Industry Insights (Private Equity)
The intrinsic issue with most private equity (PE) firms is they are operated with the sole purpose of creating shareholder value, most typically at the cost of culture and what is in the acquired companies best interest. This applies more to the larger PE firms that utilize debt leveraging, cost flow syphoning, or divesting of entities. There is a market for smaller PE firms to acquire smaller companies that have yet to reach their growth potential due to lack of ownership knowledge and the tools to apply that knowledge.
Identifying Potential Companies
The key to the smaller PE model is finding companies that have not reached their full potential. This is any company that is currently run by an entrepreneur that has never had the basic business training or ability to apply that training. A company that can flourish in the $100K to $1mm revenue typically cannot be run the same way a $5mm revenue company. As a company grows and employs more individuals, proper structure (policies and procedures) must be put into place to allow those individuals to not only complete their jobs but allow them to grow and expand.
Building a successful business plan
Many small business owners and entrepreneurs lack the knowledge and capability to develop structures, policies, and procedures to grow to a larger company. Building business plans allows companies to identify their current customer markets but also research markets that could help break into new revenue streams. Executing business plans, long term strategies, and metrics while maintaining accountability will allow these companies to achieve the goals that help create substantial increases in worth. This gives smaller companies the roadmap to the future.
Tools for the entry level business owner
Business owners need to be given the tools they require to analyze the companies they are responsible for growing. Most small business owners often state that the majority of their time is taken up by tasks that are either outside their expertise or not within their strengths. Take the owner of a widget manufacture, he knows the best way to build and sell these widgets but if he is spending more time with the financials or marketing then the company will never reach its full potential. This owner needs a quick and easy dashboard for information that will assist him to quickly see if any of his companies main Key Performance Indicators (KPIs) are out of line.
Setting obtainable short- and long- term goals
A key issue for many small businesses is setting goals for both the short term and long term. These should be goals that not only push the company out of its comfort zone but also are obtainable. Once goals are established, they should be written down and tracked on periodic basis.
Leadership
Any company that wants to grow to the next level will require strong leadership. The key to strong leadership is not just getting people to follow. It is understanding and analyzing key employees to make sure you are getting the most out of each position. What might motivate and inspire one employee might discourage another. While one employee might need to be told what task is next another might need to be given detailed instructions on how to complete the entire task. A true leader will surround themselves with people that complement any shortcomings that he or she might have. Being open to all ideas and suggestions typically leads to the best solution or road.