Episode Transcript
Hey, it's Andrew from XO capital. And today I want to talk about post acquisition growth strategies. So congrats. You bought something welcome to the first day of the rest of your hold period. The next phase is all about growth or typically about growth or to a large extent about growth. So if you bought this company correctly, Cool air quotes correctly, then you should already have at least one channel that is in some state of working. If you don't shame on you. You should, you should generally always be buying something unless it's got zero revenue and like that's kind of the play. But if it's got some revenue, you want to know where that revenue came from. And more importantly, you want to know if that source. Of customers can be useful for you as the new owner. Here's here's one example where you might want to be extra careful if the founder's social media presence like their personal socials are materially contributing to the growth of the company. You should discount the company because of that. If they're not going to come along with the business. You're basically going to have to start from scratch. That source will be cut off. There'll be posting about their next new project. Right. And that's not going to be like an evergreen blog post that is highly ranking on Google. For example, that's something you can take with you, but you're not going to be able to take that founder social media presence.
What you can take away though, is that let's say they're posting on LinkedIn, LinkedIn as a channel. Works. That's what you can take away, but it's going to be difficult for you, especially if you own a portfolio. Like we do. It's hard for me on my personal socialist to be posting about one particular company all the time. Right. And really grow. Let's say my personal following of people who are in sales, for example that's really difficult for me to do because we have products that are for developers and products that are not for salespeople, et cetera.
So. Just, just a word of caution on that. That happened to us one time and it was a lesson learned. So let's start by saying, I think it's important to leverage what's already working. I kind of have this belief that you can get to seven figures of revenue just by one channel that's working. So just one, if it's really working and you do have product market fit and you do have product channel fit, then one channel can get you to seven figures of revenue that could be organic search.
That that should sound obvious to you that you could get to that kind of revenue. From, from just organic Google traffic. It could be paid ads, right? I think take, take any e-commerce store and that should that should give you some sense that you can get paid ads, correct. And get to seven figures of revenue. And of course, you know, other social media stuff can get you there too. But again, take a look at what's working. If it's SEO. Great. Then just focus on SEO. At first, these are like, you know, your first, let's say six months of ownership. You should be thinking, how do we grow the channel that's already working? And then how do we make small, low fidelity tests against other channels or messaging or you know, personas, if you, if you use personas. To get a second channel working, but the primary thing is all about doubling down on the thing that, that got the business, where it was when you bought it and really understanding what's going on there and seeing how you could increase that. Paid ads. Of course. Can you increase ad spend without diminishing returns, look to experiments that the previous owners have run. That's another part of diligence too, is, and sometimes overlooked, you get too focused on like, well, what are the bank statements and what is the tech? But it's like, what were the growth experiments that you've tried in the past and which ones worked and which ones failed.
And if they have any record of those, those are things that you could either take a look at and say, oh, this experiment, they ran sucked because of X, Y, and Z. We want to try that one again. Or actually this is a well thought out hypothesis. that was invalidated. We do not need to go and run this experiment again. So if social media is working if that's your one channel that's working, maybe you can take those assets, those creatives, like let's say it's working on LinkedIn. Can you go on. Acts Jesus. I have not gotten used to saying that. Can you go on ax and repurpose that LinkedIn content and start posting on Twitter too? Same with affiliate programs. Is there an affiliate program already? If there is cool, just to evaluate the commission structure, can you make it even more? Generous for your potential affiliates. Can you create a relationship with your affiliates and, and actively try and build a community around the affiliates that are promoting your product? If that's working at all, that's a place you could, you could very easily double down on an end. Get real immediate feedback from these people that are out in the market, marketing your product. And I'm thinking about how to basically grow your business. Obviously they have their own sort of agenda, but part of that overlaps with their affiliate link to your product. And so figuring out. If you can get them assets or whatever you can do to help them grow your business for you is a really smart idea. And something that I think is often overlooked. We certainly don't do it enough. Here in, I specifically with super send, we have plenty of affiliates and I don't have a relationship with, with any of these people, definitely on the to-do list. So in that case do, as I say, not as I do. Secondarily discovering a new growth channel is it's amazing and helps you sleep at night. It's going to take a long time to get it right. So it's best to start early, but still, I really do believe that for these smaller acquisitions, if you're below. Seven figures of revenue focusing on just one that works. It's probably better than focusing on, on 10 and doing them all poorly. That being said, if you do have one that's kind of working and you are experimenting with, with that channel actively to try and double down on it. Then, and there's some excess capacity, then it may, might make sense to try and take a look at what a second growth channel might look like. Maybe that's ads plus adding cold email, maybe it's social plus adding ads, whatever the case may be. It is nice to have more than one growth channel, but again, it takes a, an. An inordinate amount of work and maintenance and upkeep to maintain that channel. Once you start it. So it's not like you start a new channel and it starts, you know, Quote unquote working and it's all hands off from there. I mean, ads, even if they are working are only going to work for a certain amount of time before you need to update the creative or change the messaging, et cetera. So again, if you can be really meticulous about planning or how you're planning to run these experiments and what you're actually testing. And then be careful about how you're analyzing the results, right? If you sent cold emails to a thousand people, but the messaging sucked. That doesn't mean cold email as a channel is not going to work for you. If you sent a thousand emails to the wrong, let's say persona, right? You were targeting product managers, but actually it's the CFO that needs to get bought in first. That doesn't again mean, and you get, and you're going to get terrible results there. That doesn't mean cold emails. That channel doesn't work. So don't kill a channel because it's not working. If, if you're, I'm not really sure about, I mean, just, just be very clear about what you're actually testing inside of that channel.
Cause channels can be quite wide. And then of course, if you have a portfolio, then you probably already know this, but just because let's say a LinkedIn strategy worked for company a, that does not mean it. It will work for company B. That has been the case for us, even across tools where we're, we're selling to developers in both cases, let's say two companies, both selling to some kind of service to developers. It still doesn't mean that a growth experiment for one company. Is going to work for the other company, even though the market is more or less the same. Or at least that's been our experience. Sometimes it does work, but, and it's, and it's a great place to start an experiment from. But it's not always the case that you can rely on that. So especially heading into buying something don't, don't buy it and rest on your laurels by saying. Okay. We can buy this developer tool and we know how to market developer tools because we have, I don't know, one other one in our portfolio. It's, it's going to be difficult to say for sure, with any kind of certainty. That that's going to work. I think, you know, as a total side note, in an ideal world, before you acquire any business, if you could somehow go. And try and just get customers for that business and test out your hypothesis on how you would grow the thing. Before you even write a check worst case scenario, right? You, you end up getting something doesn't work, right. And that might influence whether you buy the company or not. And if it does work great, then you just, you know, gave that, that previous owner, like a couple more customers, whatever. No, no big deal. But it will really help you solidify what you think is going to happen post acquisition and what might actually happen post acquisition. And if you can sort of front load that cost by running, let's say a cold email campaign to 500 people over a week or two. Just to see what the response rates are like. That might be an awesome indicator that you actually can grow the business in the way that you're thinking. Every once in a while there is low-hanging fruit. So a brand without social media, you could add social media and try that. You know, product level stuff. There's no email onboarding. Or there's no onboarding whatsoever. You could implement some kind of onboarding to make users feel a welcome, like have some kind of experience when they first get in the app to help get them set up, et cetera. But be just maybe help them navigate through that like free trial period. If you have one. You could always refresh the UI. Sometimes the stuff we buy is looking pretty, pretty drab, pretty old. And so sometimes that can increase conversion and sometimes believe it or not a fresh flashy, sexy looking website can actually decrease conversions from some. You know, 2011 bootstrap version one, a UI looking thing so careful there, but sometimes that's a, that's a real clear and easy win just to kind of modernize and make the app look newer. And if they've never done ads, then it might be worth experimenting with ads. Ads are relatively quick to get set up and again, just make sure that you know exactly what you are testing, because I'm to say that quote unquote ads don't work for your product is probably too broad of a statement to actually make any kind of conclusions from.
And then of course, throughout all of this, just keep in mind that if you're not providing massive, massive value for free, you're probably not going to get attention. It's not going to work over email. Sometimes the direct, the direct language can work. We've seen it work and. You know, it works sometimes it's worth testing, but generally speaking, you're going to have to feel like you're, you're giving away all the secrets. And I do like this Alex or mosey quote, where it says give away the secrets, sell the implementation. Because the reality is even if people know how to do something, they're probably not going to go and do it themselves. They might need your tool to assist them in doing that. Or if you have a service right, then here's all the work that you need to go do to do this effectively, by the way, I know that's a lot. If you don't want to do it, that's what we do, right. That that's, that's really effective, but it builds a lot of trust by showcasing your knowledge without any kind of price tag. Attached to it. You'll establish trust and it's been a great way for us to get customers while we're thinking about any of these channels. Right? So let's get apply to SEO or social media, et cetera. In the end, all of these experiments are, I should say, 98% of these experiments are not going to work. They're going to be a complete waste of effort ref revenue wise but obviously we'll be super helpful and sort of it's just the nature of the beast and, and finding any kind kind of product channel That
