As the saying goes, revenue cures all ails. The first value-creation opportunity Atlasview looks for in a business is organic revenue growth. There are often low-hanging fruits to increase the top line without needing to invest additional capital.
Here are the 5 value-creation levers, in order of priority for us:
1) Pricing Optimization
We love businesses that have a high degree of pricing power. Increasing prices is a surefire way to grow revenue, improve margins, profitability, cash flow, and create value.
Beyond simply increasing prices, we often find opportunities to change the pricing logic to better match the value customers get from the product. This might mean tying pricing to usage, cost or time saving, revenue generated, or adding additional fees for various extras.
2) Customer Expansion
Sell existing products to existing customers. It’s always easier to sell to your existing customers. Businesses often have a portfolio of products, but most of their customers use only one or two products. Getting customers to purchase multiple different types of products from you, aka cross-selling, is a fantastic way to increase the share of wallet and the stickiness of customers.
Another form of customer expansion is to get your customers to buy more (or better quality) of what they are already paying for, aka the upsell. Whether it is buying more volume, usage, or a higher tier of product/service, all are ways to increase customer contract value.
3) Market Penetration
Acquire new customers in an existing vertical. We love businesses that focus on a single vertical for many reasons - one of the main reasons is that customer acquisition is far more efficient. If the business has a long history of excellence within a single vertical, this should result in a high sales/marketing ROI.
We look for opportunities to revamp go-to-market initiatives to generate new leads. Initiatives may include cold outbound, search engine optimization, email marketing, and paid advertising.
4) Market Expansion
Expand into new customer verticals. Perhaps there are adjacent verticals that would find significant value in the business’s products. This might make logical sense if a business has already maxed out on its core vertical (where the 3rd point above may not yield any results).
This could also entail geographical expansion. Perhaps there is less competition overseas or in another region, which may result in a great ROI.
5) Product Expansion
Develop new products to offer both existing and new customers. This lever comes with the greatest risk as capital investment is required to develop new products. Not to mention the added risk of uncertainty on whether these new products will sell.
In these scenarios, we look for a level of pre-commitment from existing customers for new product development. As we've previously outlined in our approach to organic reinvestment, we want a clear and measurable payback period.