Perfecting Your Value Creation Strategy: Focusing on the Right Factors for Each Portfolio Company

Published on January 19, 2023

Not everything can be prioritised over the lifespan of an investment. It’s critical that Private Equity companies focus on the right areas from the start. The “right areas” will be different for every portfolio company. However, in general, Private Equity professionals see pricing and sales initiatives as having the highest ROI.

This makes sense. Price and volume are demonstrably the most powerful profit drivers.

  • Typically, a 5% improvement in price results in a 33% improvement of operating income.
  • The same percent improvement in variable cost will only boost operating income by 13%.

Therefore, when developing a value creation plan, pricing and sales initiatives are often the best areas on which to focus.

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