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Why PE Sponsors and Finance Teams Must Master Digital Customer Acquisition
Years ago, I watched a video where Jim Coulter, TPG Capital's co-founder, presented some of his investment themes to an audience. He talked about how to generate strong returns (alpha) in a time of low interest rates. Coulter explained why his firm's portfolio companies needed to focus on growing top-line revenue.
Knowing how to grow top-line revenue is becoming more important for financial professionals. Private equity professionals need to understand the drivers of revenue growth to generate alpha. In-house finance teams need to understand it to support their businesses.
Revenue Operations (RevOps) involves the teams responsible for customer acquisition, retention and ascension. It is a combination of the marketing, sales, and customer success teams—the key functions that drive revenue.
The best finance professionals of today, and in the future, will be proficient in how RevOps works. They will use this knowledge to develop better strategies and to support the business with its growth ambitions.
Technology has made it much easier to start a business. But growing it into something bigger has its challenges. There needs to be a convergence between Finance and RevOps to enable small businesses to scale and compete with larger ones.
We live in the age of the internet, so most customer interactions happen digitally. A Deloitte CMO survey shows that marketing leaders believe digital marketing contributes to c. 40% of revenue growth.
All successful companies will have to be digital.
Even 'traditional' businesses will have to compete using digital customer acquisition channels.
Gone are the days of John Wanamaker who famously said "Half the money I spend on advertising is wasted; the trouble is I don’t know which half." Today, thanks to digital tools, you can track which campaigns are driving sales.

The market size for digital marketing is expected to grow 3x by 20233.
Note that the figures are in billions of dollars.
Source: Market.us
Direct response marketing and digital sales systems make it easy to track every interaction with the customer. If every customer interaction can be tracked, then modeling revenue becomes a much easier (and more useful) exercise.
Despite the existence of these tools, most finance teams and sponsors still forecast revenue growth using general assumptions. They usually rely on a mix of past revenue growth, market growth trends, and sometimes a basic review of the sales pipeline to make their estimates.
There are a few challenges that finance teams and sponsors face when it comes to revenue analysis. The first understanding how customer acquisition, retention and ascension works. The second focuses on how effective a company’s RevOps processes are compared to its competitors.
Finance teams need to help RevOps identify growth challenges and provide the resources needed to fix them. To do this, finance teams need to ask questions to identify where constraints on growth are.
Are the bottlenecks in lead generation?
Are they in the conversion rates or the quality of the offer itself?
Or are they in customer retention and ascension?
There are several reasons that constrain revenue growth.
1) Ineffective channel strategy
A business may be using an inefficient combination of marketing channels. A company allocating its budget evenly across several channels might be underperforming if one channel generates a much larger share of revenue. Channel-specific ROI analysis can help uncover opportunities for better allocation.
2) Flawed marketing, sales and customer success processes
Most companies don’t have good processes around each of its revenue-generating activities.
Finance teams need to verify the severity and location of the issues before providing resources.
Is the marketing team regularly testing ad creative?
Are the sales teams refining sales pitches through call reviews and role-playing?
Are there systems that effectively track customer interactions throughout the funnel?
Are customer success teams retaining and ascending customers effectively so that customers are worth more?
These processes can significantly make or break revenue growth.
3) Sub-par offer quality
Underperformance can happen when companies target the wrong customer segments or try to do too much for many customer types. Businesses might not clearly articulate the value of their product, offer too little for their price, or set prices too high for their market.
When finance teams work closely with RevOps teams, they can better address the problems holding back the company’s growth. Finance teams can use RevOps data to offer support, advice, and resources to drive growth.
I've helped build financial models for multiple companies. I've seen the following distribution of knowledge when it comes to digital customer acquisition:
65% of companies: Lack a basic understanding of digital marketing or sales concepts and their impact on financial performance.
20% of companies: Understand high-level concepts like CAC (Customer Acquisition Cost) and LTV (Lifetime Value). They use blended figures and don’t have detailed breakdowns by funnel stage or channel.
>10% of companies: Have a deeper understanding of CAC and LTV. They track metrics like CTR (Click-Through Rate) and conversion rates for specific channels. However, they often don’t fully understand all the ways they can influence these metrics and rarely track them regularly. They may not understand the long-term consequences of changes in the customer acquisition process.
<5% of companies: Demonstrate a solid understanding of customer acquisition, including how to influence channel-specific metrics. These companies have robust systems in place and actively track and optimize data points across marketing and sales.
This integration of RevOps and financial analysis ensures a more data-driven approach to evaluating company performance and unlocking value. Understanding customer acquisition will help finance professionals predict (and grow) revenue with greater accuracy.
Customer acquisition is only getting more expensive. Being able to evaluate what drives revenue is key to making sure growth is sustainable - and not just the result of spending too much on ads.
Finance professionals who embrace this integrated approach will be able to build lasting value in the era of digital transformation.
Implications for PE sponsors:
Alternative investments are becoming an increasingly important asset category. More investors are looking to private equity* to generate returns.

Private equity, growth equity and venture capital have grown in importance (measured by AUM) since 2000.
Source: The Financial Times
Broadly, there are three levers to private equity returns:
1) Leverage (or financial engineering)
2) Multiple expansion and,
3) company performance.
Financial engineering and multiple expansion will contribute less towards generating alpha. Long-term value creation through performance enhancements will grow in importance.
This is the case for several reasons:
1) The amount of debt that companies can carry will only go down as interest rates rise.
As interest rates rise, the amount of debt companies can handle will decrease. Companies still carry significant debt despite rate increases between 2023 and 2024. This means that the potential benefits of financial engineering will likely be limited in the future.
2) When interest rates are low, company valuation multiples can only remain steady or fall.
This is because valuation multiples move in the opposite direction to interest rates. The long period of falling interest rates between 1980-2023 is likely over. Interest rates cannot drop as dramatically as they did over the last 30 years.

Interest rates have fallen between 1980-2022. This has lead to rising valuation multiples, an abundance of capital and more leveraged balance sheets.
Source: Visual Capitalist
3) There is more competition between PE firms.
As capital grows in abundance, it is becoming increasingly commoditized. Companies have access to more financing options, and are much more selective with who they partner with than in the past.
The winner in Private Equity will be the ones who can consistently improve the performance of their portfolio companies. Performance improvements can be done in various ways. It can be done through top-line revenue growth, through strategic moves, or cutting costs and becoming operationally efficient.
While operational efficiencies are important, there is a limit to how much costs you can cut or how efficient you can be. You can only cut up to 100% of your costs (theoretically), but there is no limit to how much you can grow revenues.
Private equity firms must differentiate themselves beyond being mere providers of capital. They need to act as true partners and offer value in addition to capital. This additional source of value could be in the form of operational expertise. It can also come in the form of a robust network to help companies find talent and forge additional partnerships.
Sponsors will increasingly need to deepen their understanding of RevOps. This is because RevOps capabilities directly impacts a company’s enterprise value through EBITDA.
Traditional underwriting models often fail to break down revenue into its detailed drivers. This is despite the existence of digital tools that show how customer interactions impact revenue and SG&A expenses.
Traditional financial due diligence (FDD) often lacks insights into a company’s sales funnel. This makes it difficult for investment teams to assess the true quality of a company's revenue growth.
Part of the FDD process involves reviewing the full-year outturn to validate projections for the rest of the year. However, when it comes to revenue, this process tends to be high-level. Advisors typically use historical sales pipeline conversion rates to build sales projections. In doing this, sponsors will miss out on more accurate forecasts and important details.
Sponsors who embrace RevOps can make better deals. They’ll be able to minimize a deal’s risk and maximize its reward. They can better find undervalued opportunities because of untapped growth levers. They can also avoid overpaying for businesses with unsustainable marketing or sales practices.
Without understanding the factors that drive EBITDA or the risks involved, sponsors might misjudge a deal’s value. Using RevOps insights helps generate better financial models and plans. With RevOps, deal teams can make smarter investments and stay ahead of the competition.
Implications for internal finance teams:
Finance teams are becoming increasingly strategic. The role of the CFO is shifting and is seen as an enabler of strategy execution - rather than just a record keeper and controller. This shift positions finance teams as critical partners who enable long-term growth.
Since finance is mostly a reporting and decision-making role, it needs to work closely with all departments.
However, finance teams have often clashed with marketing teams over budgets that don’t clearly show a direct return on investment (ROI).
When finance teams don’t align with RevOps, they can hold back the growth of the company. They do this by not investing enough in the right customer acquisition channels, people, or processes.
By tracking RevOps data, finance teams can better understand how customer acquisition works. By working closely with RevOps, finance teams can make sure there are enough resources focused on growing the business.
Finance teams need to work closely with IT to ensure every department has the right tools and systems to get data for better decision-making. If finance and RevOps are not aligned, finance may not support RevOps well in their digital transformation.
By understanding the details of RevOps, finance teams can make their work more efficient and accurate.
Real-time customer acquisition data can help finance teams better explain budget variances. They can help customer acquisition teams make smarter decisions and provide them with the resources they need for growth.
This knowledge also helps finance teams be more proactive and helps them create better reports.
When building 16-week cash flow reports, finance teams often focus on recommending cost-cutting measures. However, with the right customer acquisition data, they can also identify revenue-generating opportunities. This can be done by focusing on sales and marketing channels with the lowest CAC and fastest payback periods.
By doing this, finance teams can go beyond just controlling expenses. They can play an active role in driving growth by ensuring resources are used to support long-term, sustainable revenue growth.
TL;DR
Finance professionals who want to get ahead need to understand RevOps and the customer acquisition process.
Knowing the customer acquisition process helps top-performing PE sponsors make better deals and gives them a clear plan to grow their portfolio companies and create strong returns.
Finance teams that work closely with RevOps can go beyond just controlling budgets and reporting numbers. They can actively help drive long-term, sustainable revenue growth.
If you are a finance or RevOps professional, I’d love to get your perspective on this.