In the fast paced world of private equity, predictability is one of the most critical attributes a CRO can cultivate. In this episode of the GTM Value Creation Corner Podcast, JD Miller, author of The CRO’s Guide to Winning in Private Equity, joins Tony Erickson, SBI Managing Partner, to explain that predictability is vital to hit revenue targets and guide stakeholders through the journey.
Why Predictability Matters
Private equity firms often acquire companies with the expectation of increasing value. That’s where the CRO comes in. Their role is to drive revenue growth and provide a clear picture of how this growth will unfold.
However, a troubling statistic reveals that the average tenure of a CRO is just 18 months. On the surface, it can be assumes that CROs fail because they miss revenue targets, but JD offers a different perspective. More often than not, it comes down to failing to communicate expectations effectively. When boards and investors can anticipate challenges, they are able to make adjustments accordingly. Negative surprises can erode trust and derail momentum.
Balancing Data and Intuition
For CROs operating in scaling businesses, predictability becomes even more complex. With multiple streams of data, leaders must navigate the fine line between trusting the numbers and relying on intuition. Understanding which forecasting models generate the most accurate results and when to act on your assumptions presents a unique challenge.
JD emphasizes the importance of rigor in the forecasting process. A well disciplined approach, paired with a deep understanding of the business dynamics allows CROs to provide reliable guidance to their executive teams and investors. This level of insight fosters confidence and creates a culture where predictability is valued as much as performance.
Key Strategies for Driving Predictability
JD Miller highlights the essential strategies to build predictability into revenue operations.
- Align Sales and Business Strategy: Predictability starts with ensuring that sales efforts are in sync with overall business objectives. If sales motions are misaligned with organizational goals, the forecasts will be unreliable.
- Develop a Cadence of Accountability: Create a rhythm of ongoing check-ins, pipeline reviews, and sales process adjustments to keep teams aligned on goals.
- Leverage Customer Insights: Understanding customer behavior and engagement helps identify potential churn risks and opportunities for expanision.
- Build Cross-Functional Collaboration: Predictability does not only come from sales. Ensure your marketing, customer success, sales, and finance teams are communicating to create a comprehensive picture.
Common Pitfalls and How to Avoid Them
Understanding what to avoid is just as essential as knowing what to do. JD outlines some common pitfalls that hinder predictability.
- Overpromising and Underdelivering: Setting aggressive revenue targets without a solid execution plan can create confusion and disappointment.
- Ignoring Warning Signs: Small deviations from forecasted performance can lead to major misses if not properly addressed.
- Focusing on Net-New Revenue: Neglecting retention and expansion strategies can lead to unpredictable revenue.
Final Takeaway
In private equity, where every investment is a plan for future value creation, predictability is essential. True predictability must be embedded into the organizations strategy and cultivate a culture of accountability and transparency. When predictability is ingrained at every level, organizations are better equipped to navigate market fluctuations, stakeholder expectations, and long-term value creation.
Listen to the full conversation here.
