A lot of businesses can flourish for years without a formal marketing strategy. Plenty of hardscrabble entrepreneurs find the right door to knock on, and even the right message, for the moment. But eventually, as business grows, they may hit a snag. That’s often the time that private equity firms step in to offer their capital and expertise. And given that growth is key to generating returns these days, a company’s marketing becomes a crucial element.
“There are some common reasons that clients come to us,” says Slade Kobran, a Managing Partner of Chief Outsiders, a national firm that places experienced marketers on a part-time or interim basis at mid-market companies, often backed by private equity firms, in a wide range of industries.
“One reason is that a private equity firm has a specific initiative they want to launch at a portfolio company, say, they’re introducing a new product or service to market, or expanding geographically or going after a different customer.” In these cases, the GPs know the senior management team at the portfolio company doesn’t have the experience to execute these important initiatives properly. But Kobran notes these very specific mandates are only about 10-15% of the work they do.
Another scenario may find the portfolio company floundering a bit, as the CEO may not feel confident with the marketing strategy or even just the Company website. They may even be uncomfortable with the fact that new competitors are entering the market and changing the game. “In this case, we often have to do a little more investigating to diagnose the underlying problem, so we can provide solutions that stick beyond just near-term band-aids,” says Kobran.
But by far the most common reason clients reach out to Chief Outsiders is when that portfolio company has hit a wall of sorts. “The things they’ve always done to sell their products or services that used to work aren’t working as well anymore, so they’re stuck at say, that $15-20 million range, or even going in the wrong direction,” says Kobran. “They may have hired an agency or sales person or executive VP from a Fortune 500 Company and that was a disaster. And now they need someone to help figure out a way to fix their immediate problems, and get the company to a new level of growth.”
In many cases, these are strong businesses, that are excellent at providing the underlying product or service, but lack the marketing talent to make the most of their good work. “We end up working with a lot of private equity firms who invested in these companies precisely because with some help, they can grow exponentially,” says Kobran. Sometimes that means taking a Company that might take ten years to go from a $20 million business to $30 million one, but with the right set of initiatives and the right marketing leadership, it might only take three years to reach $40 million.
One such initiative would be tapping a Chief Marketing Officer to step into the Company for a short-term commitment. But CMOs aren’t wizards; they work best when they’re a good fit for the business. But what should a Company or that Company’s PE leadership look for in a CMO, even one that’s only there for a certain period of time?
“They should be looking for is someone who can come in and assess the situation quickly, and integrate into the business effectively,” says Kobran. He doesn’t think the CMO needs to have experience with a given industry per se, but they do need to demonstrate an understanding of its dynamics, perhaps through experience with a sector adjacent or applicable to the one in play. “What you don’t want is someone to waste six months just getting to know the industry,” says Kobran. “Maybe they don’t know all the language, but they understand the factors at work there.”
Another key trait is the ability to forge relationships, not just at the board level but throughout the business. “That takes the ability to speak with candor and respect,” says Kobran. “There’s little value in a marketing leader that alienates the staff by grumbling about having to educate them on best practices.” A CMO that knows how to charm the PE firm, but steps on everyone else’s toes at the portfolio company is not going to get results.
He also stresses the need for that CMO to strike the right balance between theory and practice. “They should have ideas, but not get lost in that ivory tower,” says Kobran. “They still need the ability to the roll up the sleeves, without needing an army of minions to accomplish it.”
Finally, given that the nature of marketing has evolved into one of the more accountable business functions, the CMO candidate should be able to talk about metrics. Not just to measure success, but to manage the initiatives. “Private equity firms should ask that CMO what metrics they intend to use to track a given strategy, and how they will leverage them to make adjustments,” says Kobran. “What are the leading indicators that CMO is going to review over time?”
It’s unacceptable to have a CMO launch an initiative and wait 18 months to see if the sales materialize. “These days, revenue is a lagging indicator, especially in the case of B2B enterprises where there may be longer sales cycle. They should be able to talk about how they gauge success in the middle of an initiative, and how they will adjust.”
Even if the candidate fits the bill, the Company in question has to be receptive to the ideas and input of that new CMO. Sometimes it can require employees to think differently and try new tactics, and there can be some culture shock to manage. But no one hires a CMO to stand still, and that’s certainly not why the GP invested in the business in the first place.