The Blind Spot in Commercial Due Diligence: Why Go-to-Market and Pricing Diligence Matter in Private Equity
Private equity firms invest heavily in diligence to reduce risk and underwrite growth. Financial diligence looks backward. Market diligence looks outward. Together, they provide confidence that a business is sound and that the opportunity exists.
Yet many sponsors still encounter post-close surprises – missed growth targets, slower-than-expected momentum, and value creation plans that stall in the first 100 days.
The issue is not a lack of diligence. It’s a structural gap in what commercial due diligence typically examines.
Market diligence can confirm that demand exists and that industry dynamics are attractive. But it does not answer a more fundamental question: can this company actually capture that opportunity with its current go-to-market model and pricing capabilities?
That question lives inside the business – within its pipeline, sales execution, pricing discipline, customer retention, and commercial leadership. And it is often the least thoroughly examined part of the diligence process.
As hold periods lengthen and organic growth becomes harder to find, this blind spot matters more than ever. Revenue risk and upside are increasingly determined not by market conditions, but by how effectively a company converts opportunity into results.
This is the commercial diligence gap that Quality of Revenue (QoR) diligence is designed to close.
What Private Equity Means by “Commercial Due Diligence”
When private equity firms talk about commercial diligence, they are typically referring to market diligence. This work focuses on understanding industry dynamics, customer demand, competitive positioning, and long-term growth potential. It answers critical questions about market size, growth rates, and whether a business is well positioned relative to its peers.
Market diligence is essential. No investor wants to underwrite growth in a shrinking or structurally challenged market.
But in most diligence processes, commercial diligence stops there. The implicit assumption is that if the market opportunity is attractive, the company will be able to capture it.
In practice, that assumption is frequently the source of post-close revenue surprises – even in attractive markets.
Why Market Diligence Alone Doesn’t De-Risk Revenue
Market diligence provides an outside-in view of opportunity. It explains what could be possible.
What it does not explain is whether the company has the internal commercial capabilities required to realize that opportunity. Two companies in the same market, facing the same tailwinds, can produce vastly different outcomes based on how they sell, price, and retain customers.
Revenue outcomes are determined far more by execution than by market conditions:
- How effectively the sales team converts pipeline
- Whether pricing reflects value or erodes margins through discounting
- How consistently customers renew, expand, and adopt
- Whether commercial leadership can scale performance as the business grows
These are not theoretical risks. They are the drivers behind many post-close disappointments, even in attractive markets. Without examining these inside-out factors, investors are often underwriting growth based on market potential rather than commercial capability. This inside-out perspective is the focus of Quality of Revenue (QoR) diligence.
The Overlooked Role of Go-to-Market and Pricing Diligence in Private Equity
Go-to-market and pricing decisions determine how revenue is actually generated – and how repeatable and scalable that revenue will be. Yet these topics are rarely examined with the same rigor as financials or market dynamics during diligence.
During many private equity diligence processes, critical go-to-market and pricing diligence questions go unanswered:
- Is the pipeline real, or inflated by late-stage deal entry?
- Are sales productivity issues driven by talent, process, or structure?
- Is discounting masking weak value communication?
- Are retention and churn driven by product fit, pricing, or execution gaps?
- Does the current pricing model support growth, or constrain it?
These issues rarely surface in Quality of Earnings (QoE) analysis, and traditional market diligence is not designed to diagnose them. As a result, meaningful go-to-market and pricing risks – and opportunities – remain hidden until after close.
Why Operating Partners Are Forced to Go Shallow
Many PE firms rely on operating partners to assess commercial risk during diligence. In theory, this makes sense. In practice, it creates constraints.
Operating partners are asked to review go-to-market and pricing capabilities under extreme time pressure – often over a matter of days. They are balancing multiple portfolio companies, limited access to data, and a compressed diligence timeline.
The result is often a high-level assessment based on management conversations, a handful of customer calls, and surface-level metrics — enough to check a box, but not enough to fully de-risk revenue. This approach can identify obvious red flags, but it rarely produces a fact-based view of revenue durability or growth potential.
The intent is right. The depth, given time and bandwidth constraints, rarely is.
This dynamic leaves deal teams exposed to post-close surprises and forces value creation planning to start later than it should – potentially losing critical early months of the hold period.
Quality of Revenue (QoR): Inside-Out Commercial Diligence
QoR addresses this gap by conducting a structured, data-driven inside-out assessment of a company’s go-to-market and pricing capabilities during diligence.
QoR is not market diligence, and it is not a replacement for Quality of Earnings. It is a complementary layer of commercial diligence focused on how revenue is actually generated and sustained.
QoR diligence evaluates:
- The effectiveness and scalability of the go-to-market model
- Sales execution, productivity, and pipeline health
- Pricing strategy, realization, and upside potential
- Retention, expansion, and customer behavior
- Commercial leadership, processes, and enablement
The result is an independent view of revenue durability and growth potential before the deal closes – not months into the hold period. By grounding these assessments in data and external validation, QoR provides a fact-based view of revenue risk and upside that informs underwriting with greater confidence.
How QoR Accelerates Value Creation From Day One
QoR does more than inform the investment decision. It enables faster value creation once the deal is done.
Because QoR is conducted during diligence, it creates:
- Greater conviction in revenue forecasts for investment committees
- Early alignment between sponsors and management on growth priorities
- A clear, data-backed roadmap for post-close execution
Instead of spending the first months of the hold period diagnosing issues, teams can begin executing against the highest-impact commercial levers immediately. This avoids the “lost months” that often erode returns, delay revenue acceleration, and compress exit multiple potential.
In today’s environment – where organic growth is harder to find and hold periods are extending – that head start can have an outsized impact on DPI and exit outcomes. In multiple diligence engagements, this approach has helped sponsors identify revenue risks and upside before close. In many cases, it has materially changed the conversation at the investment committee level.
QoR Complements QoE and Market Diligence – It Doesn’t Replace Them
Effective diligence requires multiple perspectives. Financial diligence confirms the numbers. Market diligence validates the opportunity. QoR bridges the gap between them by assessing whether the company can realistically deliver on its growth plan.
Together, these lenses provide a more complete picture of risk, upside, and execution readiness.
QoR is not about adding complexity to the diligence process. It is about ensuring that the most important driver of value – revenue growth – is examined with the rigor it deserves.
Closing the Commercial Diligence Gap
As private equity firms navigate longer hold periods and greater pressure on returns, understanding how value will be created has never been more important. Growth should never be assumed, even in attractive markets.
By complementing market and financial diligence with an inside-out view of go-to-market and pricing capabilities, Quality of Revenue diligence closes a critical blind spot – one that too often reveals itself only after close.
The most successful investors enter the hold period with clarity, conviction, and a data-backed plan for revenue acceleration.
Quality of Revenue diligence ensures they do.
