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

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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.

Average ROI achieved on revenue enhancement initiatives

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%.

Profit & Loss

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


Why do almost 40% of Private Equity revenue enhancement initiatives fail? From our experience, whether a portfolio company exceeds or fails to meet their top line goals usually comes down to the same 3 things:

  1. Balancing senior management & Private Equity involvement
  2. Focusing on the right factors for each portfolio company
  3. Building capability in key top line areas

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