How Private Equity Firms Can Build a Scalable Go-to-Market Engine

In this episode of The Private Equity Podcast, Alex Rawlings is joined for a second time by Brian Gustason, Fractional Operating Partner at BG Operating Advisors.

Brian explains why many lower-middle-market businesses struggle to scale after receiving institutional investment and how private equity firms can professionalise their go-to-market strategy.

The conversation explores founder dependency, underdeveloped sales and marketing capabilities, and why firms must assess the maturity of the entire revenue engine before attempting to accelerate growth.

Brian also outlines the importance of route-to-market analysis, including reach, fit and yield, and explains why growth should be treated as an interconnected system covering marketing, sales and customer success.

The episode also examines go-to-market integration within roll-up strategies, the importance of execution fit during due diligence and how operating partners can help portfolio companies sequence growth initiatives more effectively.

Key Highlights

• Why founder-led businesses often struggle to scale
• The risks of founder dependency in sales
• What Brian means by “phase zero” capabilities
• Why firms may need to go backwards before scaling forwards
• How to professionalise a go-to-market strategy
• The importance of route-to-market analysis
• Understanding reach, fit and yield
• Why lower-middle-market businesses hit growth ceilings
• The challenges of integrating founder-led businesses in a roll-up
• Why go-to-market integration should be pre-wired
• The importance of execution fit during due diligence
• Why growth stalls are not always sales problems
• Customer success versus customer support
• How existing customers can drive expansion revenue
• Separating revenue results from the revenue engine
• How operating partners can support commercial transformation
• Why growth initiatives must be sequenced correctly

Timestamps

00:00 – Introduction to Brian Gustason and BG Operating Advisors
01:01 – Common growth challenges in the lower-middle market
01:31 – Founder dependency and underdeveloped commercial capabilities
02:29 – Identifying phase zero go-to-market capabilities
03:56 – Defining a professionalised go-to-market strategy
04:23 – The role of go-to-market strategy in private equity
05:17 – Why route-to-market analysis is often overlooked
05:47 – Understanding reach, fit and yield
07:14 – Why founder-led businesses often lack scalable processes
08:38 – Growth ceilings and limited execution runway
10:05 – Go-to-market challenges in roll-up strategies
11:34 – Pre-wiring go-to-market integration
13:01 – How deal origination affects integration
13:58 – Execution fit and time to integration value
15:51 – Diagnosing the real causes of stalled growth
16:40 – Treating go-to-market as a connected system
17:08 – The role of customer success in recurring revenue
18:33 – Unlocking growth from existing customers
19:53 – Assessing whether the revenue engine can scale
20:22 – Separating revenue performance from revenue capability
21:20 – Evaluating go-to-market maturity
22:42 – Where to play, who to target and how to engage
24:10 – How operating partners can support portfolio companies
24:37 – The operating partner’s role in due diligence
25:35 – Identifying businesses that need growth intervention
26:31 – Sharing best practices and coaching leadership teams
26:59 – Sequencing growth initiatives effectively
27:29 – How to connect with Brian Gustason
27:57 – Closing remarks

Raw Selection partners with Private Equity firms and their portfolio companies to secure exceptional executive talent. We focus on de-risking executive recruitment through meticulous search and selection processes, ensuring top-tier performance and long-term success.

🔗 Connect with Alex Rawlings on LinkedIn https://www.linkedin.com/in/alexrawlings/
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Transcript

00:00

Welcome back to the Raw Selection Private Equity Podcast. Joining us today for round two is Brian Gustason, a Fractional Operating Partner at BG Operating Advisors. We’re going to be talking about all things go-to-market strategy.

Brian, you’ve been here once before, but could you share an update on your situation and give us a brief introduction?

Absolutely, Alex. Thank you for having me back. Yes, I’m Brian Gustason. I am an independent Fractional Operating Partner with BG Operating Advisors.

00:30

I focus on helping PE firms, family offices and their portfolio businesses grow faster through better growth strategy and commercial excellence. I also work as an interim CEO, COO and CRO at PE-backed businesses, and as an independent board director with a focus on go-to-market and growth.

01:01

Okay, so it’s all about organic growth. Let’s kick off with one of the most common commercial or growth challenges you see in the lower-middle market.

The lower-middle market is very interesting for many reasons. There’s a lot of activity there these days, but it also has some characteristics that are not always fully appreciated.

01:31

Many of these businesses are founder-led, which can make things challenging. In many cases, they’ve done very well to reach the point of receiving their first institutional capital, but from a growth perspective they are often founder-dependent. They have not built out a go-to-market foundation, and that can lead to a number of issues.

02:00

In many cases, the founder leads the sales process and does most of the selling. That leaves other members of the revenue team without proper training, and sometimes with no formal training at all. Marketing and customer success may also be underdeveloped.

Customer success should be focused on driving revenue with existing customers, but in many cases it is treated simply as customer support.

02:29

Customer support is not the same thing as customer success.

When I look at lower-middle-market businesses, I often look for what I call “phase zero” capabilities. Phase zero means either an entire go-to-market capability is missing or it is largely underdeveloped. For example, marketing might consist of a clunky website, a Rolodex and a couple of trade shows each year. That is not real marketing.

02:58

The same applies to sales teams that have not been formally trained and remain dependent on the founder.

The challenge for PE firms and family offices is that, in a phase zero situation, they have to go backwards before they can go forwards. They need to develop the capability before they can scale the business, and that is not always accounted for during due diligence.

03:26

That is a real problem. Lower-middle-market businesses vary significantly in their levels of go-to-market maturity, and I don’t think that is always appreciated.

I was having a conversation with someone over lunch about one of his clients, whose revenue had fallen to a quarter of its previous level. The business had always relied on looking after existing clients, but many of those clients had either retired or died.

03:56

There was effectively no go-to-market strategy, so he is now training and supporting them to win new business.

How would you define a professionalised go-to-market strategy? I appreciate that this varies from business to business, but how would you put it into a simple phrase?

04:23

A go-to-market strategy is critically important in private equity because growth is always the mandate.

There can be several types of strategy. You might have a standalone business developing a traditional growth or go-to-market strategy, or you might have a roll-up strategy, which is very common in the lower-middle market and brings its own challenges.

04:49

What I often see is that firms leave out key components. Traditional strategy development looks at strengths, weaknesses, where to play and whom to target.

05:17

It also considers competitors and the wider market. But one key component is often missing: route-to-market analysis. That is the “how”.

A strategy may define where to play and whom to target for growth, but not how the business will actually engage those buyers.

05:47

In PE, many people come from traditional strategy-consulting backgrounds and bring a familiar playbook, but the “how” can still be overlooked.

Route to market is critical and comprises three things: reach, fit and yield. These are often neglected. Reach asks whether you are reaching your best-fit buyer.

06:17

Fit asks whether you are selling to them in the way they want to buy. Yield asks whether you are reaching them cost-effectively enough to make a profit.

There is a major emphasis in PE on EBITDA and EBITDA growth.

06:46

But growth can be expensive. If you do not examine yield, you may not know whether you are reaching buyers cost-effectively. Selling can be expensive, and trade shows can be expensive, but that is often not accounted for.

Route to market includes reach, fit and yield. I rarely see route-to-market analysis used in strategy development today, despite how important it is upfront.

07:14

My understanding is that many first-time PE-backed product and service businesses have particularly poor go-to-market strategies. They lack a repeatable system and process for winning new business.

07:40

Private equity then tries to introduce those processes. We spoke about this on the first podcast: the common approach in a product-based business is to hire a territory sales representative with a strong network who can bring previous customers with them.

We also discussed how rare that is and how often it fails. It may have worked somewhere, which is why people keep chasing it, and it looks easy. Why are founder- or owner-led businesses often so unsophisticated and unprofessionalised in this area?

08:10

That is a great question, Alex. It is a real challenge in founder-led lower-middle-market businesses.

I think founders can become overconfident because they have succeeded up to that point. In many cases, growth is driven by a Rolodex or by strong relationships.

08:38

The founder may still do most of the selling through those relationships and feel confident that growth can continue. Inevitably, however, the business hits a ceiling because it has not built the go-to-market foundation required to scale.

The challenge in PE is that every investment has a defined hold period, and that changes the calculus of growth.

09:08

The clock is ticking, so there is only a limited execution runway.

A firm invests in the business and expects change immediately. The sponsor sets ambitious growth goals, but the business may not have the underlying capability or sophistication to grow quickly.

09:36

That is why it pays to make changes as early as possible. Waiting simply burns through the execution runway. Firms may have seven or eight years to double or triple the business, and that can be difficult.

Bringing in operators who have pattern recognition, understand the challenges and can orchestrate the right changes early in the hold period is critical.

10:05

Roll-up strategies are also very popular in the micro-cap and lower-middle markets.

Imagine bringing together several founder-led businesses, each with different ways of working, different processes and different levels of go-to-market maturity, while trying to generate cross-selling early in the hold period.

10:34

Go-to-market integration in a roll-up is extremely challenging. Many PE firms are unsure how to combine these businesses in a way that generates growth quickly enough.

Otherwise, you simply have a collection of separate businesses. It is like having a football team full of excellent players who are not playing together effectively.

11:04

The same applies in a roll-up. The businesses need shared data across their customer bases to identify cross-selling opportunities, as well as aligned incentives across sales and revenue teams so that people are motivated to sell products they may not yet know well.

Go-to-market integration is a significant challenge.

11:34

One thing I advocate is a pre-wired go-to-market integration strategy.

Rather than dealing with integration only after bringing in each new business, firms should design the model early so that future add-ons can be integrated and grown faster.

12:04

The fifth or sixth add-on in a roll-up should be easier than the second. Often it is not because the firm has not pre-wired the go-to-market integration architecture.

The analogy I use is an apartment building.

12:34

The plumbing should be the same on each floor. You would not install completely customised plumbing on every floor, so why would you do that with go-to-market integration in a roll-up?

That is a major opportunity for improvement in many roll-up strategies.

13:01

My view is that some of the problem begins with deal origination. PE firms may acquire businesses under pressure to deploy capital and because of the limited number of attractive companies available. A weak acquisition go-to-market process can then lead them to buy companies outside their ideal profile.

13:29

When they try to integrate those businesses, they struggle because each one is different. The go-to-market strategy may vary completely from one business to another, and the level of key-person risk may also be very different.

What is your view on how far up the process this issue begins?

13:58

That is a great point, Alex. It is difficult to find good businesses, and I sympathise with business-development teams facing that challenge.

However, when firms do have choices, they should look carefully at execution fit. There is a concept called time to value, but firms should also think about time to integration value. The sooner businesses can be connected, the sooner synergies can be generated.

14:27

Execution fit should be a key component of the go-to-market integration architecture. The objective is not only to make the sixth or seventh add-on easier, but also to qualify prospective acquisitions more effectively.

It is easier to fit a circle into an oval than a circle into a square.

14:57

It will never be perfect, but time to integration value is an important concept that is sometimes missed.

Execution fit should be examined more closely during due diligence and treated as a key evaluation criterion.

15:23

Assuming the businesses being sourced, assessed and acquired fit the existing model, the firm then has an architecture for transformation, and the fifth acquisition should be easier than the second.

Is there anything else needed in go-to-market transformation that private equity firms are currently getting wrong?

15:51

The upfront diagnosis of issues is often a challenge.

Someone may contact me and say, “We have a sales problem. The business is not growing and has entered a growth stall.”

16:11

From their perspective, they need sales training or perhaps value-based selling to differentiate themselves in a difficult market.

It may be a sales issue, and the team may need more formal training. However, go-to-market and growth must be viewed as a system. Too often, they are treated as independent silos.

16:40

I might then ask them to look at marketing as well. Is the website dated or clunky? Does it inspire confidence in a buyer? Is the messaging outdated? Is the business trying to position itself as a Mercedes while the market sees it as a Honda?

The company may be struggling to win business because its positioning is wrong.

17:08

That is a real challenge. Businesses often become fixated on one area and fail to see the bigger picture.

In recurring-revenue businesses, such as IT services or SaaS companies, customer success is critical to the foundation for growth. You need renewals and expansion revenue.

17:37

Founder-led lower-middle-market businesses do not always fully appreciate customer success. They may think primarily about customer support and maintenance tickets.

Support is essential, but they can overlook the opportunity to expand within existing customers through cross-selling and upselling.

18:05

I worked with one business that was focused heavily on new-logo acquisition and had not given enough attention to customer success.

It is often easier to work with existing customers because they already know you and are more likely to engage. In this case, the company had not considered how its customers had expanded their own operations, so it was missing expansion opportunities.

18:33

We reconsidered the existing customer base and prioritised those most likely to value the company’s new offerings.

We then modelled a conservative 20% conversion rate at the average contract value. Even at that level, the opportunity was worth millions of dollars.

19:00

The business refocused its efforts on re-engaging existing customers, and that drove faster revenue growth.

Go-to-market is a system consisting of marketing, sales and customer success. You should not assume that one area alone is responsible for a growth stall. All three must be examined.

19:23

The next question may be too broad, but what does a go-to-market system look like?

It depends on the business and its strategy, but without naming specific companies, could you walk us through a typical lower-middle-market business and what its go-to-market strategy might look like after transformation?

19:53

When you work with founders who have just accepted their first institutional capital, they are understandably positive and confident that they know their markets well.

However, the new investor needs an objective assessment.

20:22

That starts with due diligence and determining whether the revenue engine can really scale.

It is important to separate revenue results from the revenue engine. When the PE firm eventually sells the business, it will be selling the sustainability of that revenue engine.

20:50

The company may have performed well so far, but it cannot remain dependent on the founder if it is to be sold successfully in the future.

You need to separate growth results from the growth engine and assess the business’s go-to-market capabilities and maturity.

21:20

Before looking at strategy—where to play and how to reach the market—I assess the go-to-market engine and its capabilities.

If the strategy were correct, could the business actually execute it and scale effectively?

There are many aspects of go-to-market maturity to examine. It is like buying a house.

21:48

Before redesigning the house, you inspect the plumbing, electricity and other fundamentals.

In a business, that means assessing the data, positioning, pricing, retention systems, expansion opportunities and sales process. Does the company have a defined sales process and methodology?

22:15

You also need to evaluate the talent. Are the right people in the right seats, at the right time, doing the right things?

That assessment should happen before developing the strategy. A strong strategy is of little value if the company cannot execute it.

22:42

The growth execution runway is limited, so firms must assess go-to-market maturity first.

Once the gaps and improvement opportunities have been identified, the focus shifts to strategy: Are we in the right markets? Are we targeting the right buyers and ideal customer profile?

23:11

That defines where to play and whom to target.

Route-to-market analysis then addresses reach, fit and yield. Once you know whom you are targeting and where, can you engage them effectively?

The strategy must cover the where, the who and the how.

23:40

Once the go-forward growth strategy is clear, the next question is whether the business can execute it.

That requires assessing the team and developing a focused plan for the next one or two quarters, with specific sprints to build the required capabilities.

24:10

How should operating partners help portfolio companies overcome commercial growth challenges?

There is growing appreciation for operating partners who bring a strong growth and commercial-excellence perspective. Growth is the mandate in private equity, so this capability is increasingly important.

24:37

Ideally, an operating partner should combine consulting and operating experience.

They can help in several areas, beginning with due diligence. An operating partner with strong pattern recognition and practical growth experience should be involved early to identify growth risks and opportunities before the deal closes.

25:07

Operating partners can also identify portfolio companies that require growth intervention.

It can be useful to segment portfolio companies as green, yellow or red based on their growth performance and needs.

25:35

An experienced operating partner can identify which businesses need support now.

They should also orchestrate the right internal and external resources to help those businesses grow faster.

26:01

That may involve working directly with the CEO and revenue teams while also bringing in specialist external or fractional support.

Operating partners also have a portfolio-wide perspective, which allows them to identify growth-related best practices and share them across the portfolio.

26:31

Finally, a strong, commercially focused operating partner coaches portfolio CEOs and revenue teams on how to think about growth, prioritise initiatives and sequence them correctly.

Sequencing is a major challenge because businesses often jump into initiatives too early.

26:59

For example, a company may decide to change its pricing before confirming that it has the right data, ideal customer profile and positioning to support an increase.

If buyers see the company as a Honda rather than a Mercedes, the positioning will not justify a premium price.

27:29

Sequencing is therefore critical, and operating partners can coach leadership teams on the correct order of growth initiatives.

For anyone who would like to get in touch with you, Brian, what is the best way to do so?

You can reach me on LinkedIn. My firm is BG Operating Advisors, and I’m always happy to discuss growth-related needs for PE firms, family offices and their portfolio businesses.

27:57

Thank you very much for returning to the podcast for round two.

Thank you for having me back. I enjoyed it.

And thank you to all our listeners for tuning in to The Private Equity Podcast. Until next time, keep smashing it.