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Corporate Development

4 ways corporate teams can adjust to the new market environment

Learn how companies can shift away from long-held growth strategies in favor of revenue to adapt to the current market environment

Growth at all costs has been the predominant market sentiment for the past several years. But even the staunchest supporters of aggressive growth strategies have had to reconsider their stance in the current economic environment. Many firms are now prioritizing revenue generation to insulate themselves against market uncertainty.

Pivoting in service of more immediate profit may feel like a significant shift, but these adaptations don’t need to come with a massive structural overhaul. In many cases, all it takes is a moderate recalibration of goals and the ability to consider new tactics to pursue more immediate sources of revenue.

Below we’ve outlined some potential paths your business can take to adopt a more profit-driven approach for the current market environment.

1. Balancing long- and short-term strategies

Moving in a more revenue-driven direction doesn’t have to mean a full stop to long-term plays, but you may have to make a substantial departure to see results. Investors that have concerns regarding trajectory can get the peace of mind that greater revenues will bring in the near term. As a decision-maker at your company, it can be helpful to present your actions as generating income in the near future, rather than promise higher growth down the line. Long-term investments can’t happen without first establishing a sufficient runway for them to pay off and without smaller, more immediate wins to provide the funds necessary to put them in motion.

2. Managing organic vs. inorganic growth

When taking stock of your potential strategies for generating near-term revenue, it’s important to think about how organic and inorganic growth factor into your plans. Like long- and short-term planning, both of these have their place in a company’s efforts to improve and it’s important to know which your company might be more inclined to given its circumstances.

Organic growth describes development that’s brought about through a company’s internal efforts. This can be behaviors like investing in your company’s existing products and services, creating new product offerings, and expanding core capabilities.

When planning for organic growth, companies must have a firm grasp of their financial situation to assess how much money can be directed toward development compared with how much must be set aside to operate and maintain the business.

Company profits don’t depend on a single factor, but there is no denying there are high- and low-impact decisions on the path to profitability and your team must be able to separate the two. For example, cutting costs may create results on paper, but won’t necessarily lead to lasting change, since it only frees up money and doesn’t bring in new revenues.

Inorganic growth comes from sources outside the company. This strategy uses acquisitions and venture investments as a means of achieving goals like accelerating R&D or establishing a foothold to enter a market more quickly. Like organic growth, inorganic growth strategies have also been impacted by current market pressures, the current state of M&A, a diminished exit market, and investors' efforts to take advantage of lowered prices.

Acquisitions can have a significant and direct impact. Joining forces with companies that have the potential to improve your resources, guidance, and network can be mutually advantageous and provides opportunities to establish a foothold in new industries and consumer segments. Though acquisitions can create a welcome trajectory shift for both parties, they require strategic alignment based on industry positioning and/or the current status of the target company. With limited funds and possibly limited runway, your company needs to ensure that any potential acquisition has a strong likelihood of returning on investment. Otherwise, what could have been a positive gain in momentum may set you back even further. Alternatively, the parties can structure the deal as a merger, with no money changing hands.

3. Expanding the scope of industries and tactics

Public companies are accustomed to looking at what their competitors are doing before making their next move. However, they may overlook the activity of private companies, or those outside their immediate peer group, due to research and visibility barriers.

Though researching private companies and new industries will likely require more resources, an added level of market intelligence could help you pull ahead of companies that don’t cast a wider net.

Looking outside your company can help you chart a course based on industry movements or find potential untapped niches based on the prevailing sentiment within the space. The more data points you’re able to incorporate, the better you’ll understand what market behaviors to follow and avoid.

Similarly, investors should also learn to look outside their current industry focus when in search of new opportunities. You may have already experienced or had to consider the possibility of challenges affecting a long-established investment target or the drying up of a vertical in the current market environment. You can prepare for these potential outcomes by looking to adjacent industries or companies with different variables at play. In many cases, corporate investors don’t need to uproot their plans into a completely different space. Simply looking to related industries, which may be faced with slightly different challenges, is enough to find investments that haven’t been as affected.

4. Using private market intel for broader reach

Expanding your company’s investment portfolio can be an effective strategy for creating revenue and protecting against market shifts, but how can you go about finding these new investments? Finding companies and industries that continue to succeed in the current market environment can be a challenging prospect, but a good place to start is having a strong understanding of where capital is flowing. Having this foundational market intel not only gives your company a potential route for changing strategy, but also provides an indicator of where your company could be positioned in the market.

Earnings call transcripts represent another avenue for scouting out potential investments and even assessing the health and performance of competitors. They are also useful for picking up on industry trends and possible innovations to be aware of or adopt. Given that these evaluations come straight from the source, they have the potential to provide company data and insights such as founder and executive perspectives that you wouldn’t find elsewhere. For other sources of market intel, we recommend a data provider like PitchBook. Our platform can help eliminate the lack of visibility surrounding private companies and simplify existing market intel workflows useful for expanding your reach into other verticals. We provide our users with the most comprehensive public and private market data across VC, PE, and M&A, as well as industry-leading analyst support and custom research to facilitate investment discovery with the full picture of a target company and how it may fit your revenue goals.

These considerations provide you and your company with some direction on how to balance revenue with sustainability and business growth. Though many of these approaches could lead into substantial changes, you can start small and combine tactics as needed. No company is too large, too new, or faced with too much disruption to begin making changes toward greater profitability.

Want to dive deeper into next steps for your company? Read our corporate development guide.