competitors. Meanwhile, the laggards are 6% behind in revenue growth and have only improved forecasting accuracy by 10%. From a wide range of industry reports, it’s predicted that the shift from aware to aligned and optimized will begin picking up steam in the near future.

Revenue operations adoption maturity curve

New Private Equity and RevOps Report

Our new report — RevOps Intelligence in Private Equity Firms — shares the latest insight on the adoption of and need for adoption of RevOps in private equity firms and how they can make the transition. It includes these six key findings:

Finding 1 — Private Equity Missing Revenue Opportunities

Private equity has been paying dizzying prices, according to Axios. U.S. buyout multiples last year averaged 11.4x EBITDA, a record. A majority of U.S. leveraged buyouts last year were done above 7x debt-to-EBITDA ratios, also a record. Some of these high prices are driven by technology, which keeps seeing its sector-leading deal share increase. The simple math says that GPs buying companies at these prices will have to generate more value if they are to deliver on return expectations — and they will have to do so in a highly volatile and uncertain business environment.

Finding 2 — Expanding Mergers and Acquisitions

Private equity firms broke two records in the first half of 2021 — they generated over $500 billion worth of deals and propelled mergers and acquisitions to an all-time high, according to the Financial Times. These achievements have been called “truly extraordinary” and going “beyond any of our expectations.” However, acquisition deals come with big challenges. Private equity firms that mismanage an acquisition risk neglecting essential steps along the path to a smooth integration, losing customers in a clumsy transition process, and missing opportunities to maximize the revenue potential of the purchase.

Finding 3 — Silos Inhibiting Revenue

Businesses leak revenue and are unable to maximize their revenue potential for many reasons. One of the most significant is due to the challenges that silos create. The integrated solutions that most companies want to deliver — but struggle to create — require horizontal collaboration, according to the Harvard Business Review. Research of hundreds of executives and managers confirms both the need for and the challenges in creating horizontal collaboration among departments. However, although most executives recognize the importance of breaking down silos to help people collaborate across boundaries, they struggle to make it happen.

Finding 4 — Fractured Data Inhibiting Insight

Data analytics is omnipresent and expanding in the toolkit of many portfolio companies. Artificial intelligence does not have the same broad application, although this is likely evolving. Financier Worldwide reported seeing increased deal volume focused on data monetization and efficiencies created through the implementation of AI-driven strategies. It’s expecting to see AI continue to be a deal driver for private equity firms and their portfolio companies, including the use of data analytics to identify value-enhancing synergies among prospective targets and business models.

Finding 5 — Driving Value through Digitization

The EY 2021 Global Private Equity Divestment Study revealed that the digitalization of businesses’ operating models or routes to market have become a leading driver of higher deal valuation — more important than proven organic growth. Digitalization of a business ranked as a critical component of the value story and divestment thesis in the last major exit for 52% of respondents. What’s more, 51% of private equity firms regard AI as a critical value lever for portfolio companies over the next 18 to 24 months. Also, for 45% of private equity firms with a primary focus on digital growth, digital analytics is the top priority for their portfolio companies’ digital development.

Finding 6 — The Rise of RevOps

The formula for revenue growth has changed dramatically in the last 25 years as buying has become more digital, data-driven, and complex, according to the Revenue Enablement Institute. The emergence of complex technology-enabled selling systems and changing customer buying behavior have transformed the basis for generating revenue growth in the 21st century. Meeting the challenge requires a single cross-functional process to ensure a unified customer experience, find ways to work together, accelerate the velocity of information sharing across teams, and launch operating models that support marketing, sales, and service silos working as one revenue team with a single common purpose.

Learn more about the rise of RevOps in today’s private equity industry — and learn how your firm can launch a RevOps initiative to optimize your entire portfolio’s path — from acquisitions to exits.

Read the full report: RevOps Intelligence in Private Equity Firms.

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