5 Value Creation Ideas for Private Equity Funds
October 31, 2018
By: Sean Mooney
The business of private equity is getting more business-like. Today, most private equity funds are largely managed like partnerships, not like the companies they own. However, many firms have realized the private equity industry has now matured into an industry and are starting to manage their own companies like their portfolio companies.
Here are some value creation ideas being implemented with our other PE fund customers that can help you get the ball rolling on maximizing the effectiveness and competitiveness of your private equity fund operations.
Get Digital Marketing Going
Amazingly, many B2B businesses still aren’t reaching their full potential because they don’t understand or appreciate the power of digital marketing. Nearly all private equity funds fall in this bucket and are not taking advantage of this low-hanging fruit because they don’t see it as particularly relevant or appropriate for their model.
However, there are only so many hands that you can shake during the course of a year. With digital, you can regularly speak to thousands of intermediaries, business owners, and other influencers at the click of a button.
To do digital well, you need to do more than an update of the creative on your website or a quarterly deal announcement email. You should be using an integrated approach leveraging not only email, but also paid search, SEO, and regular content that is interesting and relevant.
The good news is that digital can now be done well with a relatively reasonable budget. Don’t try to brute force this with internal resources. You can outsource this to professionals who can help you get it done right and allow your team to leverage their strategic strengths rather than taking precious time to sub-optimally recreate the wheel.
Never Say Small When You’re Talking About Your Money
Most private equity funds don’t think meaningfully about the spend within their own organizations after compensation, real estate, and deal-related expenses. However, you’re spending money on all sorts of other things that add up. You don’t want to let the tail wag the dog by any means, but there are some relatively easy tools you can use to drive savings and free up some cash to invest elsewhere in your organization. One such tool that both you and your portfolio companies should use is a group purchasing organization (GPO). You’ll likely find savings in travel, office supplies, and data and telephony. It may not change your world, but it’s free money that’s relatively easy to get.
Stop Getting Bogged Down With Post-Closing Tactics
PE funds typically come up with a differential strategy, use it to prevail in a process, and then get swamped out of the gates with the minutiae of the 100-day plan. Rent an independent consultant hailing from a top PE ops improvement consulting firm to drive tactics that are important but not the best use of your teams’ scarce time, such as:
- KPIs & dashboarding
- 13-week cash flow forecasting
- Ad-hoc onboarding analyses
And other similar tactics. Groups who use these resources also typically ask for and get baskets in their debt agreements and push these costs below the bottom line (P.S., they’re also great for preparing for sale).
Use the Robots
Your team’s opportunity costs are in the $1,000s per hour. We’re regularly asked at BluWave how many employees we have. Our answer is always “as few as possible.” Like you, each hour is precious for us and we use technology, automate, and outsource whenever possible so we can as optimally as possible focus resources on our strategic cores. PE funds should do the same by using and getting the most out of the latest CRM software, portfolio company reporting solutions, strategic planning tools and the like.
Using variable resources is a necessity in this day and age in PE. Groups who use them well can accelerate growth, development, and value creation in profound ways. However, it’s hard to know who is good; as soon as you like them, they change or aren’t available, and as a single fund it’s hard to hold third party resources accountable. Shameless plug: Use BluWave. Our business is to be the expert of experts, so you can focus more on your strategic priorities.
You can’t do it alone. Value creation is, in large part, about the people and resources you leverage to help, especially for private equity funds. Take advantage of the pre-vetted network of experts available through BluWave today. Get in touch with us.