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How to Create a Scalable Growth Engine in Your Private Equity Software Portfolio Companies

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As a Private Equity firm with B2B software companies in your portfolio, you know that software-as-a-service (SaaS) companies need to keep growing fast.
For you to maximize valuation, it’s not enough for your companies to be players in the SaaS space – you need to quickly hit the right growth metrics in a scalable and predictable way to unlock their full potential.

“For the last 10 years I’ve been a C-suite executive in private equity, running B2B software companies, and I know that unless you have a strong sales pipeline, it’s very hard to forecast and build a financial model around how quickly a company can grow. But, I also know through experience that when you have a repeatable, scalable model built in — when you can quickly go in and implement a strong sales pipeline process and track funnel metrics to understand what effort it takes to convert a lead into an opportunity– then you can start to predict your growth rates.” – Themos Pentakalos, CEO, Hyperio.

Private Equity is about polishing diamonds in the rough into something truly valuable. If your company hasn’t yet hit the levels of revenue and growth they are capable of reaching… This article is for you!

In this article we will break down:

  • What separates high growth SaaS companies from the pack
  • The number one growth factor that determines growth KPI success
  • How AI software will stop the leaks in your companies’ sales funnels
  • Where to get started on sealing those leaky funnels today

What Separates High Growth SaaS Companies from the Pack

You’re probably familiar with the 2011 Marc Andreesen quote “software is eating the world.”

That was an age ago – now software as a service is king. And why not? Software-as-a-Service lets customers focus on quickly adding value to their organization, unlike bulky software assets that need long and complicated integrations to extract value.

The key to maximizing your valuation is being able to quickly unlock value in a scalable way.

Software companies, in their first few years, should be growing 100% YOY. SaaS Capital breaks down the range of growth that exists under each revenue stage, sharing that:

  • A $2 million SaaS company needs to be growing at more than 90% year-over-year to be in the top 25% of its peers.
  • A $10 million SaaS company needs to be growing by more than 55% to be in the top quartile.
  • Companies up to $10 million in ARR need to be growing by at least 20% annually to avoid being in the bottom quartile.

If your SaaS companies aren’t meeting those growth rates, chances are you don’t have a high-performing sales organization.

You do have the capital, and you know these companies have the potential to grow faster than they’re already growing.

But here’s the thing…

It turns out many software company founders don’t have the expertise on how to build a high-performing sales organization — and the path to profitability and growth lies in their sales funnel!

High-growth software companies have watertight sales pipelines delivering high quality leads, with strong product fit. If your companies don’t have consistent, reliable and predictable sales pipelines, you will eventually be left with numbers that will make you wonder why you ever invested.

Let us show you why.

The #1 Growth Factor that Determines KPI Success

Whether you’ve just acquired a software company and are mapping the road to profitability, or are looking to understand how to turn your multiples into reality, it is absolutely critical that your company can directly connect their data and success metrics to the strategies they are using for increased business growth.

That begs the question – which software company success metrics drive business growth and what number one variable connects and determines the growth performance of each?

Growth Metric #1 Determining Growth Factor

Customer Acquisition Cost

CAC = Total Outreach Costs/ Number of Deals closed

Conversion Rate

Conversion Rate to Customer = number of Product-qualified Leads/Total Number of New Customers in that Time Period

Churn Rate

*Should be less than 7%

Net Promoter Score (NPS)

*Measure of customer satisfaction and loyalty (should be above 50)

Customer Lifetime Value (CLV/LTV)

Customer Lifetime = 1 /Customer Churn Rate

Average Revenue Per Account (ARPA)

ARPA = MRR/Total Number of Customers​

High quality leads with a strong product fit, which increase customer lifetime value and retention.

Now don’t get us wrong, we know that there are other variables involved in determining the success of these metrics, like pricing, customer support and features, but those foundations were likely already in place and priced into the company when you got in.

We’re focused on creating new growth and the key to that is connecting the company’s services with new customers through a hyper-intelligent sales engagement platform that will help you see your sales funnel performance improve. High performing sales funnels are the missing piece for most SaaS companies that stops them from being scalable growth machines.

Imagine having a strong sales funnel that allows you to accurately model the impact of lead generation on revenue and the bottom line. Imagine your company being able to scale that effort and the growth that comes as an output. That’s the power of a watertight sales pipeline.

Before your companies waste another quarter with inefficient conversion rates from chasing unqualified leads, or watching sales pass them by while their internal sales force is chasing down leads that will go nowhere – see how a leaky sales funnel is sending your investment in the wrong direction

The tale of a leaky sales funnel

Let us tell you a quick story about a software company that built a “leaky” sales funnel. We’ll call them Company A.

Like most software companies, Company A were software experts, not sales experts. They had a good product but were underperforming and a Private Equity investor scooped them up.

In an effort to turn themselves around, Company A quickly threw together a team of Sales Development Reps (SDRs), bought a few email lists, put together a marketing campaign and started selling. They wanted to scale and of course, as they turned up the sales volume, leads started coming in the door. But these leads were not Sales Qualified Leads (SQLs).

Their green SDRs didn’t have the tools at hand to determine target market fit and many of the leads didn’t have buying authority. Their SDRs didn’t have the time, experience or technology to research their leads, and so were not able to communicate a clear value proposition and tie it directly to the persona on the other end of the conversation.

Once-in-a-while they found success with a new marketing campaign, but their growth showed no predictability and their sales funnel metrics were all over the map, leading the PE investors to worry about growth predictability and terminal value despite an incredible product. Not only that, but they’d wasted time trying to grow their weakest area which meant dollars-out today for maybe dollars-in tomorrow. What they didn’t realize is there is a better way to unlock value-in now rather than later – the same concept that attracts customers to SaaS products in the first place.

So, how do successful companies achieve the number one determining growth factor – attracting and converting high quality leads? By investing in AI technology that automatically and intelligently delivers SQLs to your SDRs so that they have the tools they need to succeed - green or not.

At Hyperio, we only consider a lead to be an SQL if the prospect explicitly meets the following criteria:

  • The prospect comes from the specific market/industry/sector the company is targeting
  • The prospect has expressed that they have a problem that your solution can solve for them
  • The prospect has buying authority or has a significant influence on the buying decision

Our AI-driven engagement platform automatically prospects over 10K cold leads at once with event triggered data that consistently delivers the hottest SQLs to your sales team. Your SDRs spend more time selling with intelligent work-flow automations that adjust dynamically to bring more and better opportunities into the calendars and inboxes of your sales team. Using AI-driven technology, you can set the optimal cadence to close the deal - meeting your prospects where they are, across all channels - social media, email, phone and chat - and know which personalised interactions to make to hook your lead and nurture them across their buying journey.

When you have an effective lead generation strategy and the right software to equip your sales team with SQLs, you are directly:

  • Increasing the number of leads
  • Improving the quality of leads
  • Increasing conversion rate
  • Increasing sales revenue
  • Improving ROI measurability
  • Improving lead data analytics
  • Reducing churn
  • Increasing retention
  • Strengthening the reputation of your brand

How to stop the leaks in your software sales funnel today

So our final question to you in this article is this:

If there was a predictable, step-by-step method for quickly attracting and converting a steady surge of perfectly qualified leads every day, without the added stress or costs – would you make supercharging your software company’s sales funnel your top priority?

For the sake of your investment, we hope your answer is yes, because we are confident that our software can supercharge your sales funnel so that it is consistently putting you in front of the leads needed to hit the growth metrics you deserve. Your job is finding the diamonds in the rough – and our AI software can help you spend a lot less time polishing them and a lot more time enjoying their shine.

Test out our software today with a 30 Day Free Trial

Do you want to see how our software will seal up the leaks in your sales funnel and boost the efficiency and success of your sales team? Get in touch today and we’ll set you up with a customized demo and a risk-free 30-day FREE trial. Just book a time that’s convenient for you HERE

Don’t wait to start growing today!


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