In this episode...

Bill: Thank you for joining the Missing Half podcast, where we're discovering what's missing in private equity and AI. Today I'm joined by a very special guest, Ed Marsh. He's the founder of Ed Marsh Consulting and has been in industrial businesses since 1992, with international experience across Germany, Brazil, India, and Nigeria. He's a Johns Hopkins graduate, a former grunt, NACD and PDA director-certified and the creator of the ORE and Quality of Sales Frameworks. In this conversation, we'll talk about private equity's growth blind spot, how sales math can expose weaknesses in the investment thesis, and why AI amplifies strong teams but does not fix weak ones. Ed, welcome to the show.

Ed: Thanks so much for having me, Bill. I I love the topics that you tackle, the people that you have, and I'm really looking forward to this conversation.

Bill: Yeah, and first of all I just want to start. this is close to our nation's two hundred and fiftieth birthday. And I just wanna thank you, just completely heartfelt for your service and the sacrifices you made in serving our country.

Ed: That's kind of you, thank you. And I'll note all three of my sons served as well and my dad and my grandfather, so it's a bit of a family tradition which is kind of unusual in the northeast.

Bill: Yes, no no doubt. Yeah, my my grandfather served in the Pacific in World War Two. And so yeah, we share some of those items in our heritage and legacy. So well, Ed, let's jump right into it. Let's talk about your background because it's not traditional, I would say, to to end up where you are, which what does that mean anymore? I don't know, traditional, but maybe just talk about like how you started in in that university experience to the military and now into consulting with some pretty heavy hitting private equity firms on how to move forward.

Ed: Yeah, so I won't ramble. But kind of backing up, one of the things that always fascinated me as a kid was architecture because architecture sat at the intersection of kind of hard science, linear left hemisphere kind of stuff, and design and art and vision and right hemisphere kind of stuff. So I was gonna be an architect, decided I was gonna be an engineer instead, went to school, didn't enjoy it, knew that I was gonna go into the army running raids and ambushes, and so I did that and then decided to get out of the army, to be around for my family and wanted to learn business. And at the time it wasn't as clear as it is today that there's kind of this path through an MBA for for many junior officers getting out. So I I figured I'd learn how to sell. And to the consternation of some of my family, that's that's what I undertook to do and and did quite well at it and eventually kind of fell into the industrial space, became partners with a German company in the US operation. Got worried about the value of the currency, went to India and set up a company in India to take used machines from the US to India. Did a lot of different things along the way and eventually got tired of kind of running a business with employees and dealing with all that stuff. And so I set up my consulting business, which originally was helping US manufacturers export. Then we discovered that, well, if we're gonna do better international marketing, we actually have to start doing some domestic marketing. And then if we're gonna market and generate a ton of leads and nobody's selling we have to do something about the sales team. And that kind of then brought me to this integrated model built on the manufacturing efficiency concepts of OEE, that I call ORE, overall revenue effectiveness. So that's kind of how I ended up where I am today.

Bill: So Ed, I love this perspective you're bringing to the market. And I I've also been an operator and owned businesses. I had a business with four hundred employees in a prior lifetime. So I understand as you do the operator's mindset that you, it's not just about getting an approval in a boardroom. You actually have to go do it, execute it, evaluate it, see it through all of those steps. And I I believe and have seen most, the most effective consultancies are run by people who actually have experience. And I think that's even truer today because now you can go to ChatGPT and it can make you sound like you know what you're talking about. But to have actually walked through that process, how valuable is your operations experience now as you carry that forward in your consultancy?

Ed: I would say, you know, it's I'm biased obviously, but I agree with your with your premise. I think it is valuable. But I'd also argue that if you talk about strategy, it's hard for a strategy consultant to really stick around for the flash to bang to see if there's actually a material outcome that is, you know, clearly attributable to the consulting work. The interesting thing about marketing and sales, even with a relatively long sales cycle, call it six to twelve month sales cycle. You can tell in somewhere six, twelve, eighteen months whether it's making a material difference. And so that means not only is there kind of traditional operator experience, but I would say it's contemporary operating experience. It's not just kind of this theoretical slide deck kind of stuff, but it's doing it today. And I do the same things in my business. So there's a very real and kind of practical tie in there.

Bill: No, I love that. Let's switch gears a little bit here and get right down into PE. I mean, private equity is known for its models, its playbooks, its frameworks. I mean, there's the Wharton School. There, I mean, there's hundreds of years of textbooks, of schools, of spreadsheet models around the PE operating and investment playbook. Yet when we go and look at organic growth and actually improving the exit value of of a investment, there is so little. Maybe talk about what you're seeing and and why there's a a tremendous gap in a organic growth playbook for private equity.

Ed: Yeah, I think it's remarkable the dissonance that exists between the way they visualize and execute on four different levers of growth. And Zorian Rotenberg, who's active on LinkedIn, he's a sponsor, I think mostly in the tech space out of Boston. But he's got a lot of great info on LinkedIn. He highlights this. So basically, if you've got four levers, you've got financial improvement and that's second nature for them. You've got operational efficiency and that's second nature for them. I mean, how many, you know, whatever black belts do you have wandering around that can fix that stuff. The inorganic growth piece is second nature. They they run through the valuation models as long as the strategy for the platform is solid, the inorganic growth piece is pretty easy. The organic growth piece, however, is the one that if you look at most of those bridge slides or the waterfall slides, that's responsible for a substantial amount of the value creation to drive the IRR, so in other words within a certain timeframe, that's just somehow left a chance. And you know, there's a little bit of quality of earnings research that's done during diligence, but most of that's a rut a kind of a a a backward looking snapshot. Do they have contracts? You know, are the, is is there deals in the pipeline? Can we pick a deal or two and ask some questions about it? It's not really understanding whether the sales team can execute on the investment thesis going forward, which is fundamentally the organic growth piece of that value creation is fundamentally about the ability to win net new logos and maintain and grow margin. And those are fundamentally two areas that most industrial sales teams are very weak at, and most industrial marketing teams. So across that entire GTM function. So I think the key then is to simply sensitize sponsors to the fact that it would be beneficial to them to bring the same kind of rigor that they apply to the other three levers to the organic growth lever. But then that means they need the models, the toolbooks, the you know, the spreadsheets, all the other tools that they successfully apply in the other places to apply around organic growth so that they can run the same kind of a playbook on it.

Bill: When you look at the current state of private equity pursuing organic growth, it it feels to me like it's kind of the old school way of they pick a path, they pick a thesis, and then they just, they hire a person and then they charge up that hill. And unfortunately for probably eighteen to twenty-four months, which in a hold period is forever. Right? But but it's, is is the problem in the formation of multiple tests, the lack of imagination to develop those tests and be disciplined to test them? Where are they falling apart in that initial you know, whether it's the due diligence phase or the testing phase, where is it really all falling apart?

Ed: So I think that, and this will be controversial, but I think fundamentally there's a contempt for sales as a function. And that contempt for sales, I think, bleeds over into and and to marketing to a large degree. It bleeds over into the the kind of the the unstated, deeply embedded belief that any knuckle dragger can do this. And you know, in contrast to the sophisticated financial modeling, anybody can go out and knock on doors and vomit up information about our products and services. I think fundamentally I I I would disagree a little bit. You said they pick a path. I'm not sure they do. I think often what happens is they've got some warm bodies, they've got a lot of product and service information and they expect that if they just go out and blab about that, you know, ad nauseum to as many people as possible that somehow it's gonna grow. And I think that fundamental disconnect, expecting that somehow it just happens automatically by virtue of of flapping our gums, is I think where the breakdown occurs.

Bill: Interesting. So it's almost like they treat it like alchemy and…

Ed: Yeah, exactly. Instead of the opportunity to create alpha, I think you're right. They treat it like alchemy. And and you see it on the marketing side, I'm sure you see it all the time where you've got some company that started a blog ten years ago. Their website pages talk about the fact that they were founded in nineteen twenty seven, they got sixty three thousand square feet, they got four of these CNC machines. The blog is like a newsletter talking about a new hire and it comes out once every eighteen to twenty four months, depending on when somebody feels like it. And and they think somehow a little bit of fabricated SEO and a couple of new blog posts is gonna drive demand generation and awareness success for them and it's just not going to.

Bill: Well, and when we think about and that gives me a totally new perspective and I love that because you know, the Missing Half is trying to get different perspective and see what's missing in the market. And I do think you've unearthed a couple of things. One, the contempt for salespeople and marketing people is a hundred percent real. There there's no two ways about it. I was on a call with a portco CEO a couple months ago, and he spent half an hour complaining how much he was paying his salespeople. He didn't like the commission structure. My dad, the way he set up his businesses, he loved writing commission checks because he knew that they were driving revenue, he was making money, and he wanted every one of them to make as much money as possible because he knew he was making money.

Ed: But maybe they were both right. Maybe your dad and their portco CEO were both right. Maybe your dad was paying people who are who are delivering successful growth. And maybe the poor co CEO is paying people according to a model that just rewards showing up and collecting more orders from the same companies without getting new logos, without increasing margin, without any of the fundamentally important stuff to grow the organic revenue.

Bill: True. And and that's that's probably one of the things. So when I think back to the conversation with the portco CEO, there was a component of, I think there were probably two components to the the complaint. One was the structure, the compensation structure was not completely aligned with driving value. The other half was based on the presupposition of contempt for salespeople. Right. So the you have a little bit of both there, but no, so that's interesting. When you think about this disconnect with an organic growth strategy and real competency, moving it from alchemy to alpha, right? I think we've come up with something here. Where do you see that disconnect starting? Is it in due diligence? Is it post-close, or where in the life cycle, if we assume, you know, we start and we want to have a five to seven year exit, et cetera, where do you see the disconnect start? Where does it like really grow and accelerate and become a problem? How how does that–

Ed: Well, if I'm if I'm correct in what I've said up to this point, then I would say the problem starts on mindset long before diligence, because diligence isn't even looking at the right things necessarily. Certainly, once diligence is passed, and just because I mean I would I would point out that a an acquisition target, if you run proper what I call quality of sales diligence on the GTM motion, you may find that there's significant gaps and that doesn't mean it's not a good acquisition. It might fit perfectly from a strategic perspective. What it means though is first of all, you go in knowing that it may impact your valuation model. And second of all, you've got a very clear roadmap for what needs to happen during integration so that you actually get traction quickly as opposed to just kind of sit back and hope that works.

Bill: No, I love that. That's that's a great perspective. And if we can shift that mindset, do you think that mindset is changing currently? Or are we still way early in an adoption curve for private equity? We keep hearing all these articles and all these people talk about, you know, private equity is in trouble. There's a huge glut. It's stagnant. We need to clear it out. Do you think the current crisis, whatever that means in private equity, is going to drive more awareness and adoption, or do you see the same old, same old playing out for the next several years?

Ed: So I think it's absolutely creating awareness, but the awareness that I see created is around, you know, often they'll hire a VP of sales who goes for two years and doesn't deliver. They say, okay, it must be that person. They hire another VP of sales using the same criteria, you know, industry experience, whatever, goes another two years, still doesn't deliver. So now we're four years into our, let's say, seven year runway. Now the pucker factor's really starting to go up. And at that point, awareness increases. Wait a minute. You know, Einstein said something about doing the same thing again and again. Probably we better think about doing it differently. They don't necessarily have to toolkit to to reach for the right lever. And of course that's I think a large part of the value that I can create for them. The unlock will come, I think, when they back up and realize they can during diligence anticipate exactly what's going to happen and therefore proactively address it so they don't lose two years and the IRR isn't jeopardized.

Bill: When you think about the turnover that occurs in Portco CEOs, usually at that three or four year range, whenever they have the board meeting, when organic growth isn't happening, you know, we're not hitting our EBITDA targets, and we're, like, the arrows are just not pointing the right direction. Is this not the ultimate hedge? Like when I think about the the bets that are made with PE money. And they hedge on all with all these other things. Is not ensuring that you have organic growth, new logos, and margin expansion the ultimate hedge for that portco CEO to see that deal through to execution and get their payout right at the end of it? But it's the one that people spend the least amount on.

Ed: Yes, I completely agree. On the other hand, I don't have the savvy or expert expertise to sit down and negotiate revised covenants with a commercial banker. And so I mean to say that it's only GTM I think is probably unrealistic. However, I think it's probably the biggest opportunity that's unrealized.

Bill: And if I would rather go into that board meeting at thirty-six months with positive organic growth as the narrative, right? Like if you're gonna pick your story, this is the story we wanna be in. And certainly there's other that that's not the only thing. But if you don't have growth and the arrows aren't pointing the right way, a lot of the other things you're just not gonna be around as that portco CEO to talk about and sort out. Somebody else is gonna clean up that mess.

Ed: Yeah, I think that's true. And of course, it's not just the fact that the revenue errors are not going the right way, but it's that they've sat through thirty-six months of your board presentation showing pipeline reports that indicate that the turnaround is just literally one month away and everything's gonna be milk and honey after that. And and that goes back to the fact that there's such a fundamental lack of awareness of what sales methodology is, how complex sales happen, what's going on with large buying teams, understanding growing risk aversion. Understanding the complexity of a matrix buying team, all that kind of stuff that requires extraordinary business savvy, strong consultative sales, good understanding of business finance, and a number of other attributes among the sales team that often are missing.

Bill: So we've talked about this from a theoretical construct and kind of like from a top down. Maybe let's take, let's flip the script a little bit and think about a practical guide or some practical advice that we could give someone in the first hundred days or during due diligence. So, like, okay, theoretical, big picture, macroeconomic, let's drill down to okay, here's more of a to do list, more of a deploy people towards these items. Ed, if you had some guidance or practical steps, what would those possibly be for those private equity operators to execute?

Ed: I would say just like every other function of the business, it has to start with an audit. You have to create a baseline. You have to understand where your strengths and weaknesses are before you can hypothesize about a plan to put in place that might begin to to address those. And so I believe very strongly in whether we call it diligence or an audit or a quality of sales, whatever the whatever we whatever term we want to apply. I wanna understand in granular detail everything about the sales function and everything about the marketing function. And then I want to compare those to what I know is working and what represents, for instance, in terms of sales talent, I often talk about the fact that our expectation ought to be second standard deviation talent. And I believe very strongly that we can empirically identify who those people are. I wanna understand from a marketing perspective what's happening in terms of the sort of pre-awareness engagement that's so much more important in a zero trust, zero click environment that we live in now. And some of that stuff is difficult to quantify, but if all you're doing is looking at some, call it a you know a vanity metric like website traffic, you just don't get an understanding of what's going on from a marketing perspective. So I think we have to dig in, we have to get that. Once we get that, then we can prioritize and understand, you know, there's change management, there's acculturation, there's limits to budgets, there's changing priorities. There's a lot of stuff going on in that environment. So we can't come in and just wave our magic wand and change everything. We have to be very clear about priorities. Typically I would argue that there's a couple things that we can do in parallel. The first is probably related to talent and training and clarifying sales process, adopting a sales methodology, establishing clear expectations for accountability and opportunity qualification. And over on the marketing side, I would say we really need to have a plan for how we are going to reach buyers who don't click on information, who aren't using Google searches the way they used to, who aren't falling any longer into this trap of, you know, content, form, download, lead nurturing. How are we reaching those people substantively and consistently in order to create awareness so that as our sales team goes out to create projects, they're able to do so?

Bill: Well, and in today's marketing world, there are such opportunities with AI, with AEO, GEO, with ABM. I mean, one of the things, and we're probably not going to get into it today, but I really believe AI is bringing us to a point where enterprise-level ABM is available to the mid-market, to startups, and to private equity. And they just need to pull the lever. And we're not talking about, you know, 10 million dollar marketing spend. We're talking, you know, if you have twenty-five, thirty-five, forty-five thousand dollars a month, a full ABM program where you're going to become the authority and own your market and at least have mind share in the, you know, a large market, market share of the the buyers who are available, it is there. But you you have to be aggressive and you have to pull the right levers. You can't go and spend a million dollars on a rebrand and a fresh coat of paint and think all of a sudden it it's going to change. So Ed, I completely agree with that.

Ed: Yeah, and and and it can't be just more AI-generated emails yammering on about your features and benefits.

Bill: Yes. Yeah. AI slop is not the answer. The AI that I'm talking about is much more ingrained in the processes, in the identification, in the specificity, in those type of things. And one of the things we're finding that's working well is direct mail. Sometimes you need some type of pattern disruptor like a podcast, more video, direct mail, events are booming, keynotes, sponsorships, those are coming back or, you know, we're going back to the future on those. So it's the right mix, depending on the market, depending on your ICP. So there there's just a lot. We could, we'll have a whole other episode about that at some point in time, Ed and talk about that. 

Ed: Yeah, and and maybe we'll take a detour in that episode into Reddit. Reddit to me is fascinating because everyone I talk to denies they use it. And yet the market statistics shows that the vast majority of the market across generations, particularly rising generations in industrial engineering kinds of roles, are consistently using it. So somehow there's a disconnect there that we have to overcome. But I believe it's likely for many companies a place that they ought to be thinking about.

Bill: Reddit to me is like the fast food of online. At one point in time or another, we all backslide and have fast food from our youth, right? It's not good for us. It's not healthy. We feel terrible afterward, but it's nostalgic. Reddit feels, and then we would never admit in public that we eat a McDonald's cheeseburger, right? I feel like Reddit is the same thing. It is the McDonald's cheeseburger that everybody uses it, but nobody wants to talk about it. And I and I don't know why that is either, but that is true. 

Ed: Yeah, and and it I would also argue is probably the most authentic place for review feedback that there is. Nobody's paying you to put a review on there, nobody's offering you a month of credits, you know, none of that kind of crap that happens with with other sorts of sites. The moderation is around community standard, it's not around whether they like the message. I think that's why people find it appealing.

Bill: Yeah, authentic truth and authority is what the, that AI is bringing us faster to that moment because we can scan all available sources simultaneously. So not that we're ever going to find pure truth on the internet or through AI, but we're able to find an average of all information out there more rapidly. And theoretically, like the central limit theorem says if you sample more than 30, you're going to have a average that approximates the average of the general population. So we should be getting closer to truth mathematically.

Ed: Truth is a, that's a fascinating philosophical topic, and and we won't go too deep, but I recently published a podcast episode on epistemological truth. And basically the fundamental premise is that I have my truth, a prospect or a client has their truth, and according to the epistemological definition, we could both be right because we both have evidence that we believe justifies our holding that truth. However, there's there's only one absolute truth. And it could be that neither of us have found it. But when we have these conversations about, well, that would work, no, it won't work for companies like ours, you know, it's it's it's hilarious because often those biased presumptions, and this goes back to the way the sponsor and the operating partner and the and the portco CEO all think about marketing and sales. Those biased assumptions are the product of very real experiences that we've had, even if they're not correct.

Bill: Sure. Oh absolutely. One of the things I think we have to overcome when we're, so like let's take some responsibility in our industry for the challenge that PE is facing with sales and marketing. A couple challenges we have to overcome. One, really bad sales management. You know, I call them like kind of the Annie Oakley. They go in and they're like, you know, shoot them up, we're gonna get it done. Big picture, rah, rah, re and no substance. The other, there's some other sales manager personas that are like so in the detail, never get out, never talk to customers, ma mathematicians, not sales leaders. So anyway, there's sales problems where they've been burnt before. And then certainly the the marketing industry is full of snakes. There's no two ways about it. And because like I was just on LinkedIn today and I was gonna click on a post because it said it could solve all my problems with three three Claude prompts if I just click if I just comment, you know, solve, they would send me and my life would all be better. So, of course it's true. And as soon as I'm done with this, I'm gonna click on it, Ed and that'll be that. But well let's talk, this maybe is a time when we can talk about AI and kind of shift into that conversation. Whenever you think about this movement into AI and ABM for the the mid market, what what do you think clients aren't doing very well and what should they be prioritizing? Maybe we can get a little practical here. What are some things they should be looking for to immediately impact the marketing effort, the GTM process with AI and what that should they absolutely avoid?

Ed: So I think at a high level they should be looking for addition to capability. I think to the extent that companies are looking at it, they're looking at it as a way to just kind of do existing things more efficiently and do more of those then more efficiently, instead of how can we step change our effectiveness by using this in a creative and different kind of a way? A good example is, you know, do you let AI in your CRM enrich a contact before your discovery meeting? That's using AI to improve efficiency a little bit. Or do you have a Claude skill that you've built or a plug-in comprised of multiple skills that does extensive research on the individual, on the likely members of the buying team, on all publicly available information, including press releases and SEC reports and everything else that's come out recently to understand strategic initiatives and and other priorities within the company and then put that for you in a distilled context around the problems that you solve and how you might want to approach it. That's a very different use of AI. We could say it's the same thing, but one will make that discovery call phenomenally successful. And one is just kind of table stakes. I'll tell you though, I recently asked a CEO of a company, I'm I'm helping to review candidates for sales managers of and I asked how important is it that this person be fluent in AI? I don't think that's really so important in our business, was the answer I got. So you know, again, I think it comes back to mindset. I also ask salespeople, as you know, on the occasions when I'm interviewing them on behalf of clients, to tell me specifically how they used AI to prepare for a meeting. And an astounding number tell me they didn't. I I'm I'm an old school salesperson, I know how to sell. So you know, there's there's there's no there's no replacement for a mindset that says it's not important. Once you get to that point, then I think using it in ways that augment as opposed to just replace is the key.

Bill: So two things I wanna I wanna pull on two threads are. Number one, when we think about AI and its implementation, specifically agentic AI and the automations plus now agentic today, I would completely agree with you. Ninety-five percent of the conversations I have with CEOs are about how are we gonna reduce costs, how are we gonna eliminate overhead, how are we going to reduce administrative friction in the business? That that's it. There there is very little imagination or curiosity around how do we use this to improve our unique value proposition? How do we create value add that'll resonate in our ICP? How do we apply or leverage a partner that can utilize AI in the GTM function? We're having to surface and say, well, have you ever thought of this? And they're like, that's an interesting idea.

Ed: I think you and I both recently saw an article in Harvard Business Review that talked about exactly that sort of a thing. Not just using AI to reduce cost, but using AI to drive growth. And it was specifically, I think, talking about wealth managers, but essentially you could just replace the term wealth manager everywhere it appears in an article with whatever industry you're talking about. And I think it applies.

Bill: Yes. So the other thing you pulled on there, and this is something I'm struggling with. And we're trying to wrestle with as an organization as we take AI to the market in one of our business units, is this super user concept. So we're trying to really present well to CEOs because I agree that you need to hire people that are using AI well and who are self learning, implementing those type of things. But it feels to me like we're at a moment where the enterprise needs to actually plant a flag in this, invest money, and say, okay, we believe this could be part of the sales motion and the data augmentation process and scale it across the entire organization. Well, if we leave that to the sales manager and the salespeople to implement an agentic AI system across the sales team, I do not want my name tied to that. And no disrespect to sales managers, but they're very good at selling and those things, most likely their core competency is not in agentic system development and distribution across people. Is it time for enterprises to put resources and budget and emphasis on actually investing in these systems as opposed to expecting team members to show up ready to use like captive systems that are on their machines in their environments?

Ed: So I'd answer that a couple of different ways. And first of all, one of my clients is a company that's using AI to create bespoke software for enterprise manufacturing operations. So I'm seeing it kind of on the factory floor and I'm seeing it in the GTM functions and I'm seeing it in how I use it and how friends and family use it. I would argue that the resource that needs to be committed that's much more important than money is mindset. In other words, I think the board and the ELT and the mid-level managers all need to believe that this is a substantial opportunity and acknowledge that none of us know exactly how it's going play out. There isn't a clear path for exactly how to start or what the roadmap looks like, but simply sitting there rubbing our chins and contemplating it is certainly not not the appropriate way to go about it. So if there's a substantial resource commitment in terms of management time and attention and enthusiasm and support for experiments and backed up by some modest financial investment, I think that's the way to go. At the same time, there's also, I mean, l if we talk about the let's talk about CRM. Everyone's CRM data sucks. And so how about, fine, keep whatever CRM you've got that people are familiar with, but maybe you overlay on top of it one of the new models. Like Day.AI, for instance, which is essentially becoming an intelligence and context layer almost like a supercharged CDP, what CDPs promised to be some years ago, that sits over top of the CRM and you can almost let it run independently. So if we think about inaccurate forecasts, fundamentally coming back to the fact that there's a philosophy we qualify in once and we never try to disqualify, and salespeople have happy ears and they don't understand. You know, they ask quantitative questions like do you have a budget? And they don't ask qualitative questions like what projects are stack ranked ahead of this and competing for the same money in order to really be able to qualify deals. If we accept that premise, then how about if we create a skill within a a an AI-first CRM like Day that runs, say, medPIC, a medpic framework on every opportunity, takes in every email, every recorded conversation, every interaction of any sort. And begins to fill that matrix and test our hypothesis about the degree of qualification. And then if we take it a step further, and if we use an empirically accurate tool like salespeople evaluations and assessments that I help companies use to understand strengths and weaknesses at the individual level, then we can take the deeper insight about that person, interpolate that into that AI analysis of the opportunity qualification and now we end up with great coaching opportunities and a substantially more accurate forecast. And all of that can be done without the salesperson ever even having to do anything with it. It can basically be done in the background at an operational layer if you've got some sort of a a you know a revenue ops function.

Bill: Yeah, so I think when we talk about resource commitment, we can look at a new model with AI. And we can in a week or two come up with a a use case, another week or two put that pilot project in process with an MVP. And then we can start testing rapidly. And we're not talking about the two, four, six year commitments of an ERP or an IT project. And the thing that I love about this space is we're seeing actual returns, cash on cash, of three to seven X investment in a year. So these are not like, if you invest this now, in three years, it starts to turn. Like it's now. And the the impact is felt and it is significant. We just need people to start saying yes, yes to the process more aggressively. And it's scary. None of us know. You know, I I just do what the AI tells me and I think it's good, but you know, we'll we'll have that battle at some point in time.

Ed: But how many CEOs do you talk to when you say, Well, you know, have you asked Claude, who's Claude? I mean if that's the the nature of the familiarity in the C suite, then it's a hard battle.

Bill: Yes. The awareness, what where we're seeing dramatic awareness and acute awareness is in AI search like AEO GEO. That is a a topic that is universally, I would say, understood because they know they're using Claude or Chat or Gemini to research specific things. And now they're concerned as to their effectiveness and showing up for searches related to purchases of their products or services. So that space in AI is widely accepted. The recent–

Ed: But how how many have backed up and thought, let let me say it differently. I think many think of the way they used to use Google. I'm looking for XYZ. And they now think people are using LLMs the same way. And they're not backing up and thinking about the question the people are asking the LLM. I think I may have this problem. Ask me some questions to help me properly diagnose it. And once we get to a diagnosis, then recommend some possible solutions. And once we've agreed on a solution, then suggest some possible vendors. So it's a very different kind of a search engagement and that requires very different kind of content. You know, and all all sorts of different things. And I I don't think that most have taken that step yet.

Bill: Correct. We're still seeing focus on what we would call top of funnel attraction keywords, like the industry or the product they manufacture, as opposed to how do I solve this problem? Oh this could be an answer. Here's why, the features benefit, like walking them through more of like a formal RFQ or a formal buying process that is touchless. Right. That that's where the shift has to occur. And we're trying to educate the market on that, and a number of others are as well. But it is a different process. And the the good news for those who invest a little bit of time, energy, and resources into this, early movers are winning. There's a tremendous opportunity to be first in your market today in this space and really knock it out of the park. So we're trying to encourage our clients to do that.

Ed: What's interesting is how many of your clients, if you asked, here's your EBIDTA Target, here's the gap, how many of these leads do you need to hit that? And ask them to solve for the funnel math for you, how many of them do you think would be able to do that?

Bill: 20% max, maybe 10. I mean, people don't think, because I I had a conversation with a company two weeks ago and they were like, Bill, why are you putting a target of $30 million of pipeline for this product line? We we don't we couldn't we couldn't deliver on 30 million. Because if we have 30 million in pipeline that's really good and really qualified, if we close 20% of that, that's the industry average. That's the real math that's gonna come home, possibly, not the thirty million.

Ed: But but think about what that means. If your sales team is so weak that they can only close twenty percent of qualified opportunities, how much are you having to spend on marketing to feed that funnel because of that poor conversion rate or or those you know series of poor conversion rates through the sales process? If we again, if we go back to thinking about this like we think about all the other functions or the way we think about OEE and manufacturing, I think it creates a a you know, a real awareness. And I see people sit back in their seats and take a deep breath when when suddenly that dawns on them.

Bill: Yeah, whenever you have that light bulb moment with a board or with a a a portco operating CEO and they see the math. I mean, these people are really bright and really good at math and really good at financial models. And as soon as you show them the model, and it usually takes about 15 minutes walking through that, maybe a half hour, and then it's like a it's it's like an epiphany. And they get it and they realize, marketing can be math. Sales can be math. It's not you know, Annie Oakley a and, you know, shoot up. It it's very…

Ed: And and when they see that based on the current performance that for them to ring the bell means each sales rep has to make seventeen thousand cold calls a year, they say, uh oh, we probably need to change something.

Bill: Yeah, we're doomed, right? There's the music in the background is dun dun dun, right? It's it's not a good moment. Well, Ed, we've talked about like the portco CEOs a little bit here, but I think one of the things we'd be remiss if we didn't talk about, and you and I talked about this in the pre-show, was we shouldn't let the boards off the hook because they are complicit in not getting focused on GTM and sales. Could you maybe talk about your experience and what you're seeing with the boards and why they need to change their mindset and and get on the right program here?

Ed: So it's an interesting wrestling match because clearly the board is not there to operate. The board is there to provide governance. However, I would argue that in order to provide governance, you have to be able to ask the right questions and you have to be able to evaluate the answers you're getting. And I I wouldn't be able to do that really well as an audit committee chair, because that's not in my wheelhouse. And I don't believe that a typical finance or engineering person can do that particularly well in terms of GTM. So I would argue that you need contemporary operational experience on the board, perhaps as an independent director, who can ask the right questions, who looks at the fact that we're consistently talking about a 20% close one rate, but we've got 60% of deals that end in no decision. Who can ask the questions about, what is the coaching that's being done to increase our success rate from a discovery call to a qualified opportunity? Those are just like, you know, days receivables outstanding and current ratio and all those kinds of things that are fundamentally second nature for finance people, those are the kinds of things that are second nature for strong GTM folks. And if the board can only look at the, you know, the the deck slide that shows key deals in the pipeline and some kind of a graph that's up and to the right about, you know, things are going great even though revenue is flat, then all they'll do is get frustrated. They can’t, they can't exercise the proper governance. It's that's really the topic I wrote in Private Company Director a couple of years about that a couple of years ago about that you need operators, operator experience to provide governance.

Bill: So I I completely agree with that. And Ed, I think maybe this is an opportunity for us to take a practical step and maybe walk through because what you just said is so true. And let's say someone's listening, let's say there's a a board member or a portco CEO and they're like, okay, this makes sense. This resonates. What are some practical things or what would a sales governance model look like from 50,000 foot to kind of hopefully create that epiphany moment, that light bulb moment for them? If these were some things they should look at or some frameworks you would recommend or your framework that you would walk them through at a very high level to kind of get those wheels turning for them to think about proper sales governance?

Ed: So I think we pick a set of KPIs and you know, not pipeline and not website visits. Goodhart's Law tells us that the the behavior will respond to the KPI. And so we need to make sure that there are substantive KPIs that will give us a a leading sense, but also give us a foundation that we can then work to improve conversion rates on. So if if you had to pick two on the sales side, I would say it's new logo first meetings and new qualified opportunities. Because if you look at those two and we've got strong definitions for what each of those means, then a lot of other things have to be happening correctly in order for those to work. And ultimately, they'll drive revenue. If on the other hand, we're tracking those and those are not doing well, then it gives us a fairly easy starting point to work backwards and troubleshoot where the root cause is along the way.

Bill: No, I love that. And ultimately a cure all for many, many problems is new logos. New logos, right? I mean, if you wanted to pick one thing, like if you had to pick one, that that could really do it. And it's especially for the sales function. I mean, customer service, you want retention, there's other KPIs for other divisions, but for sales, they need to bring in new logos. I love that. That's a great practical set of steps that someone could look at really quickly. And get started. And certainly–

Ed: And we we wouldn't tolerate a controller that can't close the books until two months later. So why do we tolerate a sales team that can't get meetings and new logos? I just don't understand it.

Bill: Yeah. One of the things I've seen many of these portcos fall into, they have these quote unquote eagles who are responsible for a large book of the business. And all they do is maintain the current clients. And that's where I can agree with the portco CEO complaining about how much that person makes, because they're not really a salesperson. They're a customer service representative. They're a relationship manager. And maybe that's a a definition and label problem or so that but new logos are what matter and we have to drive those through the door.

Ed: But there's cascading consequences. They look at the attributes of that person. If they believe that person is their top salesperson, then they look at their attributes and they try to hire people in in that image. And so they end up with more people that just wanna be friends and do a donut run as opposed to do the hard work of winning new logos.

Bill: No, that's so true. One of the things we really try to preach is that whenever we come up with a new GTM motion, we need to test it. And having your number one salesperson who is that quote unquote order taker who handles a couple of like whales is probably not the right person. You need hungry, like people who love the phone, people who love to get on the plane, who want to go, who would just want to like full attack to to test those initiatives for new logos because they will almost always fail just by trying to have that eagle, whatever you want to call them, right? The the whale hunter, try them.

Ed: I would argue if you have an average person do it, you're gonna get a distribution of average results. On the other hand, if you have second standard deviation sales talent and you understand the strengths and weaknesses against 21 sales-specific competencies, then you can understand who's going to be able to execute on it. And and if it doesn't work for them, you'll understand fairly reliably whether it's the motion or the person. You can kind of you've got a much better diagnostic.

Bill: No, I love that. And I I would like to, I would think I would love to really dive into that conversation about those twenty one characteristics at some point in time because that's I I'm not as aware of that level of expertise in that space as you certainly are an expert at. But that sounds fascinating to me. I always love the math that comes along with these things. They're not just smoke and mirrors. There is real math, there is real science that we can apply.

Ed: Yeah, I'd love to talk about that at some point. We could also maybe tackle portfolio operations groups. You know, beautiful in theory, but I'm not so convinced great in practice.

Bill: No, that that would be a great topic as well. Well, Ed, we are coming close to our hour here and I want to make sure that we land this plane with we are all about shameless plugs. I want you to talk about your consultancy, your ideal clients, what you do for them, where they can find you. It'll also be in all the show notes, all the social posts, et cetera. But I'd like to give every guest an opportunity to verbalize that and walk through their their pitch.

Ed: Yeah, so my company is Ed Marsh Consulting. The website is Edmarshconsulting.com. I'm on active on LinkedIn, Twitter, and YouTube. And I work with middle market sponsors and industrial portfolio companies, solely focused on revenue growth and primarily organic revenue growth. Obviously, some governance and strategy leading up to the marketing and sales and success piece. The companies that I enjoy working with are the ones that are committed to change. And that's why often working in the private equity space is more satisfying than working with, you know, some family-owned businesses that think they want to, but just don't have the emotional strength to overcome some of the barriers that exist. I like working with folks that want to get better, who are open to, you know, respectfully delivered insight and criticism and embrace it and we challenge each other and we work together to achieve a better result across that GTM function.

Bill: No, I love that, Ed. And certainly your you're accomplishing that. Your advice and insight here today have been invaluable. And I can tell that there is a a rich history of performance in the market to arrive at some of these conclusions and perspectives that you only get with scar tissue and time in the field. So we appreciate that. Well, Ed, thank you so much for joining us today. I really appreciate the conversation. Looking forward to visiting on your podcast as well in the future and talking about some topics there as well. But thank you so much for joining us today.

Ed: This has been great, Bill. Thanks for the opportunity and for the forum and for the good questions.

Bill: Thank you for joining the Missing Half podcast, where we're discussing what's missing in revenue growth for private equity. Like, share, subscribe. Have a great day.