With an increasingly competitive market, it's never been more important to stand out from the competition. For private equity firms to continue successfully making new deals and moving forward toward profit and upward mobility, they need something unique that sets them apart. Branding can be as much (if not more) of a selling point as a firm's capabilities. Name recognition is only part of it. There are many facets to creating and maintaining a brand, and they all come together for the firm's benefit. If you're not convinced of the importance of branding, keep reading!
It’s a Boost in Fundraising
Fundraising is a massive part of the game for private equity firms. In some scenarios, it’s dead in the water without investors. There are a lot of strategies involved in fundraising, but solid, recognizable branding has the effect of setting up a strong wall for the other strategies to lean on. It’s a boost to all the other efforts a firm makes.
When trying to convince an investor why they should choose a particular firm to work with, it’s important to have communication down to a science. There’s always going to be another firm trying to prove the same points to get the same money. Firms that have established a reliable brand will find that communicating with investors about what it is and what it’s capable of is a lot easier. It’s also easier to prove because the firm and the brand should be closely interconnected for maximum benefit.
Increase the Firm’s Visibility
If a potential client company has a table full of offers in front of them, a firm that doesn’t stand out or isn’t recognizable is easy to push aside. Creating a solid brand increases visibility. This is a strategy that nearly half of private equity firms are embracing. This has created a race-to-the-top scenario that makes it easy to fall behind. If so many firms are putting in the effort to increase their visibility through branding, it makes it easier for firms who are slow to embrace the tactic to become invisible in their wake.
By creating a brand and focusing on reputation, firms also stand to gain the benefit of accessing specific deals and partners. It turns the process into less of a free-for-all. If a firm is well known, it can approach investors and investment opportunities in a more targeted manner. A strong brand is more efficient than casting a wide net and hoping something gets caught in it. With the right branding, a private equity firm shows up equipped to prove that they’re the right fit because its image, capabilities, and values line up with what the other party is searching for.
Brand loyalty is a phenomenon that exists well outside private equity firms or the investment and finance sector as a whole. It’s seen in everything from the people who won’t buy anything but Coca-Cola to those firmly loyal to the Boston Red Sox or other sports teams. The concept is the same across the board. When something is known and manages to maintain its appeal, it inspires loyalty that will hold true through high and low times alike.
This is particularly important for private equity firms. While huge returns are an excellent way to get investors and prove competency in the short term, they’re not always enough to keep things going during downturns. A disappointing investment, or a series of them, can be enough to spell doom for a private equity firm. True loyalty to the brand and vision they present will be an enormous asset in weathering those kinds of storms. Counting on constantly perfect performance is a big risk, whereas investing in branding comes with very little to lose.
The Era of Performance is Waning
An increase in competition and a nearly over-saturated private equity firm market both make it difficult to attract investors and capital. That isn’t the only thing that private equity firms need to be considering, however. The landscape of finance itself is changing. It’s moving beyond the times when everything was measured by numbers on paper, and meeting or exceeding financial performance goals just isn’t good enough to secure a firm’s place anymore.
For long-term growth or even a long-term seat at the table, branding is necessary. It’s about creating a whole picture and forming relationships with the people that invest in a firm or otherwise work with them in some way. That’s the new model of sustainability, and it's a model that will continue to take a firmer hold as time passes. Private equity firms that want to succeed can’t ignore when the tides change.
How to Build a Brand
Recognizing the importance of establishing a brand is only the beginning. Firms that are ready to put in the work toward creating and fine-tuning a brand can do it in a variety of ways. Some are straightforward, and others require building things slowly with long-term efforts. Below are just a couple of tips on where to focus.
This is one of the simplest strategies to execute. Firms that are serious about branding should revamp and focus their online presence to be in line with their branding. This can include something like reworking the company website to accurately represent the company's vision. Don't leave things up to interpretation. What the company stands for and what it intends to do should be easy to understand and believe. Invest in marketing the brand.
By determining and communicating a firm's purpose, investors and stakeholders can begin identifying with the brand. The purpose must be easy to find and understand, as it allows people to look past numbers and understand whom they were working with when creating ties with a firm. The benefits of this have already been proven, and companies who invest in this strategy grow approximately three times more quickly than their competitors.
A Winning Strategy
Aside from a bit of an increase in the marketing and communication budget, private equity firms only stand to reap benefits from establishing a brand for themselves. It's an effort that will produce long-term gains. Firms that don't invest will soon realize that their competition will!