The end of the year is a great time to step back and look at the broader strategic direction of a portfolio company’s growth plan and go-to-market approach. Here are 5 key elements to a comprehensive review.

Private equity firms aren’t afraid of data, and they have kept a close eye on performance metrics all year long. No doubt GPs will know the results and how they stack up against expectations. But as the year draws to close, it might be time to look at the overall strategic direction of your go-to-market approach and marketing effort.

When private equity firms look at acquiring family-owned and operated businesses, their best laid plans can be thwarted if they ignore the personal dynamics at play.

It’s only natural that private equity firms would be attracted to family-owned and operated businesses, especially ones that are successful but have plateaued. These enterprises can have terrific fundamentals but need precisely the capital and operational expertise that GPs bring to the table. But today, those firms need to do more than clean up a balance sheet and upgrade the operations. They have to drive growth. 

The challenge is that driving growth at family-owned companies requires extra time to discover the key influencers inside that business and win their support, with a compelling message that allows them to embrace change. If that was easy to do, the owners would have improved their business already and wouldn’t be looking to partner with a private equity firm in the first place.

Too many GPs rely on raw sales numbers rather than seek out the root causes of growth issues at a portfolio company, and that hinders their ability to develop effective strategies beyond rote solutions. And given today’s competitive landscape, those simply aren’t sufficient.

In private equity circles, the industry is well beyond the point of relying on mere financial engineering to generate returns. But we’re fast approaching a point where operational tinkering alone won’t do the trick either. Today’s assets don’t come cheap, and require real growth to produce an adequate ROI.

Key top line growth themes include digital marketing, sales/marketing alignment and talent acquisition.

This month, I had the opportunity to attend my second Private Equity International’s Operating Partner Forum in New York City. It is the largest gathering in the US of Operating Partners who come together to share learnings and discuss PE portfolio operational assessment and value addition.

With acknowledgement that there is upwards of $1 Trillion in uninvested capital making deals more competitive, prices are higher and great outcomes will be more heavily reliant on top line revenue momentum. Discussion this year focused on the need to continue to drive operational excellence with a cost cutting focus AND be innovative in driving top line revenue. The 2017 forum panels were more focused on the opportunities to leverage go to market plans by investing in sales and sales productivity with discussions about helping portfolio companies with playbooks to accelerate top line revenue growth. Many panelists continue to acknowledge that their first hires were VP Sales leaders.

Operating Partners have a tough job! 

• Many firms are still trying to figure out their Operating Partner strategy
• They don’t always have input into the deal parameters yet are called-upon to see that the Value Creation Plan fulfill the investment thesis
• They don’t always have a full seat at the table with the deal partners and may not reap the same type of rewards
• They are often in the position of working with management teams who are skeptical of their input and not always quick to accept help
• They are often spread thin across multiple portfolio companies with limited resources

These dynamics were on full display at two events I attended recently – The PEI Operating Partners Forum and ACG’s M&A East.  While Operating Partners were in abundance at the first event, the second was dominated by deal professionals and board advisors.  Surprisingly, much of the messaging was very similar.