How Private Equity CMOs Build Revenue That Increases Enterprise Value

Speaker A: Ultimately the most important metric to PE firms is multiples on invested capital and you get that during a five to seven year hold period. So you want to build your long term financial viability and you do that with your customer base.

Speaker B: M welcome to Exit Algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations and prepare your business for a high value exit. I'm your host Pete Vera and today I'm joined by Alan Gossenhauser. He's an 11 time Chief Marketing Officer with over 25 years of experience driving growth in PE backed B2B sales SaaS companies. He's also the founder of Demand Revenue where he serves as a fractional and interim CMO helping growth stage companies build revenue engines that scale. He also advises CMOs and has a wealth of industry experience. I'm super excited to have you on the show today, Alan. Welcome to the podcast.

Speaker A: Thank you Pete. And thank you so much for inviting me. I'm really looking forward to our conversation today.

Speaker B: Yeah, same here. Definitely excited. I always do a good amount of research on my guests and really, really excited to dive in. Can you share a bit about your background, business journey?

Speaker A: Sure.

Speaker B: Uh, career path and. Yeah. And what led you to founding Demand Revenue?

Speaker A: I've been a Chief Marketing Officer 11 times, so seven full time companies and four since I started demand revenue. Four interim CMO roles since I started demand revenue five years ago. But I started a little different than most marketing people. I started in finance, so I got my master's in finance and then from there consulting and market research and then product marketing and channel marketing and then I got some sales experience and then I moved to higher level marketing positions and then eventually uh, CMO and a number of companies mainly in um, health technology, medical and dental device, SaaS software, enterprise software type companies. And then I spent six years at a company that was called Serious Decisions. Serious Decisions was a go to market advisory firm for the revenue functions, marketing, sales, product and customer success. And there I mentored over a hundred chief marketing officers and marketing leaders in my six years there. Really enjoyed that and I helped them grow their global presence in all the healthcare segments. And then we were acquired by Forrester. And after Forrester acquired us I stayed on two years. Um, but the culture was a bit different. They wanted uh, analysts. I'm very entrepreneurial and social and extroverted and they wanted analysts primarily to generate content, write content. And I did some of that but it wasn't, you know, my main interest. So I Left almost exactly 5 years ago, February of 2021 I started demand Revenue and right away I started working with some private equity held companies, portfolio companies. So I basically do three things. I coach and mentor CMOs and marketing leaders. I've in the last decade I've coached and mentored over 150 of them. I come on as an interim or fractional CMO more often interim. So interim CMO is when there's a gap in leadership and a private equity investor wants to make sure that their portfolio company doesn't have gaps and loses momentum. So I'll come on. That's generally three to four days a week. I join the executive leadership team and operate just as a CMO for private equity portfolio companies. And then I'm also a go to market advisor. So I come on and help with go to market transformations. Getting marketing, sales and product on the same page, looking at the revenue function all the way from figuring out your ideal customer profile to which products to push, acquiring new customers, onboarding, retaining upsell, cross sell, having consistent metrics and I use a go to market operating systems.

Speaker B: Yeah, awesome. No, I appreciate, uh, sounds like having that financial background really helps you in the marketing side of things. Have a more holistic view and plan for each business.

Speaker A: It helps. And I always have good conversations with CFOs and a lot of them tell me I never heard a marketing person talk like that. It helps, I mean, you know, it helps when you speak the same language. And my sales experience has also helped. I've been in general, uh, P and L general manager a few times as well. So I've had responsibility for all the go to market functions. Speaking the language of the C suite and the board and the CFO really helps explain the value of marketing and what marketing can do for organizations.

Speaker B: Yeah, yeah. What are ah, some of the talking points you usually have?

Speaker A: You know a lot of it comes down to how the buying process works today versus how it worked in uh, 2013. Let's say in the past you know, marketing would generate leads, marketing qualified leads and give them the sales and hopefully the leads were qualified and you know, they would, they would call clients and people would actually pick up the phone and want to talk to a salesperson where now most of that journey is done before uh, before a potential buyer ever speaks to a company. So what companies are doing only let's say a third or less of your ideal customer profile is in market to buy something at any given time. But they're researching different solutions and vendors and they're creating a short list of four to five Vendors that they will consider when they do go in market. So if you're not educating the market early about why you matter and you know, making them aware and giving them preference on your value proposition, uh, you may never get nat bad because when they come in market they've got a short list of four to five vendors they've looked at and 95% of the time the winner will be on that short list. M so if you don't have brand gravity, you're not even going to get an at bat. So you know, a lot of organizations are focused on the current quarter,

Speaker B: you

Speaker A: know, pipeline in the current quarter. If you are so focused just on the current quarter all the time and you don't have a clearly defined ideal customer profile.

Speaker B: Mhm.

Speaker A: And if you bring on customers that churn, you're not buying long term growth, you may get short term growth in the quarter. You're buying debt, you're buying churn. And that's a short versus long term conversation that I often have with CFOs that you know, yeah, the current quarter is important and understanding that how to drive it. But do you want business next quarter, next year? Do you want to retain the customers you bring on? Do you want to grow them? So it's all connected. And I think the purpose and the value of marketing more than ever is to create brand gravity. Because brand seeds, demand, I call it demand capture. Because you're capturing maybe the 5% of folks that are almost ready to buy something in market now. And if you're just trying to call them now and they don't know who you are and you're not on that short list, you're too late.

Speaker B: I've heard uh, an analogy of a business as a plane, right. And the engines, there's two engines, one sales and one is marketing. It goes to your point you gotta balance the short term with the long term.

Speaker A: Yeah. Ultimately the most important metric to PE firms is multiples on invested capital. And you get that during a five to seven year hold period. So you know, you want to build your long term financial viability and you do that with your customer base.

Speaker B: Different strategies for different growth phases.

Speaker A: Absolutely. So the first is when a company is a startup and when they're a startup, they need to get problems market fit. You need to identify problems that you can solve, hopefully uniquely, but that you can solve and people are willing to pay for. And when you're in that mode as a startup, you're doing a lot of experimentation. You don't know your ICP yet. Uh, your ideal customer profile, yet you're trying to figure it out. So you're experimenting with a lot of things, trying a lot of things and hopefully failing fast and quickly and learning from it, finding the right path and the right way. You can uniquely solve customer problems.

Speaker B: Mhm.

Speaker A: Because people don't care about you or I. They care about the jobs they're trying to get done and the problems they have and how to do it better, faster, more, you know, more cost effectively, etc. More reliably if they're successful there. The next phase is production market fit. And when you go through that, the questions change again. Because now you want to build a scalable infrastructure. So you want to build processes, people process technology, data analytics, pricing, brand gravity as I mentioned. But you're trying to sell your products and people don't want to see product selfies. What they want to see are solutions to their problems. And then if you're successful there, you get into the last phase which is platform market fit. That's where you have a set of solutions and a set of products that can be built into a platform to provide more value. And there, um, most likely the lion's share of your business is going to be retaining and growing existing customers. So customer satisfaction, not just using NPS or Net promoter score as a vanity metric, but as a vehicle to improve customer um, satisfaction and create a remarkable and differentiated customer experience where you can drive better retention, upsell, cross, sell. And that's the key to your future long term financial success. Many times if a CMO says oh, we should invest in brand and we need more money for brand, a CFO will ask why. You know, uh, because they have to in their own frame of mind understand why it's important. And you asked about metrics. So lifetime value to customer acquisition cost is one metric win loss ratio on the front end, gross revenue retention of the customers you have, how many do you keep? And net revenue retention that adds, you know, with the add ons. So companies that are really healthy have a net revenue retention of 120% or more and a uh, gross revenue retention close to 100%. So you know, they're, they're really looking at whether they have any churn, if they do, what the causes are. Those are some of the, some of the, you know, conversations man.

Speaker B: It's all great information. I uh, I would love to double click on brand gravity. And how can businesses start to build that?

Speaker A: By being present, by narrowing down on a niche that they can uniquely solve and by understanding the problems their Target audiences and ICPs are having how they can solve those problems and generating content to educate the market on who they are, why they're different, and why they can solve these problems. Even if you don't hear back from people, they're consuming content and you won't hear back until they're in the latter stages of their buying mode. That's how the buying process has changed over the years. You know, in the past, BDRs would call someone, you know, they'd get ahold of people and they'd call again and again and again. Um, and, you know, people wanted to be contacted. Now people do not want to be contacted until they're ready after they've done their research, especially with bigger deals and buying committees, which is how a lot of B2B buying is done today. It's changed a lot.

Speaker B: Yeah. Yeah, interesting.

Speaker A: But companies have generally not recognized that change. They still, they still use all these old tactics that don't work anymore.

Speaker B: M. Yeah, and you mentioned content. That's an area a lot of businesses are trying to develop.

Speaker A: Yeah.

Speaker B: Is there a kind of a protocol you would recommend for let's say, let's say a growth stage company? So is there a cadence that you found is effective? Like how many times per week and. Yeah. What type of content is working?

Speaker A: Look, I, you know, I'm a solopreneur and I post multiple times per week, you know, and I think any company that has resources can do that too, especially using AI trained. Well, the other thing I would say is with the growth of LLMs, more and more people are researching the questions they want answered on LLMs, whether it's ChatGPT or Claude or, you know, Perplexity or, uh, you name it Google. So websites need to be designed for LLMs, not humans anymore. Because what's happening is humans are researching on LLMs and they're a lot more qualified when they contact you after they've researched you on an LLM. So if your website is not configured to maximize your LLM exposure, you're going to be not in the mix. A lot of times you want to be in the mix, so that's something else companies can do.

Speaker B: Yeah. What are some of the differences between just optimizing for a search engine? Google, uh, versus now an AI model.

Speaker A: Q& A. A lot of Q and A. When you put blogs out, have a short description at the top, a summary of the blog, and then at the bottom have extensive Q and A. It loves Q and A. The LLMs love Q& A. Um, the site Structure has got to be there. You know, you have to make it easier for LLMs to consume the content and categorize what your content is. But because humans are researching on LLMs and they're looking a lot more at the results they're getting from LLMs because it's their exact questions than just, you know, if you show up on the front page, that's huge. That's huge. And it's going to become more and more significant as time goes on.

Speaker B: I think I saw a statistic out there. There's a more than 50% drop in people actually clicking on websites now because of AI, Right?

Speaker A: Yeah, that's just going to. I mean, that's not going to change. It's going to get more, more and more. Because when you think about it and you want an answer to something, you're going to get a more complete and comprehensive answer to your question. If you ask an LLM versus, you know, getting a search result and then sifting through a bunch of websites, let it sift through the websites for you. It's a lot easier and, you know, a lot faster.

Speaker B: Saves a lot of time, affects how you organize your marketing campaign, right?

Speaker A: It does, yeah.

Speaker B: Crazy.

Speaker A: You can't have a conversation today without AI.

Speaker B: That's the theme of the show. I think, uh, it's critical right now to talk about it.

Speaker A: Yeah, it kind of is.

Speaker B: How do you build a revenue engine? Like, when you consult with a company, what are some of the first things you look at?

Speaker A: First thing, I ask a lot of questions and I ask people what they're most proud of and, you know, where they think the gaps are. And I give everybody three magic wishes, and that's the C suite and the marketing department. Excuse me. So I don't come on like I have the answers. I come on to learn at the beginning. I think that's really important. You know, developing relationships and listening to what the company is proud of and what they think is working before we start talking about the gaps. So I look at people, process technology, data analytics, pricing, brand gravity, those types of things. All infrastructure types of things. Some of the things I look for specifically because I've seen this problem over and over is, does a company have churn? Do they have customers at Lee? What's the level of churn they have? What's their gross and net revenue retention? Are there issues around that? And if there are, what are the controllable issues? And the other thing I like to hit on early is has the company defined their ideal customer profiles and has it Been a cross functional effort where everyone from the CEO and every department agrees on what the ICP or ICPS are. And even if they've done that, have they put governance around it? So when there's pressure to succeed in the current quarter, do they bring on non ICP clients to make the quarter that ultimately churn that they can't retain and grow? That's one of the causes of churn is mis targeting. The other thing I see a lot Pete, is lack of alignment. You know, marketing, sales, product, customer success, doing different things, silos. You know, when uh, I was with serious decisions, they did a study of 400 B2B companies and found that companies that were well aligned and stayed aligned grew 19% faster and were 15% more profitable. And that's as true today as it ever was. I mean, you know, a lot of times the enemy is not external, the enemy is us, you know, and we've got to get on the same page. So I spend time doing that as well.

Speaker B: What are some things companies are doing to prevent those silos? To you know, encourage open communication between different functions of the company.

Speaker A: Have cross functional meetings, you know, um, on a regular basis like monthly CMOs. Developing relationships with their functional peers, you know, the CSO, the CFO, CHRO, CPO, you know, having, having good relationships there and making sure that teams work together and have a cadence of meetings. Creating metrics that go uh, across functions that define what good looks like in a consistent way. Having an integrated planning process. And by that I'm thinking three year strategic plan but also the annual plan where when the plans are put together it's in reaction to corporate goals and then the plans are reviewed for consistency between them.

Speaker B: Those are things I think a lot of companies can implement.

Speaker A: Yeah.

Speaker B: Besides the silo issue, what are some other things that businesses go wrong when trying to uh, implement a marketing plan?

Speaker A: Trying to do too many things at once.

Speaker B: Mhm.

Speaker A: I coach a lot of CMOs with that. Pick three things that you want to hit out of the park when the year is over. Yes, you'll still do 10 things, but pick the three that you really want to make headway on and make sure you resource and prioritize them. The most popular planning document that I would, that I share with cmos is something called the marketing will will not list that they get cross functional consensus on. Look, you know, marketing can't do everything and we want to be strategic and proactive and not reactive. And the other is speaking the language of the C suite and the board. So you know, for example, when they're talking about brand gravity, the things that brand gravity will influence are ah, the number of at bats that will actually be in the mix on the short list because you know, we communicated and educated early win loss ratio will be much higher. When you have brand gravity, pricing power will be much higher and your future pipeline and at bats in subsequent quarters when people do go in market will be much higher. All of those things I just mentioned are financial. They're all financial and you know, your sales and profitability are in the rear view mirror. Your future sales and profitability is dependent on your ability to satisfy, retain and grow customers. Comes down to that. Once you have customers, I'd love to

Speaker B: uh, talk a little bit more. Given your experience with private equity, first being acquired by Forrester and then consulting on the with private equity backed companies, how does the marketing campaign and strategy change? You know, when a acquisition happens, it

Speaker A: depends on the private equity firm. I've seen some firms that really care about marketing, want to invest in marketing, often want to change the name and the brand and invest a lot to make that happen. But want marketing to be a business partner and proactively manage the budget, cut the budget where they, you know, where things aren't working. You know, be very judicial with the investments and the budget that they are entrusted with. The way I describe it is, you know, private Equity looks for CMOs not to be the manager of a department but to act like a P and L general manager. Think of the organization first and how you're implementing it short and long term.

Speaker B: Um, have you seen the marketing campaigns, uh, or just strategy and online presence? Brand gravity affect a, ah, company's valuation when they're gearing up to sell?

Speaker A: Absolutely. I mean brand equity financially is an asset on the balance sheet. There's value there. And if you can show that you have a continuous pipeline and recurring revenue of existing customers and have an annuity of recurring revenue because of the quality of your customer relationships that greatly increases the value of your company. Absolutely.

Speaker B: Yeah.

Speaker A: It's going to make you more profitable too. Um, all of those things. See, but to do that you have to have the right icp, you have to narrow down and you have to make sure you don't have a lot of churn and if you do, you know, fix the causes so you have a well functioning organization.

Speaker B: I know we're coming up close on time here. I would, I'd be remiss if I didn't ask, you know, how are you leveraging AI today the most and how do you see it affecting your industry?

Speaker A: Oh, my God, yeah. As a solopreneur, I leverage AI all the time. As I said, I live on cloud, cowork. Um, I'm leveraging it. To who do I reach out to? What do I say? Analyzing my content. I have a weekly newsletter on LinkedIn called the Private Equity CMO Advisor, and it analyzes all of my written language. And then I have, I've been a podcast guest and I had, uh, like about 200 videos. So I fed that in, got all the transcripts. So Claude knows my speaking voice in addition to my writing voice. And I can kind of dial that. When I create content, always look at it very carefully to make sure it's. It's what I want to say, uh, and make changes to it. But it's very good for content generation. It's helped me a lot and analyze my business. You know, where should I move my business here? Where are the revenue sources? Uh, I feel like I have a staff of analysts helping me relatively free. I mean, it's, it's amazing. I would never be able to do this if it wasn't for AI in my business. And some ways I'm helping customers. Uh, I have a tool that was created by my thought partner, someone I work with a lot. And it's a virtual panel. And so I've set up a couple of new CMOs and I said, give me the LinkedIn profiles of all your board members. So we set up a panel of their board of directors, and you can ask them questions, and the board virtually will come back, they'll talk with each other, and you can give it a PowerPoint, you can give it content that you're thinking of presenting at the board meeting. And the virtual panel will opine and tell you what they like, what they don't like, to get ready for the board meeting, which is amazing. Amazing.

Speaker B: Yeah. Wow. Incredible. That's an interesting use case. Create your own panel, basically.

Speaker A: Yeah. So you can create one for the board, one for the C suite, one for the marketing department, you know, whatever you want. And it's, uh, and, uh, it's uncanny how good it is.

Speaker B: It probably comes up with insights that you might not be able to think of yourself.

Speaker A: Absolutely. And immediately, you know how long it would take you to think through all that. I mean, it's an incredible disruptive tool. I've been into disruptive technologies for many, many years. I'm a big student of Joseph Schumpeter, who was a 19th century economist who came out with a theory called creative destruction. This is a really big one. So people need to get on. It's not going anywhere. It's just gonna get better and better. Yeah, yeah. Embrace, use it as a tool. But, but I see a lot of people misusing it. They think they're using it the easy way to generate, you know, lousy content that, you know, is. Or uh, trying to substitute for strategy. But you need people to work smartly with like any tool.

Speaker B: What is one practical tip for business owners who want to build a marketing function that actually drives revenue?

Speaker A: Narrow down and understand the problems of your target audience. And don't transmit product selfies. Talk about the problems they're dealing with and how you can make their lives better.

Speaker B: Well said. Uh, I love it. Thank you. Yeah. That has been an incredible conversation. So many good insights. Where can listeners find you and learn more?

Speaker A: You can email me@allendemandrevenue.com or agrevenue.com

Speaker B: uh, awesome. Yeah, I'll leave that in the show. Notes and your LinkedIn as well. I know you put out a lot of good content there.

Speaker A: Thank you. Pete, it was really a pleasure joining you today. I enjoyed our conversation. Thank you for inviting me.

Speaker B: Likewise. It's been an absolute pleasure. Alan, thanks for coming on.

Speaker A: Okay, take care.

Speaker B: Mhm.