Episode #30: Building on Fundamentals: Why GTM Strategy Drives PE Returns w/ George de los Reyes

Speaker A: The Lab takes the ethereal to the practical. Our, uh podcast acts like a business school case study for private equity professionals, CEOs, operating partners and chief transformational officers. We all know transformation is the key to differentiated alpha. Uh, here's how you actually do it. Our audience tunes in to learn from those in the field getting their fingernails dirty and driving meaningful growth through, through better operations, technology and data. We learned from going to business school, teaching at business schools and applying these lessons in the real world that case studies actually help the insight stick better. Come join us.

Speaker B: All right everybody. Welcome to our next episode of the Lab podcast. Super excited to have George De Los Reyes with us today. He actually was responsible for doing what we talk about, creating value, go to market strategy. What a, what a novel concept. So I thought what we would do is sort of get going with how do we actually execute on all the things that we talk about. What is this transformation supposed to happen? When a private equity firm buys a company, how do you make it better? So that transformation needs to be set on a foundation that we can all build upon. But maybe George, you want to get a quick overview the zero. We start peppering you with questions and go from there.

Speaker C: Well, first of all, Scott, Nick, thanks for having me on. It's a pleasure, really enjoy, uh, the chance to talk about our favorite topic, go to market and value creation. George Della greatest as you said. Thank you for pronouncing it correctly. Scott. That was pretty good from a non Latino.

Speaker B: Yeah, I'm international guy. Come on.

Speaker C: International guy just rolled off the tongue there. Managing partner at Cortado Group. We are a full service go to market advisory group servicing the mid to low Mid Market. 95% of our work is within E companies. So we really understand the challenges especially in our segment of the market.

Speaker B: Right.

Speaker C: To grow, scale and um, what it takes to really have an uh, engine that can deliver organic growth repeatedly. So glad to be here. Glad to talk about it. Hopefully some value.

Speaker B: Yeah, well I'm sure because we obviously seen the successes you've been able to to generate. So part of that the question is our further topic is, you know, how do you actually grow? Maybe some people will say there's too many PE firms chasing the same amount of deals. So we have to, you know, you're going to buy a company, you have to pay m borderline irresponsible purchase price multiple for these assets. So guess what, you write a drone. And the job isn't just financial engineering. So walk us through the step one. Right. How do we set the foundation for the plan. If you used to be able to grow at 5% to get a 20 IRR, well now the argument is 12 is the new 5. So if we have to move and dial the growth to get to the same irr, how do you actually make sure you're setting the foundation correctly to set yourself up for success?

Speaker C: Great, great question. I'm going to start by quoting my partner. He's founder and CEO of cortado. He says, and he said this actually to a bunch of deal partners. He goes, hey, your deal thesis sits on the shoulders of those frontline reps in those portcos. You better make sure that they are executing right if you're going to deliver on that organic growth. You know, I, I grew up, my dad was a builder and an uh, engineer. So I grew up watching homes be built, buildings going up. And if you've ever seen a building going up, you know that it starts with a foundation, right? You got, and you got to start. And not only does it start with foundation, they actually get a surveyor out there and to actually put like point. Exactly. You want to put your slab here, not there, but here. And then everything else comes after, right? And uh, I usually, I talk to my clients about that because everybody's seen that and everybody's seen a house being built. Because a good foundation is the key to growth, right? It's. And if you get it wrong, you can fix it. But it costs time and money and work. PD is, is impatient money, right? So there's not a lot, you know, so you got to get out of the gates, right? So when I think about, you know, organic growth and growth at scale, you can't get away from the fundamentals, the foundational elements. What do I mean by that? Like who is my buyer, right? Who buys my product? Why do they buy my product? Can I hand a rep who has a territory of 250 accounts, can I hand them a uh, list that says these are your top 50 and why and these are the guys, these are the people that make the purchase decision, right? So if you don't have that out of the guinea. And it's amazing how many of the companies that ah, we work with say they have it, but they really don't, they don't really understand how to truly prioritize their accounts, not just on how closely they match their best customers, but also the revenue potential. Because a company can be really close demographically to your rcp, your ideal customer profile, they may have a small potential. So great, I'll focus on this person but they can't spend a lot. So you want to have an ICP and a segmentation as your foundation that includes both match to your ideal customer but also great revenue potential. Because I want my rest on um, the accounts that are going to drive the greatest amount of revenue in the shortest amount of time. After that it's another blocking and tackling for me is around just repeatable process. Do you have a sales process? Does it have to be perfect? No. But does it have fundamentals, exit criteria? Absolutely. Right. Is it in your CRM? Right. Why is that important? So you can actually report on it, you can coach to it. Right. I've never been in one monthly operating review meeting or any quarterly uh, QBR with my RP clients where they haven't asked about the forecast or scrutinize the forecast. So you gotta be able to have a good CRM in there. You know, those are some of the things that I think are, ah, you know, there are others. Right. That are foundational. But you know, if you ask the question what's, what does it take to really grow these things? Fundamentals. You can't get away from them. Right. You gotta have these things in place and if you don't, you're gonna have trouble scaling.

Speaker D: It's so funny. It's people process technology, how many times we hear it over and over again. I coach my 9 year old son about baseball. It's you gotta see the ball to hit the ball, right? Like at the end of the day you kind of have to build it. And it sounds elementary to a certain extent, but you're dealing with very smart founders, business growers and builders and even they are getting it wrong. So I'd love to know when you guys are most impactful because I'm assuming you run some type of go to market assessment. When are you getting tapped in? Are you getting in the diligence phase? Are you in the hold phase? Like kind of paint that picture for us?

Speaker C: Yeah. Great. Yeah, thanks for the question. So we do a lot of diligence, we do a lot of post close diagnostic and then we do uh, you know, any, anytime in the hole. Right. Some of our PE clients like to pull us in, you know, pre loi or post loi. Right. I, I prefer that because that uh, you know, that gives us a read on what's going on. I think it's adds a lot of value to, to the delegates. Others don't pull us in. You know, I, I don't know why, but they, they rather pull us in after they Close. Right. It's funny. Ah, one of my PE clients that didn't use this for either of those, but use this a lot for, you know, year two, year three stuff. They asked me to speak at a conference and after it was done, you know, the, the fund manager comes up to me and to thank me and ask me how things are going and anything that you know, anything I should know and what they can do differently. I said, look, can I be blunt? You bring us into it. Like I thank you for giving us all this work. I'm very happy. Let it keep coming. I love solving the problems, but I could have told you that was a problem when I in like literally in the first 100 days of the hole. And you waited until two months, I'm sorry, two years in the hole to go back and fix it. Like that was a problem when you bought it and now you just blew through 24 months in the whole period and you're not going to get it back. Right. So to answer your question directly, we do again diligence post close assessment to kind of inform the value creation plan and then any time in between.

Speaker D: It's interesting because when I, when I think about a firm like you, or really any firm especially gets involved in diligent, when you're going in there, you're more the partner of the firm. When you're in there in the hold, you can kind of be looked at more like a partner of the portfolio company because they're using you and they're making changes before the, you know, in the diligence phase. In a lot of cases you're saying, hey, this house doesn't have a foundation. Right. Like we don't want to build on top of this thing. So I would imagine it depends on the culture of the firm and how much they want to utilize you. Because I'm assuming you're uncovering some stuff that you're not necessarily fixing in the due diligence phase. And then once you are plugged in post close, you're fixing it. Right. And you know, I'm assuming there's challenges on both sides of the boulder.

Speaker C: Yeah, I mean we, when you're in there, at least my experience when you're in a pre close, you're definitely part of the management. You're not, you're part of the PE firm's diligence team and you're almost seen as you're. Well, you're not, you are an outsider. Right. And, and making that transition to now post blows, you're gonna, we're Gonna step in Abu, we're your best friend, right? You really got to manage those relationships really well because at the end of the day, you're dealing with people, right? And change management is a big component of this. And you're not going to affect the change if you don't have the trust of the portfolio company, right? Of that sales leader who in diligence, he said, guy who may not make it, but they don't choose to swap them out for whatever reason. But you have to help that guy deliver on the goods, right? And with his trust. So it is a fine line sometimes. And you know, it's funny, you know, you always have to play well with your pe, the deal team, the operating partner or the commercial excellence folks. And then you also have to know how to integrate well with the portfolio company. So I'm sure you're nodding because you've been there, right? It is a, uh, it's. It's an interesting dynamic, for sure.

Speaker B: We do have operating partner work, right? So that's the same sort of thing. Their job is to help make the portfolio company better. The problem is we always, the way we try to help with that is we're working with finding executives either randy asset or competing against it before they own it to opine. But the B firms don't want to pay for services until they own it because they're adding to broken deal costs to be transparent and grass. Right. And so in Verloja, in this sort of being, having exclusivity used to be a normal thing. Now there's sometimes two or three or more firms that have quote unquote exclusivity which doesn't work from an English language standpoint. That's not exclusive, but so be it, right? So I think part of the issue is getting good answers quick, getting you or anyone in early. We found. And um, I'm curious what your thoughts are. Is the chief transformation officer used to be. Oh my gosh, it's not going well. It's been two years. We need to fix it now. Probably 85% of the chief transformation officers we put in are working on companies that are doing well and we hire them day. Maybe it's not day one, within the first month because there's been a plan that's identified and oh, by the way, if the company and the family or the entrepreneur's business that you bought was already doing it, well, you know, they wouldn't need you in the first place. So you know, that balance of help from imagine from your perspective, understanding how to lean in and making sure the ICP is, you know, it is set up is yesterday's better than today, today is better than tomorrow. But it's hard to do it pre close to really hire someone. Now you can leverage that diligence to find the second and fifth derivation of the asset fits out there. But to close the run that you're trying to buy. That's why the timing is important. So I imagine let's serve that PD firm is listening to us and say yeah okay, I get it. I need to be thoughtful and I get why, you know, sort of George can help us. What's the most efficient way for them to get you what you need to start driving that plan going forward?

Speaker C: Ah, again, give me. Because you guys have been here like depending on if it's pre loi post all I. Or uh, if they're, you know, if we have, if you guys have. If the P firm has exclusivity that dictates the level of access that they have, right. If they have a. You know, if like I would say to my PE firms, my clients, if you're, if you're free loi and all you got is a management team call and some data, then what we typically do is like look, you know, obviously I can bring us in but here's a list of great go to market questions that you can ask, right? And we, we have like a. You know, we try to. We have a stock number of good questions and then we tailor that based on the industry or whatever we can find out about the company and we arm the deal team with that. We will sometimes they'll take that. Some we'll even ask, hey, let us sit in on the management team call right to listen. And if we can ask questions even great. But if not ask these questions, right? If we can get access to the deal room then we can do a little bit of data crunching and analysis. So what is the biggest value that we provide? I think in pre. In diligence or even pre or post ally. I think it's a read on the talent on those leadership. Do we think that they. Do you know what they're talking about based on some of the answers to the question. And two, is the, the pipeline data that they're given defensible? Like because they're buying based on what they think they're getting, right? And they're, they're, you know, you know like I always say, you know there it's, you know everything in the deal room is, is, is all, you know, lots of makeup. Let's put. It's been put on it.

Speaker B: Right.

Speaker C: To make it look as beautiful as possible. So what we try to do as ad valley is to really put on a very critical lens to look at the pipeline data and the CRM data, if we can get it to really opine on is this real? Is it defensible? Right. Right.

Speaker B: Are you saying everything's not in the top right quadrant? Because I felt that's what it was usually.

Speaker C: Always. It's always important. So those are the things that we do. We're providing that unvarnished opinion on the veracity of what's in the pipeline isn't real. Right. In. In there times. I. I know one time we did a uh, diligence and we. I don't know if you know this. I mean maybe probably know there's a report in Salesforce that you can, that you can run that tells you how. What's the recency that some of the data in the pipeline was. If you get in there all of a sudden all that. All those fields are just recently updated in the last quarter or what are like you. That sounds interesting. Like why are they all suddenly playing around with the dollar amounts, the data, et cetera, in the last month. Right. Versus you know, so there are tells that we, we know and we told this particular PE firm because we asked for some data in diligence and they just didn't want to give it to us. Like you're like what? You know, and they bought us and bought us. So we say listen, we think there's a red flag and you should definitely, you know, double click into that if you're going to buy it and lo and behold, they bought it and our concerns were valid.

Speaker B: Right.

Speaker C: So I think, you know, to answer your question, Scott, you know, in that early stages, it's really that, you know, uh, really validating the pipeline, giving a point of view on the talent because that's probably the amount of access we have.

Speaker D: Super interesting. And like you mentioned, it's.

Speaker C: It is a.

Speaker D: You're tiptoeing in a lot of these accounts because you are trying again. You called something out earlier that I think super important. The trust and having that sales team and that go to market team believing in your vision and being able to align with you.

Speaker B: Right.

Speaker D: You're the experts here. But from their perspective, they're the experts of what they sell. So it's, it's. It's a very. It's uh, politics. We were talking before we started hitting record. Sometimes I think some of the best things we talk about are not recorded in the prep but I'm going to

Speaker B: bring it back up.

Speaker D: So you, I was talking to you about kind of your guys ability to impact quickly and a bit more long term. Right. And it always comes back to the foundation and the fundamentals. But tell us about, you know, something practical where you, you were in here and yeah, they're trying to hit their 2027 numbers but they have to make some seismic shifts to hit their 2026 numbers. As the expert come in and do both of those things because you don't really want to, you know, deprioritize the long term. For the short term, myopic business decisions don't make sense. How do you play that?

Speaker C: Yeah, so you know, I've been in, in the prep I talked about two recent examples. One was, you know, we, we called it in the scope like we're going to go in there and do a diagnostic to give them the 2027 roadmap. It's recently acquired. But they said, hey, we got to hit our number in 2026. What can you do for me? It's like, okay, let's triage your pipeline. Let's see how real the pipeline is. Are the deals in the right stages and no matter what you're selling, you got to have upfront, you have to have good discovery, you have to map the entire buying decision team. You got to understand what was the compelling event. Right. There's certain things that are just inherent to every deal. And we said, look, we will go in with one of our subject matter expert because it was very industry specific who is sold into this particular buyer. And we're going to work with the CRO and the reps and we're going to triage every single late stage deal, right. And we're going to see does it really belong in that late stage. Have you done all these things that we just talked about and then we're going to then systematically come up with a game plan for each deal. And it could be that you got to push the deal back into an earlier stage and do all the activities that you need to do to really bring in the entire buying decision team or whatever needs to be done. And so why we want to do that because we want to increase obviously the likelihood of closing. We want to accelerate where we can and see what we forgot, right. And maybe we left some money on the table, right. So that's what we're going to do on um, one of them. Another one is around. We call it the $40 million go get right. It's an initiative, it's a three week sprint. It's data analytical intents. This is a company that is in the pharmaceutical space and you know think about, I'm a, he's kind of like a pharma rep market model. But think of a, like a rep, um, calling on a provider who's writing prescriptions. Well they have like zero visibility into or they weren't tracking on a dashboard. Like uh, I've these. All the doctors that can write prescriptions have written prescriptions. They have data that says historically they've written these many per month. Let's go and see has there been any drop off? Let's go see what doctors aren't writing as many prescriptions as they should based on their, you know, because there's data out there, it tells you how many they're writing a month. Are we getting the right wallet share of that prescription writing? And if we're not and we have a relationship, let's now focus our, the reps on those that could visit because

Speaker B: all of this is about hey, ah,

Speaker C: you just visited me. Oh, I remember you. I'm going to use you right kind of thing. So we're going to do a data exercise to help create a list for the reps to immediately execute on over the next three months. Right. So it becomes like really a rapid, rapid fire. Now like we talked about, some of these things are short, low hanging fruit, short wins or uh, low hanging fruit, whatever term you want to use but it's not sustainable, scalable. Right. We need to still give them what they need so they can execute on an ongoing basis repeatedly. Right. And give the managers the right cadence to work with the reps, the right tools to have the visibility into the pipeline. All these things that we all know about. So that's an example of some of these quick wins. Right? Because like you said they got to hit their number this year so. And they don't want to wait for a big old diagnostic on a six month roadmap. Like that's great but what are you going to do for me now?

Speaker B: Right with part of that like I'm curious, you know, know when you look at the best firms, those examples in theory they should be doing right anyway. So your argument is they're not fine. So on the one hand that could be viewed as. Or you're not doing it, you're not that great. Or it's. That is why we're buying you. Here's the upside in the value creation that we could bring. So the Question is, you know, when you see it going well, right there, there's like when you're doing your diagnostic, you're doing these, these two or three things well, and these one or two or three things not so well. What's the profile of the executive team that's doing things well, and how are they seeing that? Because sometimes it's a management team that wants to stay on, right. If they're selling 100% of the business, they don't really care about what's going on and the future. They just want to maximize the dollars today. Sometimes a team says, I'm not good at A and B. And so when I'm thinking about my new PE firm, I want them to have muscle memory and scar tissue and experience doing these things well. So how do you think through that when you're doing your diagnostic of like, all right, well, maybe these negatives, which they are in rare opportunities, could be viewed as a positive because that's where you're going to find the growth, you know?

Speaker C: Yeah. I love the way you said it. So one of the things I, I tell when I, you know, again, it's all, you got to build trust with the portfolio company, right? So I don't, I don't. And I coach my teens. Like, you can't go in there and just dump on them, right? They just got bought, and they got bought for a reason, right? They're. They've done something well enough that they got the eye of a private equity firm to, to be willing to spend a lot of money to buy them. So there's things that they're doing really well and you need to recognize, right? So it's just for us. I mean, I say that because it has to be. I want that as an ingrained attitude going in for my team. Now, to answer your, your question specifically, I, I say to the, to the elt, right? I said, guys, you're, you are, you've done something really well. Let's take the magic that you've done thus far, pull out all those nuggets of wisdom, all the scar tissue that you use of term, that term. And let's, those are all best practices that got you to where you are. Let's see what elements of those that, uh, we can bake into a scalable, repeatable process, right? So tell me who your best reps are, okay? What are they doing? Like, tell me what they do. What's different? How do they engage a customer? What are the things they do in discovery that's really good? How do they really strengthen a compelling whatever they do, the magic they do, let's bake those things in to whatever processes that reduce to roll out what I see some of the better. And again this is Scott. This is from a go to market perspective. To me the teams that are going to make it to the next round are the ones that are executing on basics and what I mean by and as a leadership team I want to see two things. I uh, I don't want to see a sales leader that's a super rep. I want to see a sales leader that's a super coach, right? If he's a super coach and that means he has a regular cadence of 1 on ones deal reviews, pipeline calls, all these good stuff and it's well, machine oil machine, that's something you can build on, right? That guy, he may have other flaws, whatever, but if he's got that level of discipline I could build on that, right. I also want that leader to have a lot of contact with the end m customer. You got to know who the customer is. You need to understand why my buyers are buying for me versus why they're not versus my competitor. Right? You got to have. I want to, I want them to have a finger on the pulse of the market and the finger on the pulse of why the buyers choose them. You know, when it comes to that's on the sell on marketing, I'm a big believer on um, a sales led marketing effort. What I mean by that is I want sales to tell marketing this is where I'm going to go get my, my revenue. I want you to do, you know, I want you to build me a marketing strategy that's going to generate demand, interest, you know, awareness and uh, the places where I say where the money's going to come support me in my efforts. Right? And it could be, you know, top, top, top of the funnel. It could be, you know, abm. It could be whatever it is, whatever the revenue client looks like. And the when I see a CMO and a CSO truly aligned and linked, that's something I could build on. If they're operating in silos, which I'm sure we've seen many times, that's a bad thing, right? Like uh, oh, and then you get the CEO that says I get nothing out of marketing, right? Like yeah, because they're not talking. I don't know what I'm getting out of that spin. Like I, I know you don't um, know because you're not, you know, so those are some of the things. I mean there's more, but those are some of the things I look for.

Speaker B: Yeah. Well, listen, I think this is why we're excited, Nick and I, to chat with you because, you know, to your point, you don't put your best surgeon in charge of the CEO of the hospital. That's different skill set. Now, maybe they were a great surgeon, just like maybe they were a great sales rep. But it's a different skill. It's different ask, It's a different need. And so but that's an evolution. And I think we've seen a lot of our PE clients we're working with collectively benefit from working with you all because a lot of the PE folks are really good at doing deals. The hard part is growing. And so we will make sure that you have a partner in crime to help you think through that go to market strategy, that transformation exercise. So I'm hoping that those that are listening that haven't worked with you and the team will see what you've been able to room to bear. And, you know, thank you for sharing some of the nuggets that you've seen with us in the audience. And, you know, there's a lot more value.

Speaker C: Appreciate that, Scott Thanks, George.