Introducing The Modern Private Equity Portfolio Performance Framework. Why the old PE growth model is broken — and the disciplined, operational framework that replaces it
I have helped B2B companies scale for 40 years. I often help portfolio companies scale, or my book Driving Explosive Growth shares the process I discovered years ago to help B2B companies scale. As I shared in the last post Why the Private Equity Deal Environment Is Harder Than Ever: What Changed, What it Means For Your Company, my interviews and research found the private equity industry built its modern identity on three levers: cheap debt, multiple expansion, and financial engineering. For more than a decade, those levers produced reliable returns. PE firms could acquire companies at reasonable valuations, load them with inexpensive debt, watch multiples expand in a rising market, and exit profitably — often without fundamentally transforming the business they owned. I have built my career fixing sales problems, and, based on interviews and research, including conversations with private equity thought leaders, I designed what I call The Modern Private Equity Portfolio Performance Framework in response to the challenges facing Private Equity Investors and portfolio companies today.
That old PE era ended. Not gradually. It ended.
Since 2022, each of those three levers has either disappeared or been reversed.
Interest rates rose sharply.
Multiple expansion reversed.
Financial engineering, without underlying operational performance, stopped producing returns.
And the consequences are now visible across the industry: zombie companies trapped in portfolios, zombie funds held well beyond their intended life, LP capital becoming scarcer and more selective, and a growing backlog of portfolio companies that are neither growing nor attracting buyers.
The Private Equity firms and portfolio company leaders who built their strategies around the old model are still waiting for it to come back.
No-Smoke-and-Mirrors Insight: It is not coming back.
The firms and leaders who are winning today have already moved. They have replaced financial engineering with operational discipline. They have replaced multiple expansion hopes with margin expansion plans. They have replaced leverage with leadership. And they have built or adopted what I call the Modern Private Equity Portfolio Performance Framework — a structured, executable approach to creating value in the environment that actually exists today.
This article defines that framework. It is built on four decades of experience working alongside PE firms and their portfolio companies — writing and executing value-creation plans, serving on leadership teams reporting to PE partners, and directly observing what separates investments that accelerate from those that stall.
We updated it to serve today’s deal environment.
No smoke.
No mirrors.
Just what works.
Why the Old Private Equity Model No Longer Works?
To understand what the new framework must do, it is worth being precise about what broke — and why the breakage is structural, not cyclical.
| 12%+
Annual EBITDA growth now required for 2.5× return (vs. 5% a decade ago) |
4–9 mo.
Typical timeline from first meeting to PE deal close in today’s market |
4–6 of 10
PE investments failing to meet original value growth plans ( depending on market vertical) |
The Three Levers Are Gone
For most of the 2010s, PE returns were structurally supported by three forces that had little to do with how well a portfolio company was actually run. Debt was cheap — often 3 to 5 percent — which meant leverage amplified returns without requiring proportional operational improvement. Multiples expanded consistently, meaning a firm could buy a company at 6× EBITDA and sell it at 9× without doing much beyond holding it. And the availability of cheap capital meant there was always a buyer.
As PE investment expert Greg Head has noted, a decade ago a firm could achieve a 2.5× return on just 5 percent EBITDA growth per year. Today that same return requires 12 percent annual EBITDA growth. That is not a marginal increase in difficulty. It is a fundamental change in what PE investing actually requires.
The Hangover From 2021 and 2022
The exuberant dealmaking of 2021 and 2022 — driven by near-zero interest rates and a flood of LP capital — left many firms holding companies acquired at elevated multiples that can no longer support the debt structures written at the time. As CNBC has reported, the industry is now confronting a growing cohort of so-called zombie companies: businesses that aren’t growing, barely generate enough cash to service debt, and cannot attract buyers even at a discount. They are trapped on fund balance sheets well beyond their intended holding periods — giving rise to zombie funds held ten years or more.
The Center for Economic and Policy Research has documented historically low payouts to investors, with the ratio of paid-in capital becoming a top-of-mind metric for LPs who are increasingly scrutinizing distributions over paper returns. As placement agent Kelly Phelan of Asante Capital has noted, investors are rewarding firms that demonstrate the ability to produce actual distributions — not just impressive unrealized valuations.
What This Means in Practice
PE firms today are simultaneously trying to raise new capital from more selective LPs, deploy that capital into more expensive and more scrutinized deals, manage existing portfolio companies that are underperforming against their original investment theses, and find exits in a market where strategic buyers are cautious, and IPO windows are inconsistent.
The firms navigating this most effectively share a common posture: they have accepted that returns must now come from operational improvement, revenue growth, and margin expansion — not from financial structure. And they have built their portfolio management approach around that reality.
The three levers that built the PE industry just disappeared.
Returns now come from one place: building better businesses.
The Modern Private Equity Portfolio Performance Framework
The framework I have developed and refined across four decades is organized around five pillars. Each pillar addresses a specific failure mode I most frequently observe in underperforming PE investments. Together, they form a complete operating system for value creation in today’s environment.
Private Equity Portfolio Performance Framework Overview
Five Pillars of Modern PE Portfolio Performance
| 1 |
Leadership Clarity & Organizational StabilityEstablish visible, decisive leadership from day one. Stop the uncertainty that leaks deal value before the first investor update is written. |
| 2 |
Voice of Customer IntelligenceBuild a strategy based on current market reality, not on how things have always been done. Customer data drives decisions. |
| 3 |
Strategic Growth Plan — People, Strategy, Execution, CashA written, executable plan aligned to the four pillars. Not a PowerPoint. A working document with owners, timelines, and metrics. |
| 4 |
Sales & Revenue Engine RebuildAssess the team, fix the process, install accountability. Revenue growth is the only path to value creation that actually works now. |
| 5 |
Margin Expansion & Operational DisciplineRevenue without margin is revenue without a return. Every pillar in this framework is designed to protect and expand margin alongside topline growth. |
PILLAR 1 LEADERSHIP CLARITY & ORGANIZATIONAL STABILITY
The most expensive mistake in PE investing is the leadership vacuum. It costs more than any other single variable.
The moment a deal closes, every stakeholder in the portfolio company — employees, customers, suppliers, and competitors — begins asking the same question: what will change, and will it be good or bad for me?
The research on leadership transitions in PE-backed companies is sobering. From my direct experience, somewhere between 80 and 90 percent of founders and CEOs are replaced within the first year of PE ownership. Executive searches take four to six months in normal conditions. I have watched one take fourteen months.
During that period, the portfolio company does not pause. Customers hear from competitors. Top performers update their LinkedIn profiles. Sales momentum slows. Customer intelligence wanes. Execution drifts. And deal value leaks out of the business every day the vacuum goes unfilled.
The Fourteen-Month Warning: One of my clients refused to write a strategic plan until the new CEO was found, arguing the plan should reflect that person’s vision. During those fourteen months, competitors took customers, employees questioned the future, and the business lost measurable value. The new CEO inherited a weaker company than the PE firm had acquired. |
What the Framework Requires in Pillar 1
The framework demands that leadership clarity be established — not eventually, but in week one. This means all-hands communication immediately after close: what will change, what will not change, and where the company is going. It means interim leadership is in place before the search for permanent leadership begins, not after it concludes. And it means the PE firm’s operating partners are visible and present — not just available on a quarterly call.
The five most important actions in the first thirty days are:
-
Communicate directly with all employees
-
Visit the top twenty customers in person
-
Stabilize the senior leadership team
-
Establish clear decision-making authority
-
Begin the strategic assessment.
Companies that complete these five actions in the first month consistently outperform those that delay any one of them.
PILLAR 2 VOICE OF CUSTOMER INTELLIGENCE
A strategy built on internal assumptions fails at the rate of the assumptions. A strategy grounded in current customer data is grounded in reality.
One of the most consistent patterns I observe in underperforming PE portfolio companies is that their strategy was written based on what the leadership team believed about their customers — not based on what customers said. These are different things. Often dramatically different.
Voice of customer research is not just a customer satisfaction survey. It is a structured series of in-depth conversations — typically thirty to fifty interviews with current customers, former customers, and prospects — designed to surface the information that drives real strategic decisions. For one large company, we completed 350 customer and prospect interviews in six weeks.
The Six Questions That Must Be Answered
1 |
Why do customers buy from you — and why do they stay?The honest answer to this question almost always differs from what the leadership team believes. The gap between the two is a strategic blind spot. |
2 |
What do customers value most — and least — about what you provide?Knowing what customers don’t value tells you where you may be over-investing. Reallocating that investment toward what they value is one of the fastest levers for margin expansion. |
3 |
Who else are they buying from, and why?Customer concentration and competitive dynamics look very different when customers describe them than when internal sales data describes them. |
| 4 |
What would cause them to leave?Most PE-backed companies lack a formal customer retention strategy. This question reveals the early warning signs before they become exits. |
| 5 |
What are their biggest business challenges this year?The answer to this question is the foundation of a value proposition that actually resonates — rather than one written in a conference room. |
| 6 |
What should you start doing that you are not doing today?This is the innovation pipeline. Customers who trust you will tell you what they need. Most companies never ask. |
The strategic growth plan that follows this research is fundamentally different from one written without it. It targets the right customers with the right message, addresses the right problems, and stops investing in areas customers have already told you they don’t value. In my experience, voice of customer research consistently surfaces two or three revenue or margin opportunities that the internal team had not identified, and one or two areas of investment that should be stopped.
PILLAR 3 STRATEGIC GROWTH PLAN — PEOPLE, STRATEGY, EXECUTION, CASH
A goal without a plan is a wish. A plan without execution owners is a document. The framework requires both.
The most common planning failure I observe in PE portfolio companies is not the absence of goals. It is the absence of an aligned plan that answers the questions: where are we going, how will we get there, who is accountable, and how will we measure progress?
The Modern PE Portfolio Performance Framework organizes the strategic growth plan around four pillars that must be addressed simultaneously rather than sequentially. I was certified in the Scaling Up methodology years ago, and I find it one of the best ways to strategically grow a company and significantly increase enterprise value.
PEOPLE |
STRATEGY |
EXECUTION |
CASH |
Do we have the right people in the right roles to execute this plan?Skills, beliefs, motivation, and accountability — assessed against what the plan requires, not against what felt adequate before. |
Where are we going, who are we serving, and why will they choose us over every alternative?Built on voice of customer data, competitive analysis, and a clear-eyed view of where organic growth and net new growth will come from. |
What are the specific actions, owners, timelines, and metrics that will deliver the strategy?Plans fail in execution. The framework requires 90-day execution cycles, visible accountability, and weekly pipeline reviews. |
Does the plan generate the cash margin required to service debt, fund growth, and build enterprise value?Revenue growth without margin expansion does not create PE value. Cash planning is not a finance function — it is a strategy function. |
The one-page strategic plan must be a working document — reviewed monthly, adjusted quarterly, and rebuilt immediately when the market changes. It must have named owners for every priority and measurable outcomes that give the PE firm and portfolio company leadership the data they need to manage execution, not just the narrative they need to manage optics.
This becomes the key alignment document for the private equity investor and the portfolio company.
PILLAR 4 SALES & REVENUE ENGINE REBUILD
The revenue line is where enterprise value is built or destroyed. In today’s environment, the sales organization cannot be assumed — it must be assessed and built to scale.
Many PE portfolio companies have sales organizations that were built for a previous stage of growth. They worked well when the founder’s relationships carried deals, when the market was less competitive, or when growth came primarily from a few large accounts. They are not built to deliver the 12 percent annual EBITDA growth the current market requires.
The framework requires a disciplined, data-driven assessment of the sales organization against what the strategic growth plan demands — not against what felt adequate when the deal was done.
The Five Sales Dimensions That Must Be Assessed
Dimension |
What the Assessment Must Determine |
Sales Team Skills |
Do individual salespeople have the ability to execute at the level the growth plan requires — discovery, value selling, objection handling, closing, and account expansion? |
Sales Management Capability |
Can sales managers coach, develop, hold accountability, and build a performance culture — or are they senior individual contributors with a management title? |
Sales Process & Pipeline Discipline |
Is there a consistent, documented sales process? Does the CRM reflect reality or wishful thinking? What percentage of the pipeline is stale? |
Beliefs & Motivation |
Does the team believe the growth goal is achievable? Do they believe in the value of what they are selling at full price? Belief gaps produce performance gaps that training alone cannot close. |
Performance Culture |
Is underperformance addressed promptly and directly? Are top performers recognized and retained? A culture that tolerates underperformance tells top performers their results do not matter. |
The output of this assessment is a clear picture of the gap between where the sales organization is today and where it needs to be to execute the strategic plan. That gap drives specific actions: targeted training, sales process redesign, CRM discipline, coaching and accountability structures, and — where necessary — leadership changes.
The Pipeline Reality Check: In most underperforming PE portfolio companies I work with, the CRM shows a healthy pipeline. The actual pipeline is not healthy. The gap between what is in the system and what will actually close is one of the most common and most costly blind spots in portfolio management. A pipeline audit is not optional — it is foundational. |
Building the Revenue Growth Engine
The framework distinguishes between two revenue streams that require different strategies and different investments. Organic growth — expanding revenue from existing customers through share of wallet growth, service contracts, aftermarket, and expanded relationships — has a shorter sales cycle, higher close rates, and lower customer acquisition cost. Net new customer growth — opening new logos — takes longer, costs more, and requires a different skill set.
Most PE portfolio companies underinvest in organic growth strategy and over-rely on new customer acquisition to hit revenue targets. The framework rebalances this by requiring a documented key account growth plan for every customer that represents meaningful revenue, a defined new account target list, and a pipeline that reflects both streams with appropriate velocity metrics.
PILLAR 5 MARGIN EXPANSION & OPERATIONAL DISCIPLINE
Revenue without margin does not create PE value. The modern framework treats margin expansion as a strategy — not a finance department problem.
The final pillar of the Modern Private Equity Portfolio Performance Framework addresses the dimension that most directly drives enterprise value in today’s environment. With multiple expansion no longer available as a return lever, every point of margin improvement has a direct and measurable impact on valuation.
The framework identifies four primary margin expansion levers that operational leaders and PE partners should actively manage — not just monitor.
| # |
Lever |
What It Requires |
1 |
Pricing Discipline |
Stop leaving margin on the table through unnecessary discounting. The sales assessment in Pillar 4 almost always surfaces price erosion as a root cause of margin underperformance. Belief in full-price value is a sales skill — and it must be trained and reinforced. |
2 |
Customer Profitability Analysis |
Not all revenue is equal. A detailed analysis of net profit by customer, product line, and channel consistently reveals accounts and offerings that consume resources while generating minimal or negative margins. Stopping or repricing these is one of the fastest margin improvement actions available. |
3 |
Operational Efficiency |
Process inefficiency, excess overhead, and under-utilization of technology are margin killers that are often invisible until someone looks for them specifically. The framework requires a structured operational review in the first 90 days. |
4 |
Revenue Quality |
Recurring revenue, long-term contracts, and customer retention rates are not just growth metrics — they are margin metrics. High-churn revenue requires constant replacement cost. High-retention revenue compounds. The framework explicitly targets improvements in revenue quality alongside revenue growth. |
What This Means for Founders and CEOs Preparing to Sell
The framework described above is not only relevant for PE firms managing existing portfolio companies. It is equally relevant for founders and CEOs who are preparing to attract PE investment, because the companies that move through diligence fastest and command the best valuations today are the companies that have already built what this framework describes.
In today’s environment, PE investors are not just buying revenue. They are buying scalability, operational discipline, and leadership depth. A company that walks into diligence with a written strategic growth plan, a professional sales process, a voice-of-customer research foundation, a leadership team that can run the business without the founder, and a clear margin expansion story is a fundamentally different acquisition target than one that has only revenue and relationships.
Companies That Attract PE Interest Today |
Companies That Struggle to Close Deals |
| ✓ Written strategic growth plan with execution metrics |
✗ Revenue goal, but no documented strategy |
✓ Professional sales process with pipeline visibility |
✗ Relationship-based selling with no CRM discipline |
✓ Voice of customer data informing strategy |
✗ Strategy based on internal assumptions |
✓ Leadership team capable of scaling without the founder |
✗ All key relationships and decisions in one person |
✓ Diversified customer revenue |
✗ Top 3 customers = 60%+ of revenue |
✓ Documented margin expansion opportunity |
✗ Margin pressure with no clear plan to address it |
✓ Clean financial reporting and operational data |
✗ Good business, opaque reporting |
The preparation window most founders miss is the 12- to 18-month period before going to market. Companies that use that window to build what PE investors are looking for — rather than just cleaning up financials — consistently attract stronger interest, move through diligence faster, and command valuations that reflect the operational quality of the business, not just its historical revenue.
The Bottom Line
The private equity industry is not broken. It is recalibrating. The firms and portfolio companies that recalibrate with it — that accept the new reality and build the operational capabilities it requires — will outperform. The firms and companies that wait for the old model to return will not.
The Modern Private Equity Portfolio Performance Framework is a response to the market as it is today. It is disciplined, whereas the old model was casual. It is operational, where the old model was financial. It is customer-driven, whereas the old model was internally focused. And it is executable, which is the only quality that ultimately matters.
The deal does not create value.
The plan does not create value.
Execution — disciplined, data-driven, customer-informed execution — creates value.
That is the only lever left.
I have spent forty years helping B2B companies and PE-backed portfolio companies build and execute growth plans. I have written strategies, trained over 1,000 salespeople, served on leadership teams reporting to PE partners, and observed what separates investments that compound from those that stall. My passion is fixing sales problems, developing customer-driven strategic growth plans, and updating and creating frameworks for leaders to increase enterprise value.
The answer has never been more obvious in my opinion and experience — or more actionable — than it is today.
If you are ready to act…