Strategies for Sustainable Growth: Insights from Clairvest's Leadership

I'll turn it over to Tyler to start with a brief introduction on himself.

We have a domain-based approach where we identify industries first and then leading companies within them to execute growth strategies. So very excited to talk about this topic today. Clairvest manages over $4 billion of capital and is typically a minority investor alongside owner-operators.

We do this by letting them leverage our large-scale technology platforms so they can focus on their business and meet its potential. And in my role within Meriplex is I lead the connection between our go-to-market strategy and the delivery of our services, focusing on innovating our products. So everything we package, once it's contracted, we can actually sell it and meet all the customer requirements.

I lead BlueWave's research and operations team, and I've had the privilege of supporting thousands of our clients and their projects over the course of my four years with BlueWave. Let's go ahead and dive into the interesting stuff. Firstly, starting with some key trends, when we look at today's macroeconomic environment, there are really several promising signals of stabilization, suggesting an environment really better positioned for growth activity than we've seen, perhaps, over the past 24-plus months. Firstly, year-over-year inflation has certainly cooled. And, while we're not close to the lows that we saw 2020 and early 2021, we've certainly seen inflation steady and hover in the low-to-mid 3% over the past 12 months, which is encouraging.

Secondly, we're seeing strengthening consumer sentiment, which can, of course, be a leading indicator to increased consumer spending, boost to business investment, higher revenues and profits, and, in turn, further business investment and expansion, new projects, and et cetera. And finally, we continue to see positive GDP growth, noting and acknowledging, of course, the slight slowing of such growth in the most recent quarter-over-quarter. But nonetheless, these signals ultimately suggest we're pulling the nose up and leveling the wings, if you will, certainly from where we were mid-2021. through most of last year. And when we look at BlueWave's proprietary dataset, which comes from the thousands of projects that we support annually, we see promising signals supportive of growth as well.

Specifically, over the last 60 days, we've observed a 70-plus percent increase in proactive businesses investing in growth strategy projects. But what does that mean? While every project has its nuances, these projects have most often included our clients engaging strategy consulting firms to perform market analyses, for example, understanding the current market landscape, growth rates in the space, market trends, competitive analysis, and also evaluation of customer insights. In addition, these projects have included the evaluation of expansion and growth opportunities, for example, evaluating both organic expansion levers through expansion into, let's say, new geographies, new channels, selling new products or services. But they've also included the evaluation of inorganic growth levers through acquisition.

Ultimately, the increase in growth strategy activity is encouraging, but I would say it's also critical, especially with the volatility and shifts that we've observed in the market and across industries over the past two to three years. Every business should really consider revisiting their growth and go-to-market strategies regularly, as your answers to the core questions, such as where to play and how to win, are likely different today than they were two to three years ago. Other similar key trends BlueWave's observed include 12% and 18% increases in demand for strategy and sales and marketing projects, respectively. For context on BlueWave's service taxonomy, examples of strategy projects would include not only growth strategy projects, but also activities such as commercial due diligence, strategic plan, facilitation, and voice of the customer activities, among others, of course. Whereas examples of sales and marketing projects include initiatives such as pricing strategy, sales effectiveness and training, rev, ops optimization, digital marketing enhancement, and more.

These increases suggest that not only are proactive businesses taking action in this more stable environment, but they're making meaningful investments in their commercial infrastructures as well, and optimizing their tactics around how to win in their respective markets and industries. So, having discussed these key trends, I would like to pass the baton to Mitch Green from Clairvest to share his perspectives regarding how to determine the extent to which a business is well positioned to achieve and to support growth, and also what activities are oftentimes most critical to execute on immediately post-acquisition.

And from there, we gave them the capital to go do their thing. And the first, I would say, added complexity was when a layer of financial sophistication was required for either competitive reasons or supply chain. And then we had to do our first couple of things, find the good industry, find the good company, and then really strengthen the finance teams. And from there, the next thing we needed to make sure was we took the next step in IT. And as long as we were good on some of those infrastructure building investments, the companies ended up doing pretty well and we had a good run.

And as we look at 2024, the fact is, money is still more expensive. Consumption is a little bit slower. There are, I would say, systemic changes in the ecosystem where we can't count on the same drivers to get great returns from good companies. A great return in private equity is going to be reserved for the best businesses. And this go-to-market sales strategy is really that next evolution of what we need to do and the companies we work with.

So these are the tests that we're.

putting as great importance on as anything else in diligence. Is there not just a good industry, but is the plan logical with the dynamics going on? Are they saying we're going to do direct sales in an industry that's been intermediated on sales for the last 30 years? Might be a good idea, but is it logical within the constraints, just as an example? And is the company positioned in the good old days, if you had a scrappy small business in a growing industry, they could automatically gain share.

Well, today, without the proper people and resources and technology, just being able to hustle doesn't do it. So we're looking for those things. And then it's really about the people and processes and technology, and they all need to hang together. You need to have the right leadership. that's got experience with the game plans, the systems that can properly implement both.

And, for example, in systems investments, the CRM was the first layer. Now you want CPQ to tie in with CRM and marketing automation. And we see that in all the different companies we work with in different forms, but without the leadership, it doesn't happen. And of course, the finance. as a business partner, I would say that's the one thing that's kind of carried through my whole time in private equity.

So, with those points, I'm excited to have Randy and Tyler weigh in on their activities at our portfolio companies, because these are hires we probably wouldn't have made 10 years ago, but we couldn't live without them today. Fantastic.

That's why you need the Business Builders Network. Visit bluewave.net to learn more and start a project today.

What are the attributes of that customer? We actually kicked that off really to focus on our go-to-market investments, but then we quickly streamlined our product offerings. Based on that effort, we actually, when you streamline the product offerings, the ones you hand off to operations are easy or to execute and provide service delivery on. We spent some time going through this. It was a very impactful exercise for our business.

We even created scoring systems. We'll talk about this later when we're talking about KPIs to make sure that we are talking to customers that fit our value proposition, because they'll be the happiest. What we found is we were able to revamp our messaging, revamp our product value propositions, our pricing. Once customers are willing to pay for value, if you get the right messaging correctly, the pricing just reinforced the value proposition. This was something that was a huge benefit for our business that we continue.

We do profile clients and we do have an ideal, but it often will change within different segments of the market.

Acera, when we were formed after our partnership, through the transaction, we really came out as a new looking entity. We merged two entities. When we re-entered the market, we had an opportunity to foundationally go to market as though the firm itself was a new product offering. We have hundreds of products, like I say, in hundreds of industries and different specialties, but coming out of that transaction, the fact that we maintained a certain core structure of employee ownership, with Clairevest in a minority position, as well as having some new scale, allowed us to approach and go to market as a whole, entire firm and communicate a value proposition on the fundamental basis of how we're owned, that translating into a whole bunch of different segments of our market. in the same way.

I'd say we're in an industry that is really hard to differentiate in. If you take the 10 largest insurance brokerages, all focus on many industries and have specialization and claim to be able to service the best. I think for us, we tie back a lot in our go-to-market to our platform and why the platform itself allows us to create value for clients. I agree with Randy, when you do that, pricing becomes one of the lesser considerations.

Then let's define the attributes, because if you do a good ICP, you can actually target those customers, but you can actually broaden the scope a little bit to get others that may not have all the attributes, but are close enough. We were able to leverage our private equity partners. They were heavily involved in this process. They had resources, experience, and ideas that allow us to look at, from a lot of different angles, things they've picked up from their other investments that were leveraged. Then, finally, this about how do we reinforce.

Once we've gone through the exercise, we actually used our annual national sales kickoff to actually train the entire go-to-market engine on what we've come up with. Then we've done follow-on training on a weekly basis. We've had some in-person summits that are specialized for specific things, but we've been able to reinforce that and actually create alignment. Our mission is that 80% of our customer-facing sellers are providing the same value proposition that we can hone and improve and increase our.

Differentiating, attracting the best clients for their organizations. I would also add the cost of getting it wrong is really high, because a share is measured on, ultimately, the performance of the risk that they're underwriting for their insurers. If they're getting bad clients in there that don't look after safety or whatnot and drive up claims, it hurts the whole organization. The same thing for Meriplex with subpar IT infrastructure, the cost of dealing with those clients and moving them onto the better platform. It's a huge success factor getting that right.

What we found just in the early days of adoption is that opportunities that get low scores generally, we have lower win rates or less than ideal contract terms or maybe even deeper discounting. We're using this information earlier in the sales cycle to abandon opportunities more quickly and reinforce and make sure we get the right resources on the right opportunities. One of the things that we've learned over time is that we track our win ratios. Our win ratios are going up. We get actually better pricing for both the customer and for us.

That continues on. Then what we also find is that when we're selling to the right client profile, the customer satisfaction numbers are naturally higher. I think those are all little mini taxes you pay if you don't get focused. that could make your investments less impactful. That's why we continue to hone this and this scoring system.

We do like to look at lost opportunities where they're qualified and get a good sense of why we didn't win. in an area where we think we can, what went wrong. We do do some KPI tracking around that. Then, of course, we're obviously looking at the big things like revenue, which of course is an obvious KPI, but also the margin that we're getting and making sure that the business that we're writing is profitable and that we want to continue to write. Because I think you can be winning sometimes in areas that isn't overly lucrative to the business, and so we do watch that as well.

Also, when it comes to setting a strategy.

Obviously, as we get out of the gates, we're looking within our ideal client profiles and in areas we're targeting to see what sort of penetration that we can get. Then, as we start to have success with some of that, we're looking at how we can expand into other areas of the market where we're proving out a growth strategy and we're saying, yes, we're having success here and executing. A logical next step for us is, okay, how can we now move up or down market where we see other opportunity to add value? How can we expand geographically? For us, some of that comes organically.

Other comes through M&A activity and other partnerships with other businesses. Those would be some of the short.

we have no plans to go up market. You're a big fish in our pond. You're important to us. There's a little bit of an identity in that mid-market where mid-market companies, they don't want the unsophisticated partners. They also don't want to get lost in the fray with the large providers.

We're reinforcing our brand in a way that we plan to be the juggernaut to enable US-based medium-sized business. You're in the right place and you're important to us. That's what we've really done. Our initial focus has been on new logo acquisition. What we've seen is our cost per lead has come down and our win conversion ratios have gone up, just because we're a little bit more targeted in what we're going after.

Our next phase is to go through our existing customer base through the renewal process. The good news is most of our customers already fit. the ICP, which is where most of our ideas came from, is from our existing customers. Then you will find from time to time that you have a situation where you may have someone outside the ICP have an opportunity to renegotiate pricing or get more capacity back for the core ICP that we're after. Then I agree, we use this information as we go into M&A.

We may look for acquisitions that could expand our ICP from a capability perspective or take that same message to a new market. It definitely informs our growth, both organically and inorganically through M&A.

They're asking all these questions. How are you differentiating? What is the go-to-market strategy? Am I going to be on the winning team? It's not just a nice dinner anymore and I'll sign.

When we're acquiring companies, of which both these companies have made many acquisitions, they're asking the same thing. They're selling their baby into this platform. They want to know it's going to be the right thing for their people, for themselves.

It's critical. It's not just for winning customers.

Finally, thanks again to our audience for taking the time to tune in. We absolutely look forward to seeing you next time.

This is a free way to support the show. Thank you, thank you, thank you in advance. In the meantime, if you need to be connected to the world's best in class, private equity grade, professional service providers, independent consultants, interim executives, or anything else that are trusted by hundreds of the world's top business builders in private equity and beyond, please give us a call and visit our website at bluewave.net. That's B-L-U-W-A-V-E.net, and we'll support your success. Onward.