Value creation opportunities in Due Diligence: A Go-to-Market (GTM) Focus in Founder-led Businesses
Diligence when acquiring a platform asset or bolt-on presents a unique opportunity for investors to uncover the commercial levers that will drive value creation.
Working through several GTM projects with our clients, below are some insights to consider during the diligence phase – including areas some of our clients wish they interrogated before taking the keys. This article will focus on investing into or acquiring Founder-led businesses.
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1. Customer Insight: Is the Business Truly Listening?
Many founder-led businesses rely on personal relationships and gut feel. To ensure customer stickiness and growth post deal, it is important to consider can the business:
· Demonstrate and provide insights from a structured customer feedback approach (e.g. NPS, churn analysis, win/loss reviews)
· Clearly articulate its value proposition to customers
· Segment their customers and maintain account management discipline
🚩 Red flag: Poor customer understanding and insight = revenue leakage risk and blind spots in product-market fit.
Opportunity: To engage with customers early and respond to their needs with a well-structured and efficient segmentation and key account program.
2. Sales Model Maturity: Who’s Really Driving Growth?
Founders often wear too many hats, even in Founder-led businesses at $100M+ revenue. During diligence, assess:
· Role clarity across sales, account management, and ops
· Lead generation vs. closing capacity vs. account management
· Founder dependency in key deals and the role they play in selling plus delivery
🚩 Red flag: If the founder is still the top closer, the sales engine is unlikely to scale.
Opportunity: Build out a scalable sales function with a quick transition to decentralise from the Founder.
3. Data & Reporting: Can You Trust the Numbers?
GTM effectiveness depends on data integrity. In diligence, interrogate the accuracy of the pipeline and forecasting:
· Is the CRM used and accurate?
· Are pipelines real or aspirational?
· Is there integration between sales, ops, and finance?
· Look at previous forecasts and how they landed against actuals.
🚩 Red flag: Manual reporting and Excel-based forecasts = higher risk of phantom revenue post-close.
Opportunity: implement a robust CRM to support an improved sales function. Increase visibility and transparency to help the team understand the business better. Better forecasting will lead to better working capital and cost efficiencies.
4. Margin Discipline: Not All Revenue Is Good Revenue
It sounds obvious, but diving deeper into the mechanics of the following will be revealing:
· Gross margin by customer and product – how is this calculated? Is it apples and apples and what estimations are in place?
· Pricing and discounting practices, including delegations of authority and SOPs
· Customer concentration and renewal rates – are there manual renewal processes? Are contract term dates defined for recurring revenue and what actions are needed to secure revenue?
🚩 Red flag: Assume recurring revenue is at risk and identify the steps (people and processes) to capture.
Opportunity: Creating a key account program can help to align margin and create opportunities for tough conversations where margins are below par.
5. Innovation & Product-Market Fit
New product development is often carried out on the gut-feel of Founders and not responding to customer needs. It is critical to understand:
· Track record of successful product launches
· Responsiveness to evolving customer needs
· Alignment between product roadmap and market demand
🚩 Red flag: NPD without a deep and evolving understanding of the customer needs leads to lower success rates.
Opportunity: A well structured customer feedback loop and key account program will lead to faster, market aligned and more successful NPD.
6. Cultural Readiness: Can the Team Handle Change? “We’ve always done it this way.”
Finally and most importantly, any change under a value creation plan will be delivered by ‘people’. Careful assessment of the team, their ability to cope with change and their openness to new ways of working is essential.
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