In the ever-evolving landscape of private equity, firms are constantly searching for innovative ways to increase the value of their portfolio companies. As traditional methods such as leveraging and deleveraging give way to the new school of operational improvements driving value creation in portfolio companies, there is an often-overlooked yet powerful tool in the latter avenue: web and user experience (UX) design. When executed strategically, these elements can dramatically enhance a company’s valuation, making them a best-kept secret within the industry.
Why Private Equity Should Care About Web and UX Design
“The power of a well-designed website is not to be underestimated on any front.”
Web and UX design are no longer just about aesthetics or creating a visually appealing website. They are integral to any company’s overall business strategy, impacting everything from customer acquisition and retention to brand perception and operational efficiency.
In today’s digital-first world, a company’s website is often the first point of contact for potential customers and investors. A poorly designed website can lead to high bounce rates, lost sales, and a negative brand image, ultimately affecting the company’s bottom line. Conversely, a well-designed website with an intuitive user experience can increase customer satisfaction, boost conversion rates, and enhance brand loyalty — boosting revenues and increasing company valuations (for portfolio companies), or growing investor-bases and attracting better operating partners, talent, and business owners (for PE firms).
Many smaller portfolio companies in the middle market tend not to have functional and/or mobile-responsive websites, mostly due to time and resource constraints. This provides a clear avenue of improvement for PE managers to adopt early in the acquisition process. For private equity firms, investing in web and UX design offers a high return on investment (ROI) with relatively low upfront costs. Unlike large-scale capital expenditures or complex operational overhauls, web and UX design improvements can be implemented quickly and can yield immediate, far-reaching results.
Furthermore, private equity firms themselves are not immune to concerns about smoothening their own prospective investors’ user experiences, and can similarly look to making improvements to their own firm website to drive brand awareness and increase investments. While business owners may not actively search for private equity buyers for their companies, a PE firm’s website is nonetheless their first point of contact after being introduced via intermediaries or direct contact. Business owners are accustomed to using a PE firm’s website to form their critical first impressions of the company, and a sub-optimal website may result in a firm falling to the wayside as business owners begin narrowing the field to choose a buyer. Private equity is a competitive business, both in terms of increasing portfolio company valuations and vying for high-potential business acquisitions. The bottom line is clear for PE firms — the power of a well-designed website is not to be underestimated on any front.
Superior Web and UX Design: A Proven Competitive Advantage
“Studies show that every dollar invested in UX design returns $100 to the business.”
In today’s market, where competition is fierce and prospective clients and operating partners find more opportunities online than ever before, companies need to leverage every possible advantage in the digital sphere to stand out. Superior web and UX design can provide that edge, helping companies to attract and retain customers, build brand loyalty, and increase their market share. This is especially true for smaller portfolio companies, who may not have had the time or resources to invest in functional and attractive websites prior to their acquisition by a PE firm.
The positive effects of good web and UX design for any firm are not just vagaries; they have been statistically proven time and time again. A study by Forrester Research found that companies with superior user experiences generate 5 times more revenue than their competitors with poorer experiences, while another separate Forrester study also showed that every dollar invested in UX design returns $100 to the business. Additionally, a report by the Design Management Institute revealed that design-led companies outperform the S&P 500 by 219% — and over the 10-year period from 2005 to 2015, that percentage rose to 228%. These statistics underscore the significant impact that web and UX design can have on a company’s financial performance and overall valuation, and are applicable across all sectors of business, from a small and newly-acquired portfolio acquisition to the PE firm managing it that is also seeking to grow its investor base.
Besides the importance of a seamless user experience for any and all prospects, there is, of course, the equally pressing concern of ensuring that a company’s website (and branding at large) is visually captivating, with the ability to draw prospects in and hold their attention while delivering crucial information about the portfolio company or PE firm’s best attributes. While the old saying may be “don’t judge a book by its cover,” the same does not hold true for business websites, which serve as the primary differentiating factor in a competitive business landscape increasingly reliant on digital methods of communication and spreading awareness. A firm’s website design and branding — from the company’s language and tone to design aesthetics, images used, and functionality — must resonate with prospective operating partners, talent, and investors to effectively retain attention in a crowded business landscape.
The above fact has also been proven by both industry experts and research studies. Former Forbes Council member Kristopher Jones has highlighted the importance of good branding in driving business for companies in any industry, and consulting firm McKinsey found in a 2018 study that companies in the top quartile of their Design Index (i.e. companies that had standout design and branding capabilities) outperformed industry benchmark growth by as much as two to one, and saw disproportionately larger revenues (up to 7% more) and total returns to shareholders (up to 9% more) than companies in the lower three quartiles.
Conclusion
“In a world where digital presence is increasingly important, web and UX design should be at the forefront of any value creation strategy.”
Web and UX design are powerful tools that can significantly enhance a company’s valuation, yet they remain underutilized by many private equity firms. By prioritizing these elements, PE firms can unlock hidden value within their portfolio companies, driving revenue growth, improving customer satisfaction, and achieving more successful exits.
In a world where digital presence is increasingly important, web and UX design should be at the forefront of any value creation strategy. Furthermore, agency partner fees for web design and UX optimization services typically amount to lower costs than rehiring management and replacing operating equipment and systems — and, unlike a personnel overhaul, usually provides faster and greater positive impact for ROI, especially with the speed and scope of digital advertising today.
Not sure where to begin? Grady Campbell is here to help. With 35 years of experience in transforming brands and driving growth by design, our unique expertise working with firms across the middle market makes us the go-to-partner for private equity firms focused on differentiating in the marketplace, accelerating fundraising and deal flow, and maximizing returns. Our business is growing your business — get in touch with us today at gradycampbell.com.