22nd September 2026
Many HCM software businesses are facing the same problem.
On paper, the fundamentals are strong. There’s a well-regarded product, low churn, and a base of long-standing enterprise customers. But growth has slowed.
We see this pattern quite often in HCM software. And while it’s frustrating, it’s rarely structural. More often, a handful of decisions determine whether a business can turn strong foundations into sustained growth.
We worked with employee benefits platform Zest through this journey. Within four years of FPE investing, Zest’s ARR doubled, and it was acquired by Epassi Group. But getting there meant getting three things right - the same three things we see making the difference across HCM software businesses.
What the most successful HCM software businesses do differently
In our experience, three areas tend to make the difference between a company that’s stagnating and one that’s achieving sustained growth.
Getting precise about who you’re selling to
Without a clearly defined ideal customer profile (ICP), HCM software businesses fall into two costly traps.
The first is trying to do too much, too quickly. That could mean pursuing customers they aren’t capitalised to serve, stretching into enterprise segments that demand extensive customisation, or expanding geographically before establishing scaled operations at home.
The second is inefficient personalisation. For example, building bespoke features for individual clients outside the core model, which consumes resources without improving the product for anyone else.
Getting specific about your ICP - by company size, sector and buying behaviour - makes everything else work better. It reduces implementation time, improves retention, and creates a sales motion that compounds as you win more of the right customers. In practice, this is often the difference between steady growth and a scalable commercial engine.
The right ICP also looks different depending on your subsector. For example, for payroll and benefits, compliance requirements make geographic focus a near-necessity, whereas for learning platforms, targeting English-speaking markets can make more sense than deep penetration of a single country.
When we first invested in Zest, the business was serving customers across a wide range of sizes and routes to market, without a clear view of where the highest-value growth was. We sharpened the focus onto mid-to-enterprise UK corporates, where the product’s fast implementation and low churn created a clear advantage.
Building the commercial capability to convert demand into revenue
Once you’ve defined your ICP, the next question is how to reach those customers and convert demand into revenue.
In our experience, three decisions shape your capacity to grow:
1. Direct vs channel selling
Direct sales gives you more control over targeting, pricing and pipeline - and, done well, creates a more predictable growth engine. Channel partnerships are more efficient to operate but harder to replicate and carry concentration risk. Direct sales should drive most of your growth, with indirect channels playing a supporting role where they offer clear distribution advantages.
As a non-core division of AIM-listed financial services group Fintel, Zest didn’t have the commercial infrastructure of a standalone growth business. The business had split resources between one direct sales hire and a partner manager running a white-label channel. Once we had worked out where the highest-value growth sat, we concentrated investment in direct sales and rebuilt the GTM function around it.
This meant establishing an in-house marketing capability, relaunching the brand, and rebuilding lead generation. It was a deliberate trade-off. Zest needed the commercial infrastructure before it could turn existing demand into revenue. Once that was in place, leads started converting into ARR and profitability.
2. Cross-selling
Selling additional solutions to existing customers is more efficient than acquiring new ones, but it requires careful account management, which should be established as a distinct function. It also requires careful product management, and Zest used data to create the opportunity: People data becomes exponentially more valuable when connected across modules, and demonstrating this to existing customers creates a legitimate reason to expand the relationship.
At Zest, the roadmap focused on targeted module extensions, including a mobile app, a benefits marketplace, and Discounts and Claims Centre add-ons. These created clear upsell paths, keeping net revenue retention above 100% throughout the holding period as existing customers grew their spend alongside new logos coming through the direct sales pipeline.
3. Pricing
While pricing wasn’t the primary driver in Zest’s case, how you price your solutions directly affects your ability to capture the value you create. We are seeing part of the market shift toward usage-based pricing, especially as AI features become part of products. Pricing structures that capture that value support higher revenue per customer and stronger NRR.
Build the team to match the ambition
Building a commercial engine from scratch is different from running an established one. It needs people who have made that leap before. At Zest, this was where the most work was needed. As a small division of a large corporate, the business had deep product and customer expertise but limited leadership capability across the functions a standalone growth business relies on. The priority was a considered leadership succession, with Matt Russell appointed as CEO, bringing private-equity experience and direct sector experience as the former CRO of Zest’s largest competitor.
From there, we supported the build-out of the wider team - including a new Chair, CFO, and Chief Product Officer - alongside commercial functions in marketing, business development, and account management that had not previously existed as standalone capabilities. The new Chief Product Officer led improvements to the core platform and the add-on modules, the marketplace and Discounts and Claims Centre, that opened up the upsell paths described earlier.
What this means for your business
Zest shows what can happen when these three things come together. The harder question for most businesses is where to start.
Our full report on HCM software gives you the tools to work that out. It covers the four metrics that most directly influence valuations in this sector, with clear benchmarks for each, so you can see where you’re strong and where you’re exposed. It also maps the HCM software landscape by subsector, showing where AI adoption is moving fastest and where M&A activity is concentrated.
If you want to understand what your HCM software business is worth today, and what it would take to increase that valuation, you can read it here.