Does your private equity firm conduct a digital valuation to help size up a prospective portfolio company? If not, you’re far from alone. The whole process of pouring over financials, calculating EBITA, and analyzing countless other high-level figures is laborious on its own, so it’s understandable why their website and digital assets often take a back seat. Without a doubt, the world is consuming more digital now than ever, making the case that a company’s digital should be evaluated along with the numbers.

Private Equity Digital Valuation – What to Look for

First, let us clarify that when we say “digital,” we *mostly* mean front-facing digital processes and the online experience of the public. This includes social media, reviews, and most importantly a company’s website. As we walk you through the digital valuation process, we will also illuminate how a look at a company’s traffic analytics and tech stack can also be included in the process.

Since digital is so critical to business in these times, you should enter a deal with clarity on where a company stands in this area just as you would on the financial side. Is there messaging consistent and does it address the right audiences? Do they prioritize appealing and effective design that equips and engages the user? Are they utilizing the best platforms and tools to grow?

We are here to help you respond to those questions and others.

Evaluate With A Framework

We’ve developed a loose framework to evaluate the digital features of any company you may be considering a deal with. It comes in the form of a scorecard with space for notating and keeping track of scores as you progress through each category. For each area, you’ll begin with a perfect ten & subtract points as you observe shortcomings. By determining scores this way, you start with faith in the good work that has been done and then set out to mark areas for improvement. 

To model the scoring, we evaluate a real company, identifying them under a fictional name: the Gunther Group, Inc. (commonly known as Gunther). Here’s a snapshot of the business.

The Gunther Group
Sector: FinTech
Services: Data and Software
Product: SaaS Application & Consulting
Revenue: Approximately $25 million annually
Size: Roughly 300 employees

Categories

The categories for the scorecard are as follows: Design & Branding, Messaging & Positioning, Site Functionality, Content Strategy, Tech Stack, Traffic, Social, and finally,  Reputation and Reviews.

Follow along for our evaluation of Gunther’s digital. We’ll give you an overview of each category before we conclude with notes that explain the scores we’ve given for each.

Design and Branding: 5/10

Through their website & across their digital assets, a company should provide an online experience that’s easy to digest and navigate with clear and consistent brand visuals. 

While Gunther’s branding is consistent across their website and social media, it is word-heavy and lacks personality. In the right place, even dull designs can be reasonable and efficient—I’m sure some financial reports come to mind. They want to maintain the formal tone of their brand identity, rightfully so but seem to cast aside the notion that a creative & thoughtful design can be inclusive of formality.

Creating a user-friendly hierarchy of information is one small part of the design and their tiresome, clunky paragraphs do them no favors here. And, with images taken directly from screenshots, the visual quality also suffers.

Gunther’s site design is uninspiring, to put it plainly. This serves as a reminder that business is not entirely facts and figures, but an art as well—at least in this category. 

Messaging and Positioning: 3/10

An intended audience drives the framing and writing of the website. Depending on the audience, a site must cater to a whole spectrum of skill levels and familiarity, since people of different levels will behave differently on a site.

So “Messaging and Positioning” refer to how successfully a site tailors itself to the intended audience in terms of site design, jargon, and to extent navigation.

Gunther misses the mark in speaking to a critical audience segment through their digital.  Their messaging is wordy, explaining their services in language that will only be understood by tech fluent people. And yes, that information needs to be accessible somewhere on their website. But upfront the messaging should be directed to the decision-makers. This audience needs to understand Gunther’s services at a high level and get a picture of what value they’ll receive from working with them.

To make decision-makers central to their messaging would impact a positive shift in engagement on their site ultimately leading to more conversions.

Site Functionality: 5/10

“Site Functionality,” perhaps the most self-explanatory of the categories, observes whether a potential portfolio company’s website operates with ease. To earn good scores in this category, it goes beyond all the links working and all the pages lining up (though that’s certainly important).

Gunther has a functional site, but not one that’s pleasing to use. Two menu bars of options create too many choices for new users. With no breadcrumbs, their maze of links and pages becomes overwhelming and frustrating. 

But these are just the most forgivable mistakes. Their dropdown menu is cumbersome, run off the screen and can’t be used properly.

Attention was clearly not put into making sure the site functions across all devices. When this flaw is corrected, users will not only have a better experience on the site but a more favorable impression of Gunther overall. 

Content Strategy: 7/10

In essence, a content strategy is a brand’s output of curated, high-value information to their inbound audiences on a recurring basis. Many companies are executing a digital content strategy and of those doing so there is a spectrum of quality and effectiveness. If a company you’re looking into lacks a robust content strategy or has none at all it doesn’t mean they aren’t successful. However, it is a good indicator of whether they have realized their business potential online.

Gunther gets some well-deserved credit for their content strategy. For starters, they host webinars every month that share information on new products and focus on topics that appeal to an industry niche. Their webinars do require an RSVP and only those individuals will receive a recording of the content. A drawback with this approach is that they miss out on getting more life out of those pieces. 

Beyond webinars, they update research reports every quarter—a helpful resource that seems to mostly target existing customers. And although their blog page isn’t flourishing with content, they keep it current with company updates and occasional thought leadership pieces.  

They are consistent in delivering content to those who are currently using their products, but lose points because they effectively ignore another critical segment, the decision-makers. A major facet of content strategy is to nurture your future customers with quality content that displays your dedication and ability to help them. Right now they’re missing out, but they at least have the framework for creating content already.

Tech Stack: 4/10

The “Tech Stack” grades the software that companies use to make their sites run and support their business online. A free platform called Built With will give you a very full picture of all that supports the digital components of a company you’re evaluating. To discover their CMS, hosting services, and email platforms, it’s really just as simple as dropping their URL into a search box.

Gunther takes a significant stumble in this department, leaning on programs like Squarespace. Typically a company of their size will not use a basic website builder, because it limits them in their ability to scale digitally speaking.   

In a similar vein, Gunther doesn’t use Marketing Automation or other platforms that help perform tedious procedures across multiple platforms. If they did, they could better measure the patterns and behavior of visitors and pair them with automation tools equipping them to be more effective and efficient.

Traffic 6/10

Most companies will have a Google Analytics (GA) account in use. Benchmark metrics, which GA analyzes, exist to measure the amount and quality of traffic on a website.  Depending on where you are in a relationship with your prospect you may or may not have access to this information. If you can get into their GA, evaluating this category could be the most influential because it will shed light on the areas we’ve been observing so far.

Gunther manages an average of roughly 700 unique visitors per day which is sizable traffic. But the number of visitors alone does not determine traffic quality. For instance, they have a low average session time and a high bounce rate of 78.54%. Although they do get people to their website, those users aren’t delving deep. People tend to arrive at a page and leave without even a click on another link.

Most interesting is that 92% of their traffic comes from desktop. Modern users tend to skew numbers towards mobile devices, but this speaks to Gunther’s intended audience. It’s not everyday people who are visiting the site, but firm workers and desk riders that do financial research 9-to-5. And yet their desktop design is inconsiderate to users, as I mentioned in “Site Functionality.”

And one of the final faults is that most traffic ends up at Gunther’s homepage and then nowhere else. This supports our claim that the monthly content they publish is not enough to generate significant traffic, and that their design confuses and hinders progression through their site. 

Social: 7/10

Social media is often the first impression people receive from a company. Whether LinkedIn, Twitter, or a platform with a more social or relaxed feel, it’s expected that a company is active on at least one platform.  

Sometimes B2Bs like Gunther ignore or discredit social media’s benefit to business. But in their case we see decent activity on LinkedIn and Twitter, which are the right spaces for them to network and build industry authority. Their LinkedIn profile is even filled out with nice company photos, a thoughtful touch. They’re consistent on both and since the platforms have different requirements for posting, their content is varied from one to the other.   

Where they could improve by using social media, is in making a stronger impression of their company culture. Perhaps that was their original intent when they set up a Facebook account. Based on their activity on the platform it doesn’t appear to be worth the effort to maintain that space. A better platform for them to show their less serious side and promote culture and employee engagement is Instagram.

Reputation & Reviews: 6/10

With employee and customer reviews readily available, it’s easy to get a feel for the environment and work ethic of a company you might choose to work with. From our standpoint, the 3 best digital platforms to evaluate a company’s reputation based on reviews are Glassdoor, Indeed, and Google.  

We acknowledge that the impressions you’ve gotten through your industry relationships will provide more nuance and legitimacy, but even so, reviews on online platforms shouldn’t be neglected. You’ll end up taking some reviews with a grain of salt, but when you spot trends be sure to note.

Gunther holds a lackluster 3.5/5 stars on Glassdoor. We saw consistent positive feedback about the office game room, but issues that came up like immobility and disrespect towards employees are concerning trends. Although there are not many reviews on Indeed, the several that are there starkly contrasts that negative image from Glassdoor.  Most are upbeat with 5 stars, commenting on growth opportunities and an environment that fosters trust. We compare the dates on each site, but that doesn’t give us further insight as they mostly overlap. 

As expected, we don’t get a complete picture from reviews, but they help us consider ways to help Gunther build their reputation through a strong authentic digital presence beyond the review sites.

Final Results

The Gunther Group’s digital is fairly underdeveloped. Some of their issues can be revised with ease, like the organization of their website content. Others will be larger scale. Overall here is what we recommend:

1. A complete website redesign that would introduce an emphasis on design aesthetic, stronger messaging, and better navigation and content.
2. Additions of Instagram and YouTube or Vimeo to their social sharing platforms to promote company culture and share content.
3. Include a Marketing Automation platform in their tech stack. This will add efficiency and effectiveness to nurture leads, distribute content and understand who is engaging with them.
4. Assess the pain points of decision-makers who they desire as customers. Respond to those areas by consistently (and more frequently than once a month) providing them with valuable content, whether it be video or blog style.
5. As with anything you put out online, utilize the tools that measure the effectiveness of your content. Looking to the insights that analytics platforms provide and working off the information is key to competitive performance in our digital world.

Final Thoughts for Private Equity Digital Valuation

A private equity digital valuation that turns out a bad scorecard does not make for a bad company. It is quite possible that the corporation disguised as the Gunther Group is an astoundingly successful company that your firm would be wise to invest in. This outlook is only one of the ways companies project themselves to the public and the experience they provide within the digital world. Negative scores reflect not a failure, but a fuller picture of the opportunity and the potential for rapid room to grow.

Click here for a blank copy of the scorecard, so that you can readily put it to use!