Episode 65: Josh Schwartz of Growth Factors on Navigating Growth As An Operating Partner

Episode Transcript  

Shiv: All right, Josh, welcome to the show. How's it going?

Josh: Hey, doing good, man. It's been a crazy week. I've got a seven month old teething baby who's kept me and my wife up all week. So teething led to cold, cold led to ear infection. So I'm not, I wouldn't say a hundred percent of my game today, but like, this should be good though. Yeah.

Shiv: Yeah. That is, I've been there. Very different start to a podcast than usual. I'm sure there's people listening with young kids that totally identify with that. Yeah. 

Josh: Yeah, yeah, for sure. Or if not, in the future, you know.

Shiv: Yeah. Or in the future. Exactly. Yeah. So well, with that, why don't we introduce yourself? Like, what do you guys do at Growth Factors in your role? And we'll take it from there.

Josh: Yeah. Yeah, sure. So, my name is Josh Schwartz. I lead the go-to-market strategy team at Growth Factors, which is the operations arm, for Bregal Investments, which offers about six different private equity funds, globally, but most, the, fund that we work with the most is Bregal Sagemount, based out of New York City, raised about $7.5 billion over the past 10 years. Most recent fund, $2.5 billion for flagship, another $500 million for a small cap fund. We also have a credit fund inside of there as well. They boast kind of as like flexible capital for all types of scenarios. And my job as a go-to-market leader on the operations team is to help our portfolio companies realize those investments as fast as they can. We're trying to always increase MOIC, the IRR, help remove obstacles, miss the hurdles, give good advice, help with anything that we can. You know, to make that investment better, shorter, faster, that's a good way to put it.

Shiv: And in terms of your role, like you mentioned Sagemount and then you mentioned Growth Factors, like walk us through that. Like how do these two practices connect with each other and relate?

Josh: Yeah. Um, so from Bregal Sagemount standpoint, I think the easiest way to put it is that we've named our value creation team, our operations team, Growth Factors. Yeah. Um, and then from a legal standpoint, there's other stuff, you know, that we don't have to get too deep into, but what it does allow us to do as well is work with some of those other funds. Um, because in the value creation team, typically what you'd see is that they're paid by management fees. Right. Um, so do that typically mean you can only work with one fund, but what we've been able to do is work with, uh, Bregal Sagemount, uh, Bregal Sphere, which is our impact investing fund, BU, which is our fund based out of Switzerland and some of the other ones as well.

Shiv: And so in effect, you have taken the operating partner or operating side of a PE firm and it operates almost like a separate consulting or value creation team that has its own P&L that's separate from the private equity firm. Is that the best way to describe it? Because most PE firms actually have that embedded and it creates a bit of a conflict or trade-off at all times.

Josh: Yeah, I would say either way, you're to create some sort of conflict, right? Because I mean, in the end, what you really want to do is have incentives for the same program, we're all driving towards the same outcome, which is a great exit, right? So that's for everyone involved there. And you know, we have our reasons to do that, which is like, typically, when we get to do good work, do good business, people want to work with us more. And then, you if you're connected to the fund, you know, a lot of times the way that you're paid to that is through carry or other things. Right. So, it's all connected. Yeah. But there's pros and cons for both, both ways to do it.

Shiv: And walk me through the model a little bit. like Bregal Sagemount acquires a company. When are they bringing you in? What are some capabilities you bring to the table from the growth factor side? What are some core levers or pillars you focus on?

Josh: Yeah, yeah, thanks. So when do they bring us in was your first question. So a lot of times, however, we're jumping in pre-deal. So before it's closed, usually around LOI. Once we've got like a pretty good deal in hand, make sense to start getting us involved to talk to the management at the business, mostly to try to determine, you know, do we want to work together? Yeah, they they need to like understand our model and determine like, yeah, do they do we want like something that's not necessarily this heavy handed, but like has a lot of support. I think is a good way to put it right now. Everybody wants that. Some people just want the cash. Leave us alone. That's okay. Right. I think our model is, you know, a lot more, Hey, we have these people here to help you. Right. And if you need that, we're going to, we're going to get them involved early. So to answer your question directly, we're getting involved before the deal gets closed, helping to understand like the evaluation of the business, giving our opinion on the operators at that business and how we should evaluate it. Right. Because a lot of times when you're either going to bid up or down in a competitive process is depending upon what you believe the evaluation is and what's the opportunity at the business. Right. mean, know, bidding at 19, 20, um, times EBITDA is different than 22, 23 and no, like we had to decide, you know, what we want to do. Yeah.

Shiv: And how are you figuring that out pre-deal, guess, like, for example, on our side, we work with a ton of private equity firms and we'll do marketing due diligence. So we're helping them understand what is the potential on the marketing side and looking at the opportunities and adjusting budgets and things like that. So what is your approach? What are some of the levers that you're focused on?

Josh: Yeah. I mean, there's a lot of different things, but I'd say like in general, you know, the, a of, a lot of it comes down to the same thing. It's like, how do you get more leads? How do you convert more of them or how do you maintain and keep more revenue? Right. So a lot of times when you get into a business like this at the size that we're working with, which let's just say like normal investment for us, the company's somewhere between like 30 to $50 million in recurring revenue. Now they've also probably been around for 10 to 20 years. So they, and they also usually have like really great products, but maybe they could use some help on the go to market side. So that's like a really good fit from us. So just like you said, right? Like we can come in and audit the website. We can audit, you know, SEO, we can take a look at, win rate numbers. can listen to recorded calls. We can talk to the team to understand where they’re at with their pricing and packaging strategy. Is there something in from a discounting, you know, percentage or levers that we, that we could pull off? Right? Is the account management team maybe underdeveloped, you know, at the moment, or they haven't focused or prioritized, you know, upsell and cross sell in the past. So to answer your question, we kind of go across the spectrum from, you know, looking at marketing, you know, new logo sales, account management, customer success, and also into like the pricing and packaging world to help us determine how powerful we think those levers are. And then really, I guess, what's the ease of getting them done? Yeah, because like, I mean, maybe, know, like implementing Salesforce, for example, isn't going to be something that you do overnight, right? But, you know, potentially, you know, turning on, you know, a channel could if we already have a relationship there or, you know, going out and hiring our first few people in account management when it's never been done before. And those types of things can have an impact. Yeah.

Shiv: How do you figure out, like what's your methodology for figuring out what to prioritize? Because valuation plans, you can throw the kitchen sink at it. You can do management, can do revenue, you can do cross-sell. So how are you prioritizing between all of those avenues?

Josh: Oh my gosh. Yeah, I think it's really important to understand. You know how we even approach value creation. You know, and for us, it's, you know, kind of taking a look at it. We call it pillar by pillar office by, you know, office of the CFO office of the CRO office, the CMO. That's pretty normal, I suppose. But taking a like, like a tiered approach where we want to look at data, interview people at the business. And kind of bounce back and forth between those two things and work together to really determine what that is. Because, I mean, let's be honest, like lot of consultants and people like me, we walk into a business, we think we know everything. But really, the people that know the stuff is have been working at the business for a long time. They are in the day to day, they understand the business, right? So we have to make sure that we talk with them. We interview them, we really understand where they think the opportunity is. And that helps us lead us in a, in a good direction. I mean, I literally say, I interview hundreds of these people at these portfolio companies and they're, they're all the smart ones. I literally tell them, look, look, listen, I have no good ideas. You have all the good ideas. What my job is, to collect them, make sense of them, and then put a value to them. Right. So do put a calculation to it, right? If I'm going to drive more leads, how are they going to convert on the funnel? What does that mean for enterprise value? What's the impact of that? And to answer your question directly, that's where we determine if it's worthwhile doing or not, is the enterprise value impact of it? And then the difficulty, right? Because if it's high enterprise value impact in a short period of time, that's something we got to do. Right? And also if we have the people at the business telling us like, Hey, you got to do this, you got to do this. That's something that we got to do.

Shiv: Forgive me, I'm still trying to wrap my head around this process. I understand, let's say, the dynamic of our relationship with PE investors, because we'll come in, we'll make the recommendation, and then ultimately it's the board's decision to decide what to do. In this case, you are Growth Factors, you're partnering with Bregal Sagemount, and then are you captive to them? Are they the only PE firm you're working with? And then what happens with your recommendations? They then building their own value creation plan using your recommendations? Or are you involved in the value creation plan creation process? Like help me understand that distinction.

Josh: Yeah, yeah. I think a lot of times that's the difference between consulting and working in private equity is how serious are your recommendations taken? And then also the back end of it, what is your role in implementing those things and project managing those things and making sure that they happen? Right. So that's, I think, the big part about my job, is not just going in and finding it and saying like, this could be cool, go do this. Is that we also have to help them on the implementation aspect, the project management aspect and take a role inside of that sometimes. Right. So, you know, just looking at the size of the business, sometimes like we have to actually step in and get our hands dirty. Right. I was just telling you guys like, you know, just this morning, running a cold calling, you know, workshop for one of our portfolio companies doing the same thing, you know, tomorrow. It's for a reason. It's because, you know, we recommended or in some way someone has recommended, we need to build this team that does this, that goes, gets more meetings, that generates more business. And, you know, there's, there's somebody in the business that can do a good job, but maybe doesn't have as much experience as someone like myself that's been doing it for quite a long time. Right. So that's where a lot of that value comes in, right? It's like, we're not just saying, Hey, go do this, but also, you know, stepping in and helping, when necessary.

Shiv: And I guess when you're coming in and you're getting involved, even the part that I was questioning on the connection with Bregal, like, are you guys captive to them or are you working with other PE firms as well?

Josh: Yeah, so we're just working with, so like, if you look at the structure, there's Bregal Investments. Now, underneath the Bregal Investments, there's a bunch of different private equity funds. There's like six. We are captive to them.

Shiv: To that, okay, I understand. So in a way they've kind of just outsourced it and you're kind of running it. I understand that. And I totally get the need for project management and implementation and execution. Talk about the work that you then have to do on the people side because there's the value creation work. You're, I have experiences, especially when we come in, like we get in there and we're partnering with the CMO or CEO and sometimes it's perceived as a threat and other times it's perceived as a partnership. Talk about how you go about navigating that.

Josh: Yeah, my gosh, it's a great question. Typically, this is my advice to, you know, management teams. And we get asked this question all the time, right? It's like, Hey, how good do you think so and so leader is or whatever, right? I just tell them like, Look, the best leaders are not worried about us coming in. And getting them kicked out of their role or whatever. Okay. It's, it's the people that, typically are not open with themselves or are scared that we're going to, displace them. That's where we have issues. Right. So that, also tells you something about their capabilities and ability, because somebody who is really self-aware understands that like, these people are here to help. We make that very clear. Yeah. So we can always sometimes evaluate how good that leader is in that category based off of how threatened they feel by somebody like me. Because, hey, we're here to help. And all the arms and elbows that you can get, you should take it. So we see really smart people take it like that. Hopefully that answers your question. if you have a follow-up, yeah.

Shiv: Yeah, it does. Yeah. I I've experienced the same thing. I found that the best, the best leaders, CEOs, marketing leaders, revenue leaders are open to getting as much help as possible and have an open mind. Where we run into problems is when people feel like they're doing a good enough job and then six months later, they miss revenue targets and then they had told the board that they don't really need help. And I think that's kind of where you end up in like, know, pie in your face kind of moment.

Josh: Yeah, exactly.

Shiv: A lot of it's like, it's a lot of people that operate that way where they don't want the help. It's like a territorial thing. It's like that's their, that's their fiefdom, you know?

Josh: Absolutely. Yeah, I mean, I've had it happen a couple times. And don't get me wrong, I think that for a purpose. But usually, as we dig in, there's something that we find that just like, isn't right. You know, that could be data, that could be leadership style, you know, it be a lot of things. But yeah, I think the people aspect is really, really interesting, because it's a change management process, is really what it is. like, moving the leaders aside and like talking about like, how do you implement change, you know, a business or, you know, like massive, like we're talking like big change sometimes, right? We'll say to like, Hey, this company grew at 10% per year for the last 10 years. And we're like, Okay, cool. Well, we're double or triple that we're gonna grow by 20% or 30% for the next three, four years. And like, that's different, right? Or they could be in like startup mode. And we're like, we're like, Hey, this is a family run business mode. And once we come in, that's not the expectation anymore. Right. We need metrics. We expect updates. There's, you know, different expectations for leaders. Yeah. so there's definitely a change management process that goes on there. Right. Where, I think like, honestly, the best way to do that is to bring them along, you know, through your thinking, right. Make sure that you're, you're over-communicating with them. As in just like, for example, Hey, I found this, you know, I was going through the data I found this, you know, instead of making the assumption or like something like that, be like, Hey, like, what does this tell you? Right. And actually like show them that information and walk them through it. And like, we'll actually probably get to the better answer together anyways. And when somebody feels ownership, in the process and. You know, it feels like they've been heard that changes the dynamic of the change. Right? Cause a lot of times these are things that they're suggesting or that we want to bring to them that are like now their ideas, not ours. I think that's a really important piece, you know, like around what we do or in servant leadership or in consulting in general is like, you're not the hero. Okay. I'm not the hero. The people of the business are the here and they truly are because those people are doing it every single day and they have to go do a lot of the hard work, you know, and they have to listen to me, which it's probably not good anyways, right? So honestly, they're the heroes. Like somebody like me is just like, you know, pointing stuff out and trying to be helpful, but you know, they got to do the work. So we might as well empower them to do their best work.

Shiv: Yeah, that's the other thing I find is that inside companies, especially ones where it's clear that help is needed. The middle management or like more junior folks actually want mentorship and direction and want guidance from people who have been there and done that. And they can, they also can see the signals of things that are not working or strategies that they've implemented that aren't generating a return that they want. 

Josh: They're feeling that pain every single day, you know? Yeah.

Shiv: Yeah. And they're, yeah. And they're feeling the pressure of having to deliver on something and missing it. And then feeling accountable to everybody and worrying about their jobs and all that kind of stuff. So there's a bunch of other dynamics and I think it's more the leadership where the resistance is there. I've even seen it with CEOs, like, especially founders, like you founders can build a great business and then exit it. And now there's a professional board and there's pressure in different way, different expectations for reporting. And you don't, you're not used to having so many cooks in the kitchen. You're used to just leading it yourself and there's an identity crisis at play there. And that makes it harder too, because it's like that person needs to level up into becoming a professional organization CEO, not just a startup or like a founder-led business. 

Josh: Sure. Yeah.

Shiv: Yeah. It's a big, I think that's a big gap. I think, especially as people like you or our business, like we come in, I think it's about finding the right type of partners internally that can actually execute on some of those things. And I think by the end of it, you end up having a major transformation, to kind of make that transformation, you have to navigate people and the politics and all of that stuff as well.

Josh: Yeah, let's go back to like when you said, hey, when do you get involved? Right. And I was saying, it's so important to get to know the management team and right. And both sides are trying to decide if we want to work together. That is a huge part. If we want to work with someone, right? Is this CEO is this CRO is their leadership team? Are they going to come along with us? And also how open are they to this stuff? And I can tell you, like we've done a lot of investments over the years and the ones that work out the best are those ones. And it's not because we give the best advice. It's because they're open to it. They're open to change, right? There's less resistance and it takes less time to make change happen. Right? Because all the resistance typically does is to your point is six months later down the road, we missed the number and we're like, okay, what now? Okay, now we're open to the change. Right. But now we wasted six months and you know, typically our hold times are somewhere between three to five years. I most recently it was like 3.3 is average exit. And when you waste six months, you you just extended, you know, the whole period. Yeah. And your IRR just dropped. 

Shiv: Totally, totally.

Josh: So, and, and there's other, you know, a lot of times there's structure in the deal that you could have got hurt on all kinds of things. So in general, let's say what we're looking for during that, you know, management interviews and talking to businesses is like, you know, it's, it's the EQ, the IQ, it's the self-awareness aspect, now founders and leaders in the business.

Shiv: Yeah, I think sometimes it's also like, I think, you we talk about growth and value creation and all these different things. And I think one of the most understated elements of an effective value creation plan is actually consistently executing on it. And then just having a plan that the whole organization can rally around, it's clear who's responsible for what, it's clear what initiatives you're moving forward. And if you consistently move the ball forward, like one way or another, you're going to create enterprise value. But what ends up happening is like in companies, you have one idea that gets three months. And then before, you know, you shifted to something else and there's multiple people who have different versions. And so you don't end up creating. 

Josh: Yeah, the shiny object. Yeah,

Shiv: Yes. You don't. And so you really need true buy-in from everybody. So I think it's more about that. It's like, can everybody operate it as a team? And even if you disagree, you kind of talk about it. And then finally you commit to the decision, you kind of move forward. And I think that as a cultural tenant ends up making much more progress.

Josh: Yeah, couldn't agree more, man. That's a good way to put it. It's beautiful. Yeah.

Shiv: Yeah. So talk about like, are some of the now that we get into like the actual work itself, like as you close a deal, and you're brought in and you've better the deal, you built a plan, like what are the areas that you're focusing on post close?

Josh: Yeah. So, on the go-to-market side, I saying earlier that those are, you know, how to drive value through it's like the marketing sales, account management, pricing and packaging are the big things. So if you think about, you know, how that applies to like bigger terms, like in, especially in software, it's like, get more, close more, keep more. Like I was saying earlier. Yeah.

Shiv: Got it. like when you're looking at those avenues and like obviously go to market is a priority, but what are some of the other major areas that you're kind of looking at?

Josh: Yeah, so in totality at Growth Factors, we also have other pillars outside of go to market and pricing and packaging. So we do also do as a service M&A. So it's inorganic growth. We're also doing talent or recruiting as a service. So we've hired hundreds of people every year back into our portfolio companies, anywhere from C-level executives down to entry level salespeople. So I actually spent a lot of time or historically have spent a lot of time there as well. And we also do some things on like culture and DEI and things like that. So, but I'd say biggest things that you'll see, yeah, or go to market pricing and packaging, recruiting and M&A.

Shiv: Yeah. And one of the things that you had said is like 70 to 80% of the value built at exit is through go to market. Can you expand on that?

Josh: Yeah. Yeah, we did a study a few years ago and you know you can do like an enterprise value, you know, calculation, you know, in the end and where does it come from? And a lot of times if you just understand, you know, how a company is evaluated, it's, you know, it's an EBITDA number growth percentage, right? And there's some sort of magic number of, you know, people talk about like the rule of 40 a lot, right? So just as for example, like 20% EBITDA and 20% growth. It's interesting, but here's the scenario. Okay. If I have 50% EBITDA and 10% growth, what should I try to do? Like, should I go down to 40% EBITDA to get 20% growth? Or like, what's the right mix? And to be honest in the market, there's a correct evaluation there. You'll see the multiples expand at certain levers of that because they're, and they're basically saying like, for example, Hey, your EBITDA is too high. Your growth's too low. You'd be better to actually spend that money because $1 in the bank is a value that won, but you know, a dollar of recurring revenue could be a value that, you know, 10, 15X that whatever. Yeah. 

Shiv: Completely agree, yeah.

Josh: So back to the point is like a lot of times it's where, where to spend it. And that's where we're trying, what we're trying to do. Right. And I think you hear this in the market today, right? It's like, your money the right way. You know, the, days of just burning cash or over right efficient go to market. So I think a lot of times in our plans, what you'll see is it's okay to do that, you know, to burn some cash or to actually burn cash, but like drop EBITDA down below where we got it in the first couple of years. Because what you're really trying to do is cause a J curve inflection on growth. And, you know, you got to try stuff. You got to make investments into growth, you know, to get the flywheel going. So to that, I guess the point is, trying to find the right balance between those two things, between EBITDA the business and, and growth rate and doing it in efficient way. And that's where I think a lot of that go to markets, you know, value comes from, you know, at our exits is like fine tuning that right. Deciding where to do it. Finding where there's inefficiencies in the process or revenue leakage, filling those gaps. And I guess like the small knob turns along the way. Yeah. can give you a lot of examples of, of the knob turns for sure. Yeah.

Shiv: Yeah, yeah, I think that the point about a dollar in the bank is worth just $1 on exit. Whereas if you have $1 of recurring revenue, it's worth $7, $10, $15, even $20X, you know, the type of business that we're talking about on exit. It's such a great point. I think that's one of the things that we try to preach is also that just if you know, for example, you have great LTV to CAC ratios or great CAC payback periods, you can be more aggressive because you know that that money is going to find its way back to you. We find that a lot of companies, like we once had a client that had $200 million in cash in the bank. 

Josh: Sounds like Apple, yeah? 

Shiv: It was a large, large business, but it's a ton of cash for a company of their size. And they were not a public company yet. 

Josh: Oh my gosh. Yeah, you're sitting on a gold mine, right? 

Shiv: And I think a lot of companies may not look like that exactly, but they do have like EBITDA where it's 30, 40, 50%. And the growth rate can definitely be inched up. I think, especially if you're owned by private equity, you're kind of more hesitant to deploy that because you're hitting your rule of 40. It's a healthy business, you know, and you're why get more aggressive when you can have a good exit on that.

Josh: Yeah. It depends on your comp plan too, man. Like, let's be honest, like a lot of these executives, you know, there's like, Hey, there's an EBITDA target or whatever. Right. But there's, there's a balance there too, because if you have ownership in the business on the backend, you know, you're going to make some money, you know, on trying to hit like the right mix between those two things. Right. So, yeah.

Shiv: The incentives need to be changed. You can build a healthier business if those incentives are more aligned. I've bootstrapped this company. I don't have any investors, but I'm often making this trade-off between being in the EBITDA-focused company versus investing in really big ideas. Like this year, we're building our own software. We're launching our own training program. We have a bunch of things ongoing, and that takes cash and capital upfront. It would normally just be pure Ibidah for us, right? But we have to make that conscious decision to kind of get to the next level.

Josh: Yeah. Well, I'll just give you an example. Like somebody had asked me this. was at, I was speaking at some sort of like Salesforce panel a few months ago. And it was like a PE focused one. And there was a bunch of CEOs in the room and they were asking like, Hey, you know, like, what about EBITDA? Should I spend this money da da da the right and like, just to your point. And my advice to them was very simple. It was like, look, do you plan on exiting soon? No. Okay. Listen here. Right? Because you've got time then. So I think that's the other component here is to think about is like, yeah, it's great to have a ton of EBITDA when you're preparing to exit. Yeah. But if you're not, if you're like, I've got three years, I got four years, I got five years. It's time to, I'm not saying burn the cash down to zero, like that. But like, it's okay to drive that number down a bit. You know, to go look for growth. Yeah. Or to like we call it like green shoots. Yeah, you can show, you know, a new market, a new product, a new vertical, whatever those things are. The next buyer is going to really love that they're going to evaluate that and they're going to see it as an opportunity as well. Right? Something that they didn't have to go do, I guess is a good point. And it's already been tested in some ways. Yeah. So we love that. Yeah.

Shiv: Yeah. Yeah, I mean, even just for founders that are listening, like one the things that I think about is, you know, as a founder, your business holds a ton of your net worth, whether it's, know, each front of the answer is different. But the point is like, when you have EBITDA and you issue dividends to yourself, like you have to put that money in some sort of an asset. If you just leave it in a bank account, you're making a mistake, you know, whether you put it in the market, whether you put it in real estate, like you're putting it in some sort of an asset. And that asset that you put it into, like you would be lucky to get 20% return on. You'd be lucky to get 15% and exactly, right? 

Josh: Yeah, yeah, for sure. Seven. Ten. Yeah, yeah, right.

Shiv: So I had a PE investor once tell me like, if you're doubling your money every five years, you're doing great, right? And that's the 16% growth, right? Something along those lines. So I think if you think about it in those terms, it's like, well, what is the best investment that you can make on that capital that you would be taking out as dividends, it's to reinvest it in something, right? And what is that reinvestment? Like as long as you have strategic levers inside the business that you can scale up, whether it's go to market, new products, new channels, new opportunities, new supply chain areas, whatever it is. As you invest M&A, right? As you invest that, that will pay way more than whatever you would get it from a different asset class.

Josh: Yeah, that's the calculated bets and like that is the value creation plan aspect, right? Like that is the whole idea behind that, right? Is like, let's figure out where are the levers. Let's figure out how much it's going to cost us to go do that. And then what's the return? What's the potential return? What do we think that that enterprise value return in X time period is going to be? That's what that whole thing is about. Right? So I think that's a, you know, talking to the founders, founders are listening. You know, you have a really good operating team, a really good partners when they can kind of explain that to you, right? Like they're like, yeah, we think that we should do this, but why? Why? Right? 

Shiv: Right. Right.

Josh: Cause it's like, to your point, it's your money. If they can explain it to you, like in those terms, like, Hey, if we do this, it's going to increase your enterprise value by X. That's like a much easier way to, it's a palatable, right? You know, way to spend money, right? Because then you're seeing the impact or the return. So if I give you guys, you know, million bucks, I'm going to get back potentially 10 and at the low end seven, like, let's go.

Shiv: Totally, totally. Yeah. And I think that's a trade-off that more companies, and I think PE investors in general do think about these kinds of things. And that's why they think about putting debt on the business or putting money into M&A and stuff like that. But I think on the go-to-market side, I find that there can be more aggression, especially when you have your net revenue retention dialed in, you have great CAC payback periods, great LTV to CAC rates, like some of these core business metrics that are in a better place. We see like if you use it as a benchmark, like 10 to 15% of your revenue should be going to sales and marketing spend at the very least. A lot of companies are under invested there. So that's an opportunity immediately to spend more.

Josh: Yeah, yeah, that's definitely a piece, right? When we walk in, we're trying to figure out where the budgets are being spent and, you know, is there opportunity there, but yeah, I mean, there's so many amazing companies out there. Let's be honest. There's so many amazing companies out there that have been product led founder led, you know, have found most of their sales through word of mouth or inbound or RFPs and they've got to a really good spot and they're comfortable. Yeah. And then you're like, okay. This is going good. Right. But usually what happens there's a window, right? There's some sort of window that opens up, right? For example, there was one of the companies I'm working with, their biggest competitor was like, Hey, we're actually going to shut we're end of life in our product. Okay. And they sent out a message to all of the users, all the companies that were using it. Like, Hey, we're end of life in our product. Well, that freaked a lot of them out, right? And so now their competition's like, ooh, we have a window of opportunity, right? Like, let's take advantage of this. So what do we have to do? We have to say, okay, we're going to make investments in sales. We're going to make investment in marketing. We're going to use technographics to go and target those people. We're going to learn who every single one of them is, and we're going to bring them over to us, right? But that's a calculated, you know, risk based off of a window of opportunity. And it's a really easy example too, right? But there's all kinds of examples like that that you could. You can say, well, hey, we have this small window. We've got three to five years to go do this before a bunch of other people come and do it. And we got to capture the market.

Shiv: Yes, totally agree. Totally agree. I know we're coming up on time. So I want to just talk about one last thing before we wrap up as one of the interesting things about your role, Growth Factors and the arrangement you have with Bregal Sagemount is the model and how it's structured. So what advice would you have for PE firms that are trying to explore this, trying to figure out how to leverage operating partners or how to make sure that they don't overspend on overhead at the same time are supporting their portfolio companies?

Josh: Hmm. Yeah, it's definitely like, you know, something we're seeing more and more, right? Is it more funds or creating operating teams? They're trying to leverage, you know, experts in different ways. They think that they can do a few things. Number one, helps close deals, which is great. Number two, you who's operating, helping operate the business. And I say this like, and here's probably the downfall is that if you have the guy, the finance guy, that's like never, you know, been a CEO, never been a CRO, whatever, you know, really guiding those businesses that the advice that they can give can be hurtful. Yeah. Cause they're looking at it from an investment standpoint. Right. So I think, to answer your question more directly, that is the spot. Yeah. Where, you know, founders where management teams are looking for guidance and looking for help. They're looking for people that have been in their shoes in the past. Right. And they can help guide them. And a lot of times, you know, that's the value that they bring is that instead of giving, you know, advice that could be destructible or bad, they're giving them advice  that's like, Hey, I've been there. done that. Here's what happened to me. Right. Let's go a different way. All right. So you're going to build an operating team, look for those people and maybe understand the private equity side or have had some sort of touch to it. But and then look at your portfolio and say, what do these people need to try to make a match there? Right? I think that's definitely the big piece.

Shiv: Yeah, yeah, that's great advice. I think, that's these people that have been there that understand that our operators have that experience. I think a lot of PE firms need to provide that. So great advice. And with that said, Josh, what's the best way for people to get ahold of you if they want to get in touch or learn more about what you guys are up to?

Josh: LinkedIn's always good. Yeah. So you can find me. My name is Josh Schwartz on LinkedIn. It's like Josh Schwartz STL because I'm from St. Louis. That's it. Yeah. So reach me there.

Shiv: Awesome. Yeah, awesome. Yeah. And we'll be sure to include that in the show notes. And with that said, Josh, thanks for coming on and sharing your expertise. I think that was a great conversation. And I think a lot of PE firms that think about value creation and how to prioritize things and also just building their own operating teams can take a lot away from it. So appreciate you doing this.

Josh: Thanks, Cool. I'll talk to you soon.