Marketing, as we’ve established, is a key driver of financial success – it isn’t just about running ads or bringing in customers. And for businesses backed by private equity, it’s even more than that. Marketing has to be a strategic growth engine, because it directly influences profitability, scalability, and overall valuation of the business. For stakeholders who are hoping to grow a portfolio and see real ROI, a solid and efficient marketing framework is one of the most powerful ways to increase a business’s worth and potential.
How Marketing Ties Into Business Valuation
At the core of it, business valuation comes down to demonstrating profitability and long-term growth potential. Marketing has a hand in both of these areas, as it influences key metrics that are the underpinning of financial performance.
Revenue Growth Across the Portfolio
Good marketing strategies improve top-line growth. From attracting new customers to increasing transaction values, marketing can quickly amplify the business’ revenue – and across multiple locations. This creates momentum in the portfolio, which marketing teams can build upon.
Example: Imagine a healthcare network that invests in local Google Ads and social media campaigns. One location might see a 15% increase in patient bookings, but if applied across 40 or 50 locations, that’s a portfolio-wide revenue increase that’s pretty hard to ignore.
Operational Efficiency
Efficient and scalable marketing saves time and money. And when centralized marketing systems are powered by the latest technology (like automation tools, CRMs, and streamlined reporting), they can more wisely allocate resources.
Better targeting means fewer wasted dollars, and with centralized control you’ll be able to reduce repetition of efforts. This type of efficiency translates directly into better EBITDA margins – a metric that investors love.
Enhancing Brand Equity
A strong and recognizable brand isn’t just good for customers – it’s absolutely vital for valuation. A business with trusted brand equity stands out in the market, and it becomes a lot more attractive to potential investors.
Key Metrics That Matter to Stakeholders
For private equity firms and investors, marketing is about results more than its about creativity. The metrics we generate in marketing give stakeholders and investors a real look into what is driving financial performance. These numbers guide smarter investment decisions, sure, but they also plainly demonstrate the operational maturity of a business, and whether or not it has long-term potential. Here are the metrics that stakeholders care about most:
1. Customer Acquisition Cost (CAC)
CAC is going to show just how efficiently your marketing is bringing in new customers. A low CAC means your marketing efforts are more cost-effective and scalable – both of which appeal to investors looking for growth.
Why it matters: Investors see a low CAC as a sign of a good marketing strategy that has the potential for better profitability.
2. Customer Lifetime Value (CLV or LTV)
CLV shows how much revenue you can expect to earn from a customer, over the entirety of their relationship with your business.
Why it matters: A high CLV (relative to CAC) shows positive results in your customer acquisition efforts. This signals that you have the ability to generate consistent long-term revenue.
3. Marketing ROI
This metric measures the return on your marketing investment, both across individual campaigns, locations, and the entire portfolio. ROI is the ultimate proof of whether your marketing strategies are working and delivering value.
Why it matters: Stakeholders want to see how every marketing dollar turns into revenue growth, and they want to see how smartly resources are being allocated.
4. Brand Value
Brand value isn’t as easily measurable as CAC or ROI, but nonetheless it’s a key factor in exit multiples during acquisitions. A strong and easily recognizable brand means higher customer trust, loyalty, and market positioning. These can all significantly increase valuation.
Why it matters: A business with a trusted and established brand is eons more attractive to potential buyers or investors, and often commands a premium during exits.
These metrics are your foundation for showing that marketing is a contributor to consistent profitability and business growth. Focus on these metrics, and you’ll make your business more valuable to both stakeholders and future investors along the way.
The Power of Marketing During Acquisitions and Exits
Marketing is a true game-changer when it comes to acquisitions and exits. Solid marketing and the data to back it up demonstrates growth potential, shows operational maturity, and it’s the way you’re going to showcase the scalability that investors and buyers really want to see. A business with a strong marketing strategy simply commands a higher valuation.
Before the Acquisition: Building the Case
Buyers want businesses with a track record of great marketing. Data points like consistent revenue growth, high retention rates, and excellent digital engagement show investors a business that knows how to scale. Show what you’ve achieved, but also show what’s possible.
After the Acquisition: Fueling Growth
Once a business is acquired, marketing becomes one of the main tools for scaling. From attacking new markets with local campaigns to developing cross-promotional opportunities in a portfolio, marketing is almost always the catalyst for acceleration post-acquisition. And that means that the marketing team or department is going to be where they’re looking for results. Be prepared.
Example: A private equity-backed health clinic launched dynamic local ad campaigns so they could promote their new services in over 25 clinics. Within a year, their patient volume increased by 20%, which significantly boosted revenue at the portfolio level.
During the Exit: Highlighting Results
When it’s time to sell, you can be sure that buyers will be scrutinizing the business’s ability to sustain – and scale – growth. Marketing plays a central role here, showcasing the strength of the brand, and proving its operational efficiency. Businesses with scalable and data-backed marketing strategies are a lot more likely to command a premium at exit.
Additional Strategies to Align Marketing with Stakeholder Goals
1. Use Advanced Analytics
Predictive modeling and data-driven reporting lets you identify growth opportunities, and then fine-tune campaigns for maximum impact.
Example: A behavioral health network uses predictive analytics to find areas where the demand for mental health services is growing. This lets them open clinics in strategic locations, and run targeted local campaigns.
2. Build KPI Dashboards
Provide stakeholders with clear, real-time visibility into marketing performance across all of a business’ locations.
Pro Tip: Use these dashboards to highlight the most important metrics, like customer acquisition cost (CAC), return on ad spend (ROAS), and lifetime value (CLV). This will help your stakeholders understand the direct link between marketing and financial success.
3. Regular Strategic Updates
Action Step: Give quarterly updates that show how campaign performance ties into broader goals, like increasing EBITDA or improving customer retention.
When marketing strategies are made to meet stakeholder priorities they do a lot more than just drive conversions – they become tied into the success of the whole portfolio.
The Long-Term Financial Impact of Marketing
While operational fixes might solve some immediate problems, great marketing has a ripple effect that creates value over time.
Key Long-Term Benefits of Strategic Marketing
1. Sustained Revenue Growth
Loyal customers are the heart and soul of long-term profitability. If you nurture repeat business and build lasting relationships, your marketing can create a consistent revenue stream for all locations.
- Why It Matters: Loyal customers don’t just come back. They spend more money, refer other people, and they help you build a predictable cash flow that makes a business more attractive to investors.
2. Improved Operational Efficiency
Scalable marketing frameworks also streamline efforts, and this makes it easier for businesses to grow without ballooning costs. Whether it’s with automation software, centralized tools, or just better resource allocation, marketing helps businesses operate smarter, not harder.
- Why It Matters: Efficiency is more than cutting costs. Efficiency is about maximizing impact. Scalable systems reduce waste and make room for reinvestment in high-growth areas.
3. Competitive Differentiation
A strong and consistent marketing presence makes your business stand out in a crowded digital marketplace. The difference between being a local name and a trusted leader in your industry may seem small, but it makes all the difference in a competitive market..
- Why It Matters: In competitive areas, differentiation gives customers choices. A well-executed marketing strategy makes your brand the go-to solution, and keeps competitors at bay.
Marketing as a Financial Growth Engine
Marketing is the force that connects a business to its customers, market, and future potential. It can shape how a business is seen by the public, how quickly it grows, and how it handles challenges.
It’s about building a brand that can lead in any market, and a business that stands out in any portfolio. When done right, marketing at the multi-location level can transform not just how businesses grow, but how they’re seen by the people who matter most: their customers and their stakeholders.
