How to stem revenue decline and return to growth

by | 7 Sep 2022

If you’re not growing, you’re dying — Tony Robbins.

Recently we were engaged by a private equity fund to advise on one of its portfolio companies. It was a B2B enterprise cyber security platform business established in 2014 — achieving $10m in annual recurring revenue (ARR).

But there was a problem. Growth had stalled for two years in a row, and the private equity partner and principal were becoming concerned.

They had good reason. The company was falling behind, despite operating in a market with a compound annual growth rate (CAGR) of 13%. The sector was forecast to hit $299bn in 2027.

In that context, growth was a must. The soaring valuations of competitors left little room for stagnation or decline. With $195bn invested during the pandemic alone, businesses like our client needed to deliver high multiples to meet investor expectations.

Although they had found an early niche in regulated industries like financial services, they were struggling to grow beyond this market. Competition was intensifying and the sales team retreated to the low-hanging fruit of customer renewals vs targeting net-new logos. This flattened revenue and ceded market share to competitors.

We were engaged to assess and understand the underlying issues and make recommendations.

The results on the ground were interesting.

The sales teams were blaming marketing for a lack of leads; product management believed that the sales team could not position the value of the solution; marketing lacked the budget to run new campaigns, and everyone thought the leadership was oblivious to their problems.

Though serious, the issues stemmed from a surprisingly common problem. In a nutshell, the leadership had offered no new strategy or direction beyond ‘We just need to win new business.’

Whilst we recognise the need to deliver on tactical/short-term wins, it is equally important to have a longer-term strategic vision in mind. An exclusively short-term focus is akin to a runner looking down at his feet all the time and attempting to accelerate. He will keep tripping up until he looks ahead.

Likewise, the various teams were isolated in their silos. As with the lack of leadership, this wasn’t new, but its friction had been hidden by the company’s early success.

Causes that hinder growth can vary depending on the size of the business, but they include:

Common traits amongst private equity back software companies that underperform or fail
Common traits amongst private equity backed software companies that underperform or fail.

Having a strong foundation and strategy is (obviously) key to growth, but businesses often struggle with what that means in practice.

In the case above, we worked with the private equity principal to:

The goal was not just to stem the revenue decline, but to improve the company’s responsiveness to changing market conditions, best practices and competition.

It’s possible to appear successful without these foundations, especially if a business is surfing a wave of early sales. But when the tide goes out and the rocks are revealed, you’ll need these things in place.

That moment comes for every successful business. Don’t wait for it. Get ready now.

What next?

At Citius Partners, we provide clear services that cover these areas. To discuss the specific challenges you face, contact us.

Mitul Ruparelia

About Mitul Ruparelia

Mitul Ruparelia is a Managing Partner of Fortius Partners, a growth transformation partner for private equity and venture capital backed businesses. He has over 20 years of growing profitable, sustainable business units, defining strategy and leading sales, marketing, product, innovation, finance, raising investment and people management for established, underperforming, and scale-up businesses. He has helped companies scale to valuations of over $1 billion.

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