After a company is purchased by a private equity firm, it launches into what’s known as the first hundred days–time when the company is expected to grow or scale and to grow fast. It’s a stressful time and it’s often fraught with missteps, particularly in the ways in which marketing supports sales.
Shiv Narayanan is helping companies avoid those missteps. First with his business, How to SaaS, and now, with his new book, Post-Acquisition Marketing: How to Create Enterprise Value in the First 100 Days.
On Author Hour today, Shiv discusses his five-step framework to scale marketing, how to avoid costly missteps, and the importance of data led development.
Jane Stogdill: Hi Author Hour listeners, I’m here today with Shiv Narayanan, author of Post-Acquisition Marketing: How to Create Enterprise Value in the First 100 Days. Shiv, thank you so much for being with us today.
Shiv Narayanan: Thanks for having me on Jane.
Jane Stogdill: There’s a lot of really helpful advice in this book that I want to dig into but first, tell me a little bit about how it came to be. Your company deals specifically with this work, right?
Shiv Narayanan: Yeah, the background for the book and in our companies, I used to be the CMO of a company called Wild Apricot, and we were acquired by private equity back in 2017, and then sold to a different private equity firm in 2019. Going through that journey uncovered that a lot of companies that are owned by private equity are large B2B enterprise software companies that are very good at sales, and not very good at marketing.
In 2019, I founded this company that focuses on helping private equity investors and their portfolio companies to figure out how to scale to the next level by leveraging a data-driven approach to marketing.
Jane Stogdill: First of all, if you’re a founder and you’ve just been purchased by private equity, tell our listeners why the first 100 days so critical.
Shiv Narayanan: Yeah, there are a lot of financial dynamics at play when a company is acquired because you’re essentially buying an asset. So, similar to the way that you would buy a house when you buy a company, you do a certain level of due diligence on it, and with businesses, it’s usually on the financial side.
This is what the big four or five accounting firms like Deloitte and E&Y and PWC do is they’ll evaluate the potential or the financials of an asset to say, “This is how much revenue they make, this is their profitability. Here’s what’s right, here’s what’s wrong, here’s what needs to be adjusted.”
When you acquire a business, one of the big reasons you’re buying it is because you believe that it can grow faster. Because you’re paying, in many cases, you’re paying huge multiples, and there’s a reason behind that. We can dig deeper there but there’s a lot of competition for these deals because there aren’t that many great businesses that come up, but there’s a lot of supply of financial capital out there.
The capital is competing against each other, and so founders that have built software companies, in particular, end up seeing huge exit multiples where their companies are being sold for very large numbers.
If you’re the person that has bought a company at a really high multiple, an example of that would be, let’s say you’re doing about three million in profit, you could sell that company for upwards of 30 to 40 million dollars because your multiple is 15 to 20 times your EBITDA. If you’ve bought it for that much of a premium on what the yearly profit is, well, the only way to make your money back is to grow it faster and to increase your profits at the same time.
The first hundred days end up becoming this critical period during which you need to pull all these different kinds of levers in order to scale that company faster, and marketing is one of those levers. It just happens to be that when companies think about scaling, they don’t look at marketing as often as they should, primarily because in a lot of these companies, sales are looked at as a revenue driver whereas marking can be as well, there’s just not enough of the right mindset or thinking about it inside those companies.
Marketing as a Solution
Jane Stogdill: Presumably, you have a successful business so was clearly a niche for the work you do. Why was there a niche to fill, why have people not thought about this solution enough?
Shiv Narayanan: I mean, investors are very aware of the pain points in the marketing side and so are CEOs. Gartner did the study in 2020 where they found that demand generation in marketing is one of the top priorities for CEOs to solve but their confidence in their ability to solve it is lower.
People are definitely aware of the problem, it’s more, “Do they have the right people and resources to be able to handle and tackle that problem?” Another stat is the beacons of marketing, their average tenure inside organizations is, in many cases, less than 18 months. You have these executives that are being hired by companies, they don’t deliver and then they’re fired well before they can make any type of an impact.
The reason is, especially in a high-pressure environment where an acquisition is involved, where let’s say you and I were to found a company and we’re going about it at our own pace and happy to grow it slowly, that’s fine. But if we went and bought a company and we’ve allocated capital to make that purchase in the first place and then we’ve taken debt from the bank to leverage against that, similar to the way you buy a house, you get a mortgage, right?
When you buy a company, you also take that against the asset that you’re buying. There are all these additional pressures and speed is the key because you need to deliver a return faster. If you don’t have the right person or the right people to deliver on that, then you miss your targets, and if you miss your targets, there are all kinds of consequences–people lose their jobs, investors get frustrated, there’s a lot on the line if the investors don’t generate a return.
The way this goes up the chain, let’s say you’re contributing money into a retirement fund of some kind, a lot of those retirement funds, they invest that capital for the money that you’re putting into that across different asset classes. For example, you might put some money into a mutual fund or the stock market, they might put some into the real estate market. Some of that capital is often allocated to the private equity market, and so private equity has to be answerable to those investors that are actually giving them the capital to go and buy these B2B software companies. So, you can kind of see how the pressure builds up.
Private equity is accountable to the larger investors giving them money. If they don’t scale their companies, they don’t have enough of a return to give to those, it’s called limited partners, and so if they can’t give enough of a return, at the next cycle, when they need to raise more capital, the limited partners will say, “No, we’d rather give this money to a different asset class or a different firm that gets a better return for us.” There is just a lot on the line.
Jane Stogdill: Why is marketing the answer? Let’s dig in.
Shiv Narayanan: Well, I would say, it’s one of the answers and it’s probably one of the most untapped answers. Traditionally, the playbook for scaling a company after an acquisition is to ramp up sales for sure because that’s kind of what brought you to this point, right?
What we’ve encountered is a lot of our clients do north of a hundred million dollars in revenue and they have a huge sales team, but a marketing team of fewer than 10 people. Sales are kind of like the breadwinner inside those companies. Scaling sales after an acquisition is almost just a standard part of the playbook.
Another standard lever is pricing because increasing prices is one of the quickest ways to generate a higher return without necessarily adding costs to your bottom line. So, marketing just happens to be one of those areas that there’s a ton of potential on but there’s not enough awareness about how to leverage it to create enterprise value, to drive top-line level revenue growth.
What we’ve done is we built a framework around that and said, “If you follow this step by step, here’s how you scale your marketing budget and its impact on revenue, and here’s how you get buy-in from the board and your investors and your CEO, so that you can make more of an impact on the business overall.”
Five Step Framework
Jane Stogdill: Okay, let’s talk about that framework, there are five steps in the book you describe, can you take us through some of it?
Shiv Narayanan: Yeah, I mean, at the core of it, the idea behind the book is that you need to scale marketing with data. The reason marketing doesn’t get a bigger seat at the table is a lot of marketers hide behind catchphrases like, “We need to grow the brand,” or, “We’re providing air cover,” or, “People are seeing those videos and we don’t really know the revenue impact of that.
The problem that gets created by that type of internal messaging from marketing is there’s no accountability for marketing. The starting point is to say, “We need true revenue accountability for marketing.” And marketing is just as much of a rainmaker as sales. In terms of percentages, it might be skewed one way or the other in different organizations, but marketing should be viewed as a revenue function, not as a cost function.
In sales-led organizations, marketing is viewed as a cost function. It’s like, “Sales is the rainmaker, marketing is a necessary evil required to support whatever sales are doing.” But when you shift that viewpoint, then marketing becomes a rainmaker. When marketing is a rainmaker, then you start to think about, “Okay, if it is a rainmaker, how should I hold this function accountable?”
The starting point for that is the data. Step one is what we title as a marketing due diligence to see, “Where is marketing spend going today and what is the impact of that spend on closed one revenue? How many deals does each of the marketing campaigns bring in, from which channels did most of our revenue come in from? Which channels or campaigns were more effective than others, should we re-allocate our spend from the ineffective channels to the more effective channels? Where else can we scale?” Understanding that data at a very deep level is the key, or at least step one.
Then based on that, step two becomes looking at how you can scale the marketing function by ramping up demand generation. Within every business, literally, I mean if you look at any business, you can do 50 things to scale marketing. If you were to pull together a whiteboard and put 30 people in a room, there would be 50, 60, 70 ideas in terms of what you can do from a marketing perspective. The question is, where should you start? Where is the biggest opportunity and how do you kind of work backward from that because we don’t have unlimited resources? You have to sequence it in the right way.
That’s where the second step, you’re using data and research and saying, “Hey, these are the different channels where we could potentially invest and based on the research and our historical data, here’s what we can expect to get in terms of a return from these channels or campaigns. We should scale these areas up and we should scale these areas down, and then beyond that, here are some additional areas we’ve done research on that have room to scale. We need to experiment and validate with additional campaigns and spend. If we can validate that or invalidate it, we can decide how to allocate our spend more effectively.”
Based on that, the third step is content. Thinking about the buyer journey, your customers are looking for solutions at every stage, right from an awareness stage where they might be unfamiliar with your business and they start to become aware of those solutions, through to the consideration stage where they’re ready to sign a contract and everywhere in between.
The question is, “How much of all of those different stages of the journey does our company have its entire content engine built out?” This is where most people either misinterpret content as just a sales enablement activity, where it’s primarily to create decks and one-pagers or whatever the salesperson needs, or they misinterpret it as purely as an SEO play, where you need to rank organically for all the terms people are searching for.
There is a list of all kinds of other content that you need to nurture people through to truly understanding what your solution is, and how they can improve their lives or transform the problem that they’re facing by working with your particular company. So, building that out, taking an inventory, and then making recommendations based on that.
Fourth is the team. Based on all of the things that have been identified, usually marketing teams or companies are missing key skill sets to be able to scale their marketing organization. Are you missing, let’s say a demand generation manager? Are you missing a marketing officer data analyst? Are you missing a content person or an SEO specialist? Do you need a better VP of marketing? All those kinds of questions need to be asked in terms of where you want to take the marketing organization.
Because at the end of the day, regardless of what plans you make, it’s the people that make the move in terms of the strategy. Staffing up the functions becomes a key portion of how you’re executing, and you want to make sure within the first one hundred days, you’re staffing up those roles pretty quickly.
The last piece is the budgeting and the financials based on all of this work. You look at, “Okay, our marketing budget, let’s say, used to be $2.5 million a year. Based on everything that we’ve looked at and analyzed and researched, we think the marketing budget should be $3.6 million a year, and based on our research, we think that $1 million should be split up in this fashion when it comes to programs or headcount.”
Knowing that split is super important because then, you can take all of that information and present it to the board as a business plan to say, “We used to spend this. Here is the ROI we got on it. Now, we think that we can do way more, and here’s the ROI you can expect on it. We know this because we did all of this research and went through this process.” And walked them through it like a story and that’s the key.
There is no magic bullet. It is not like we’re saying you can lower your spend in two x or three x your marketing. It is more like, can you responsibly scale in an environment where you have professional institutional investors who have increased scrutiny into every area of the business and have their finger on the pulse and the dials when it comes to the financials?
You have to really be a seasoned marketer that understands finance and data to be able to speak that language because that’s the language that those investors really know how to speak.
Jane Stogdill: I imagine your work brings your clients a lot of comfort and peace of mind.
Shiv Narayanan: Yes.
Jane Stogdill: I am curious to know how you developed that model and I want our listeners to know you’ve taken us through your framework briefly, but the book really embeds it in case studies that bring it alive. Even as someone who is not an entrepreneur, I related with so much of it because the human element really affects every step of this. Can you tell us a little bit about how you came up with this five-step strategy?
Shiv Narayanan: For me, the first step was just having built a company like Wild Apricot, I was the CMO, and really learning from a trial-by-fire standpoint. When we were building that company back in 2014 and until the time, we sold it in 2017, 2018, and going through that process. At the time B2B marketing was in its earlier stages where data was really misunderstood, and it still is, companies really hadn’t figured out how to scale marketing intelligently.
As we were building those frameworks, I would meet companies who were facing similar challenges and it was very easy to notice that they were earlier in their stages of maturity as a marketing organization. The more companies I met, the more I realized that this problem was widespread.
Then when we got acquired, both the private equity firms that we were acquired by started pulling me into their other investments to help level up the marketing organizations of other portfolio companies. So, going through that was another validation point. Then there is a lot of data out there–McKenzie has this continuum called the digital quotient, and they put it on a spectrum of not all digitally transformed to a fully digital transformed company.
An example of a company that’s really good at digital marketing for example would be Shopify, right? Or Expedia. On the flip side, you have these old-school B2B companies that are huge and have massive platforms, but they just haven’t ever needed to crack digital because business in the past was all sales driven.
So, we look at our mission since we know something about what can help these companies going forward. Resolving that pain point, also helps the buyers because buyers hate dealing with these large clunky B2B systems where you have to, for example, schedule a demo, wait 10 days to talk to a sales rep and get it, and you go through these broken buyer journeys and by that time you may as well go buy it from a competitor. So, the buyer wins, and the company wins.
Our mission is to be able to move these companies along that continuum of digital maturity and every time we see another company going through that, we accumulate another experience point or reference point to say, “Here’s another way in which we can transform a company going forward.”
I’ve been building that up since about 2016 because I have been casually advising other startups as well, so it’s just built up over time.
Importance of Patience
Jane Stogdill: Hearing you talk about how people who are leading marketing teams are getting fired and rehired and fired, and money that’s maybe being spent in the wrong places. It sounds like using the strategy saves a huge amount of waste.
Shiv Narayanan: A hundred percent.
Jane Stogdill: Resources, capital, time.
Shiv Narayanan: A hundred percent, yeah there are huge costs associated with firing someone. Not only do you have to off-board them and lose the institutional memory, but you also have to onboard somebody new and teach them everything that the previous person knew, and then by the time you’ve done all of that, you might find out that the new person is no better than the previous person.
So, one of the things and this is not as much in the book, it’s just more my philosophies, I think companies need to work on being more patient with their go-to market leaders and there would be far less turnover. Even in the high-pressure environments where you’re raising capital from institutional investors, patience is super important, and the role that the marketing leaders can fulfill there is to tell a better story to those people so that there is more buy-in at the board level.
If you go to a quarterly board meeting and you use fluff, that is the quickest way to lose the board’s confidence and ensure that at some point you will be let go. Because if it is a marketing-focused board meeting and you don’t have the numbers, the board has no way of knowing if you’re the right person to scale this in a pressure cooker, right? Having the right framework, that’s on the marketing ladder, to be able to communicate upwards and say, “Here is the plan, it might take us time,” as long as you’re telling the board that, “Hey, this might take us 18 months but here’s how we’re going to go through this step-by-step and execute and scale.” That is all the board really needs to see, and a lot of marketers miss that mark.
Many CEOs are more sales-focused or product-focused so they don’t necessarily know enough to help the marketing leader to be able to tell that story. You’re kind of stuck in this limbo where you don’t have enough coaching, and the board is expecting something–people don’t know clearly exactly what they’re expecting, and at some point, somebody needs to be able to speak that same language. And those marketing leaders exist. I know a lot of marketing leaders that find a ton of success, have grown some big companies, had huge exits, and had great financial outcomes but I would say they’re the anomaly.
For every one of those people there are 20 marketers that have been fired and hired 20 times over in that same period of time, and so if you can reduce that you would help companies overall be more successful.
Jane Stogdill: You’ve touched on this a little bit in what you were just saying but what advice do you have for private equity firms and how they can support this kind of work?
Shiv Narayanan: Yeah, so a couple of things. I think the larger private equity firms have already clued into this. There are some big PE firms like Vista Equity Partners, one of our clients, TA Associates. These kinds of companies focus on portfolio operations, that’s the department usually, or strategic resources is another name, where every time a portfolio company has a problem, they either have somebody on their team who is an expert in that, or they have a large network of partners that they pull in, based on the problem.
We are often looked at as a strategic resource for marketing by a lot of PE firms. Currently, we have relationships with about 25 to 30 PE Firms and that is growing every day. And then they have different relationships for sales, a different one for pricing, a different one for, let’s say, technology or engineering. So, it’s almost like a toolbox depending on what a portfolio company needs, PE firms can pull the right partner in or an internal resource. A lot of PE firms are not large enough to have a large internal resources team, so they usually rely on external partners. I would say that’s one key solution.
Then the second is to invest in education and training for the leaders of their portfolio companies. Are you giving enough training to these people to be able to live up to what the expectations are for their function? Because in a lot of cases, when we come into a lot of client engagements, the marketing leader needs coaching and guidance.
By the time we’re leaving, they know what to do. They start to see the big picture and they start to see the matrix a little bit, and they can start to speak that language and they have far more confidence of the board. It is more about teaching them how to be able to speak that language and what type of data the board needs to see. I think investment from both of those angles would go a long way.
Jane Stogdill: Okay, thank you. There’s so much more wisdom in the book. Shiv, it’s been a pleasure speaking with you, congratulations. Again, listeners, the book is Post-Acquisition Marketing: How to Create Enterprise Value in the First 100 Days. Shiv, in addition to reading the book, where can people go to learn more about you, your business, and your work?
Shiv Narayanan: I think the best way would be to check out our website, www.howtosaas.com, and to follow me on LinkedIn. I think it is LinkedIn.com/shivn-22. From there, I put up great content every day and so that will be worthy of following if you are in the space.
Jane Stogdill: Great, we’ll check it out. Thank you.
Shiv Narayanan: All right, thanks, Jane. I appreciate it.
HOBBY BOSS: Steve Mastroianni