Driving Brand Growth Through Ecommerce

Private Equity firms are more than just capital investors. In reality, they add value to the portfolio in four key ways. 

1.    PE firms help build great brands...brands that customers are willing to pay more for. Brands thrive when commodities fail, and improving brand value is crucial to success. Improving value is not just about charging more, it involves a well rounded approach that includes people management and excelling in satisfying market needs.
   
   2.    PE firms help growth by helping management teams strategize and scale. PE firms will either make changes in the existing business model or create a new one. They know how to unlock true growth potential.
   
   3.    PE firms have the expert advisors a company needs to truly accomplish Digital transformation and sustainable growth.
   
   4.    PE firms know how to improve profit margins by reducing costs, reviewing and advising on cost savings and ensuring that the back end is operating efficiently to support scaling growth.

While every business is different, the underlying assumptions can make an impact on your investment thesis. Evaluating a business through a digital flywheel framework is crucial as you consider the interconnectedness of future Ecommerce growth.

Investors typically leverage key performance indicators from the marketing and sales funnel as a determinant for success. However, the funnel approach can miss the full picture. The flywheel approach places the customer at the center of all decisions and captures the digital spin-off effects of strategic levers to build momentum across brand awareness, customer acquisition, conversion and retention.

The digital sector has become increasingly sophisticated with the use of chatbots, personalization, augmented reality, user-generated content, and programmable advertising. Looking beyond past financial performance, strategic due diligence considers the three core levers of the flywheel - acquisition levers, nurture levers, and digital enablers. 

While price may be all that matters for some sellers, there are other important factors that a savvy investor can offer to position themselves to be the winning bidder. Sometimes the highest bid is not necessarily the right bid.

It is critical to understand what it will take to achieve value-added growth and assemble the right expertise to support the brand. It’s also important to answer a few questions up front to help differentiate your offer. Do they want to keep their management team or will there be changes or major hiring needed? Are they interested in keeping a minority or even majority stake of the equity? Do they simply want investment to grow the company or sell long term? What are they seeking beyond capital that you could support in a unique way? These are just some of the key questions to understand.

Another way to separate your investment firm and stand out from the pack is to hire external advisors to demonstrate that your firm is serious. It will be critical to ensure the company feels comfortable with the due diligence process, experiences working with a team that is open and collaborative throughout the process, and understands what unique resources will be available to them. 

Timing can be tight when conducting a due diligence process and the need for speed and accuracy may cause a firm to narrow their focus. By looking only at the financials and hearing from the management team, they may be missing important pieces of the picture.

Analyzing market conditions, customer insights, and competitive intelligence are keys to success. Careful and insightful market research, along with go-to-market planning and understanding how customers perceive the brand should be completed prior to closing a deal.

Understanding a company culture and any sensitivities are also a crucial part of the process. Growth requires changes and the right mindset is equally as important as the core competencies within an organization. 

Compass Rose Ventures does not give financing services to start-ups. We provide advisory services to growth Investors and Consumer Brands that have a proven product or customer base. Based on individual needs, we are happy to provide practical advice.