What Companies are Good for Your Portfolio?
When you’re considering whether a candidate company will be a good addition to your private equity portfolio, what should you be looking at? There are a lot of factors that can make or break a company over the course of a few years. That’s not much time, and you don’t want to hold onto assets very long. The name of the game is timing and speed. Find, buy, build up, and sell the right company all at the right times, and you’re golden.
A Private Equity Portfolio Company Should Have Room For Growth
Jeremy Han, in a fantastic and useful article at goodstrategy.net, lays out an investor’s ideal priorities and how to navigate them:
“[It] is not start-ups but scale ups that matter. Start-ups are too diverse in nature, and hence hard to pin ‘how to help’ whereas scale ups have certain characteristics that can be identified and to indicate potential. Thus, the key question shifts to this – how to identify ‘potential’ in a company? … [It] can be spotted in two areas. One is in the mindset of the owners, and the other is in the ‘framework’ of the company.”
On the subject of mindset, Han notes that the name of the company in question can provide valuable insight. Have the company’s founders and owners given it a name that evokes growth and ambition? If so, that’s a good indication that you’re working with the right people. “It signals intention,” he states.
That signal of intention should also be coupled with an attitude that embraces change, and implements it. You’re looking for company leaders who really do think differently from the rest of the pack, and don’t just repeat empty slogans.
Attitude + Framework = Growth Potential
What is the framework that makes the magic happen in a scalable company?
Han recommends taking a look first at their strategy. Is it focused on competition, or on differentiation? Let’s put that question another way. Are they playing catch-up with everyone else, or are they doing things better than anyone else, in a way no one even dreamed of before?
We’ll hazard a guess as to which one you want to throw your money at.
Next, how are their people skills? Do they just hire staff, or do they search for the right people to do the right job? Do the people on top spend a lot of time learning and becoming better and better industry experts? If so, you’re looking at something dynamic and agile enough to break through barriers.
Private equity profile companies with the potential to scale also have a special relationship with the established norms of their industry regarding cash flow. They ignore them. Instead, they do all they can to improve their cash flow beyond what their competitors expect, and race past them. They’re constantly refining and improving their business model in response to new conditions.
They also execute all of the above strategies deliberately, leaving nothing to chance. They focus on priorities, rather than merely checking off tasks. They don’t waste time or other resources.
Scale Sales For Faster Expansion
We at Boomsourcing love this mindset and framework. That’s why we partner with investors to help transform their private equity portfolio companies. We specialize in helping well-positioned companies scale fast. Our teams of SDRs drive qualified prospects right into their arms. We do this in tandem with back office task outsourcing, including for accounting processes and customer service.
Contact Boomsourcing today to start scaling your portfolio companies like never before!