A Proven Approach to Scaling Water Companies
Scaling an innovative company into a meaningful, profitable business is a challenge in any sector. In the water sector, however, there are added layers of complexity.
“Customers in our sector are cautious and conservative, and for good reason,” says David Henderson, Managing Partner, XPV Water Partners. “They’re usually working on mission-critical processes, such as treating municipal drinking water, manufacturing products, or producing energy. If a solution fails, it can have high consequences. Buyers need to know they can trust the solutions. In order to scale, companies need to take extra steps to ensure that they do deliver extremely reliable product and services.”
For this reason, scaling a business in the water sector rarely happens at the speed experienced by Silicon Valley start-ups – for many companies, it can take decades. However, it is possible to apply a winning strategy to speed up end-user acceptance necessary to generate market leading growth and XPV Water Partners’ track record shows that the firm’s partner companies are doing this successfully.
The right tools to scale
Building customer trust is part of a strong business growth strategy. But for many of the sector’s emerging companies, Henderson says, it’s the pace and resources required to scale that pose a bigger challenge. “We regularly partner with owners who are looking to scale their business but don’t have access to the right tools to do this. They have an exciting vision for their business but have not experienced firsthand what it means to rapidly scale a company, placing them at high risk of falling into certain strategic pitfalls that can stall versus accelerate growth.”
To help their portfolio companies achieve their market potential, XPV Water Partners needed a consistent, repeatable, and scalable approach that could respond to these needs.
Charting a path for growth
For 15 years, XPV Water Partners has worked to understand the industry, anticipate business needs, and provide the right resources at the right time, Henderson says. The resulting Focus, Leadership, Opportunity, and Winning (or FLOW) Growth Accelerator System is a refined set of company-building platforms, resources, and tools to support management teams as they scale.
FLOW Growth Accelerator System draws from a combination of proven business programs and a set of proprietary tools developed in house by XPV’s team and industry experts. “We regularly evaluate existing concepts and tools – in fact, many of the resources we currently offer have been vetted by our team having undergone the training ourselves,” Henderson says. “When we do integrate these programs, we always refine them to better fit the needs of our portfolio companies.”
When they started to develop the system, XPV Water Partners first focused on how to build strong leadership teams. “Our Talent Platform is based on helping our companies recruit A-players,” says Henderson. “We offer training on proven hiring practices, we tap into our extensive network to search for high-quality candidates, and we help owner-operators make successful appointments to critical roles.” As a credit to the platform’s success, companies across XPV’s portfolio have recruited more than 20 highly qualified executives for strategic roles over the past two years alone.
Once a company has great talent, it needs a playbook. Says Henderson: “Our Strategy Platform helps our companies to focus on the right priorities and embrace concepts that will allow them to scale. We also introduce them to the tools and capabilities they need to manage a successful growth phase.”
With the Talent and Strategy elements up and running, the XPV team turned its attention to expanding its capabilities to grow a portfolio company’s top and bottom lines, focusing on operations, M&A, strategic sales, sales training, marketing, and performance analytical tools.
Empowering teams with skills for success
“What I like most about FLOW is that we’re building skills within the company – it’s not about XPV doing the work; it’s not a “franchise” system,” adds Henderson. To that end, before XPV partners with a company, its team collects data, conducts analysis, and creates a roadmap with management that is customized to support the growth goals. “Every company has unique needs, so we want to be sure we’re delivering the right resources in the right sequence,” he adds.
For Henderson, the results of the past year have provided one of the most powerful examples of the FLOW system’s success. Despite market headwinds caused by COVID-19, the portfolio had its strongest revenue, profitability, and cash flow growth in XPV history, far outpacing the industry.
“When the pandemic hit, our portfolio companies were prepared to pivot,” he says. “Through our training and tools, they were equipped to make informed decisions, sharpen their focus on the right things, communicate with and align their teams, and take immediate action. Within 30 days, most of them had gone from defence to offence.”
A defined competitive advantage
Beyond supporting a solid response to the pandemic, the system is generating value, Henderson says. Over the past several years, XPV’s portfolio companies have completed 18 acquisitions, adding tens of millions of dollars in new value. “We have helped our companies improve margins, harden their products and services to withstand rapid growth, and set up new strategic partnerships driving new sales growth.”
As an added bonus, XPV Water Partners is seeing a set of accomplished FLOW alumni emerging to join the firm’s ecosystem of experts. “As we welcome new companies to our portfolio, we’re able to tap into trusted talent and, in some cases, redeploy executives,” says Henderson.
What makes FLOW different from other approaches? While private equity and venture capital firms have successful approaches of their own, says Henderson, they are not typically aligned with the realities of the water sector.
“The FLOW Growth Accelerator was designed and built for scaling water companies,” he says. “It works because we’ve listened to and learned from our companies and the sector for 15 years. We’ve cultivated the ecosystem of experts, regulators, end users, and business partners that contribute to FLOW and its delivery, helping our companies generate valuable returns.”