A New Chapter Unfolds: How the Life of Business Owners Transforms After Private Equity Investment

Perhaps the most immediate change is the financial liberation that comes with PE investment. Business owners find themselves equipped with the capital needed to fuel expansion, embark on strategic initiatives, and explore new markets, unlocking growth opportunities that were previously out of reach. Often, as we work with leadership teams, one of their top constraints is the cash and access to cash to make the strategic investments to scale.

Strategic Shifts and Collaborative Decision-Making

The dynamics of decision-making evolve. Business owners now navigate a collaborative environment where strategic decisions are often made in consultation with PE partners. Decisions business owners, once made on the fly based on their training and market knowledge, must be reviewed with their PE partner. This shift from unilateral decision-making to a more collective approach reflects the collaborative nature of the PE-business owner relationship.

Focus on Operational Excellence

With PE investment comes a heightened emphasis on operational excellence. Business owners work closely with PE firms to optimize internal processes, streamline operations, and implement efficiency measures. As a Scaling Up certified coach, we help with what we refer to as relentless repeatability. The goal is to maximize returns and position the business for sustained growth.

New Perspectives and Expertise

The entry of PE partners brings new perspectives and expertise into the business. Entrepreneurs benefit from the insights of seasoned professionals, gaining access to a wealth of industry knowledge and strategic guidance that contributes to better decision-making and long-term planning.
Intense Scrutiny and Accountability

PE investors subject portfolio companies to rigorous scrutiny. Business owners experience heightened accountability as they navigate regular performance evaluations, financial reporting, and the need to meet predefined milestones. This level of scrutiny contributes to increased transparency and accountability in business operations.

From our experience, this is often the biggest struggle for entrepreneurial business owners and their leadership teams. Entrepreneurs and family-run businesses are used to making decisions quickly and are not accustomed to the level of accountability mentoring of their teams’ execution to plan. This can often be a tipping point for a past business owner to discuss an exit if the PE firm’s performance-based culture is too much of a disruption for the owner.

Leadership Evolution and Talent Development

The role of business owners evolves from day-to-day management to a focus on leadership and talent development. Entrepreneurs work on grooming a capable leadership team and nurturing talent within the organization to ensure the business can thrive independently in the long run.

Do you have the right people with the right skills in each leadership position?

Are your various leaders in place based on their skills and demonstrated capabilities or tenure with your organization?

We often find senior leaders in roles based on their lengths of service and not their abilities. These individuals may have been skilled enough to get their teams and departments to where they are today but lack the skills and ability to meet future growth objectives without training and coaching.

Exit Strategy Planning

Business owners become more attuned to the concept of exit strategies. Whether it involves an Initial Public Offering (IPO), a strategic sale, or another avenue, entrepreneurs collaborate with PE partners to formulate a clear exit strategy that aligns with both parties’ long-term goals.

It is not unusual for business owners and PE partners to agree on doubling the business in three or 5X in five years…10X in 7 years.

Increased Pressure and Expectations

The pressure to deliver results increases after PE investment. Business owners find themselves navigating higher expectations and performance targets. For our leaders who once ran a family business, this may be their first experience with performance-based objectives and the level of accountability to specific goals they have never experienced before. The challenge lies in balancing ambitious growth goals with the need for sustainable, long-term success.

Enhanced Network and Industry Connections

The collaboration with PE firms opens doors to an enhanced network of industry connections. Business owners gain access to valuable relationships, partnerships, and market insights, contributing to the overall growth and positioning of the company in the industry.

For example, our firm serves several PE firms. When a PE firm wants assistance in the voice of customer research, improving sales effectiveness, and developing a customer-centric strategic growth plan, we often serve PE firms and their portfolio companies.

PE firms often have relationships with several service providers and expertise the business owner may not have been aware of or had access to.

Balancing Professional and Personal Growth

Achieving a balance between professional and personal growth becomes a priority. Business owners navigate the dual responsibility of steering the company to success while ensuring their personal and professional development amid the evolving landscape.

The life of business owners and their leadership teams undergo a transformative journey after PE investment. While financial liberation and growth opportunities abound, the shift in decision-making dynamics, increased accountability, and the pursuit of operational excellence brings forth new challenges and responsibilities. Successfully navigating these changes requires adaptability, collaboration, and focusing on long-term success.

Let’s schedule a call if you just received a PE investment and want to ensure your team achieves your explosive growth objectives.