Go-to-Market Value Creation: 7 Areas of Investigation During Diligence

Historically, Go-to-Market (GTM) is an underinvested value creation lever but that’s changing. Private equity firms have an abundance of committed capital that needs deploying. Interest rates remain high and so are valuation expectations. Competing forces cause deal teams to invest more in diligence. They seek additional angles to make deals attractive. They cannot rely solely on legacy plays such as financial engineering, cost cutting, M&A and product. They need a broader range of plays to earn the multiple. Enter go-to-market.

How do you know there is go-to-market value to be created? What should teams investigate as they perform due diligence? During diligence, Alexander Group go-to-market experts investigate the following:

1. ICP and Segmentation

Does management understand where they have the strongest product/market fit? Are they playing in the markets where they have the greatest right to win and the most attractive unit economics? Do recent bookings and pipelines align with management’s answers to these questions?

Indoctrinating a discipline around targeting and pursuing the most attractive markets enables companies to deliver differentiated growth.

2. New Market Entry

Does the business have an established Marketing function? Have they demonstrated the ability to generate awareness, establish the brand, and drive inbound and outbound demand? Does the business have a function or invest in market insights (sizing, trends, competition, customer personas and value drivers, buyer journeys, etc.)?

Establishing a competency for penetrating new markets amplifies new product launches and M&A, and creates incremental growth pathways.

3. Demand Generation

Does the business have a downstream Marketing function? Do they have established agency relationships? Does their campaign and program spend align to benchmarks? Do they track return on marketing spend (e.g., have campaign attribution capabilities)? Do they have dedicated lead generation headcount?

Demonstrating an ability to sustain a pipeline in the absence of founder or product-led growth de-risks executive turnover and late-stage product life cycle.

4. Cross-sell and Upsell

Who is responsible for these motions? Do the same resources that land new logos also sell into existing accounts? Do they leverage account management, customer success, renewals or other roles to grow relationships with existing accounts? How do they enable and motivate sellers to expand existing accounts?

Proactive plays and codified roles help companies access untapped growth opportunities and create repeatable processes as new products enter the portfolio.

5. Differentiated Coverage

Does management understand the cost to sell to and serve each customer segment? Do they differentiate how they market, sell and service customers based on lifetime value? Do they leverage digital channels?

Lowering customer acquisition cost and cost to serve frees up capital and creates a more scalable model.

6. Pricing

When was the last time the company increased prices? How did they determine how much to increase the price? Do they differentiate prices by customer segment? How do they package the offering? Does packaging align with customer preferences? Does packaging create a path to upsell and cross-sell? What discounting and price control governance is in place?

Demonstrating a track record of realizing price increases and capturing value enhances the quality of future cash flows.

7. Revenue Operations

Does the business have a codified management cadence (planning, budgeting, forecasting, pipeline)? What data and technology does the business leverage to support the GTM function? Does the business have a codified sales methodology? How do they ramp and enable sellers? What is the average ramp time? How do they set and allocate quotas? What are the productivity expectations? How do current resources perform?

Visibility, predictability and consistency gives confidence to fund growth initiatives.

Final Thoughts on GTM Value Creation

Go-to-market is an underinvested value creation lever. While deal teams often explore the quality of the Marketing, Sales and Service function during diligence, many fail to investigate opportunities to invest in capabilities that drive enterprise value. Including GTM in diligence and value creation efforts opens new pathways to maximizing the multiple.