6 Ways to Accelerate Portfolio Company Growth

Private equity firms are focusing less on financial restructuring and more on operational improvements and sustainable, product-led growth. Here’s a quick breakdown of the 6 key strategies driving results:

1. Use the Jobs-to-be-Done (JTBD) Framework: Align product development with customer needs for faster revenue growth.

2. Cut Costs and Scale Operations: Reduce expenses through integration, automation, and tech tools like RPA and cloud ERP.

3. Expand into New Markets: Use data-driven strategies to enter markets with high growth potential.

4. Build Strong Teams and Leaders: Develop leadership skills and break down silos to improve efficiency.

5. Boost Financial Results: Focus on EBITDA growth through pricing, cost reduction, and working capital improvements.

6. Plan for a High-Value Exit: Align operations with buyer priorities and invest in digital upgrades to maximize valuation.

Key Metrics for Success:

• EBITDA Margin Target: 15-25% growth

• Revenue Growth Goal: 15-30% CAGR

• Equity Multiple: 2.5x or higher

These strategies, when applied together, can increase exit valuations by 40-60%. Let’s dive deeper into how each one works.

How PE Firms Can Accelerate Growth at Their Portfolio Companies

1. Apply JTBD Framework to Product Development

The Jobs-to-be-Done (JTBD) framework shifts the focus in product development from who customers are to what they need. This approach has been especially effective for private equity-backed software companies aiming for rapid growth.

Map Customer Needs with JTBD

Understanding what customers truly need requires more than just traditional market research. For instance, BOSCH transformed its power tool division by analyzing how carpenters actually worked on-site. This real-world insight led to the success of their CS20 circular saw, which captured 15% of the market in just 18 months, directly boosting revenue share ^[3][5].

The JTBD process follows four key stages:

This structured approach delivers tangible results. For example, Kroll Ontrack shifted its focus from generic legal professional personas to specific tasks like document discovery. By addressing precise litigation support needs, they achieved a 200% revenue increase ^[3].

Use thrv Platform for Product Planning

Platforms like thrv simplify the implementation of JTBD across portfolios. Some key advantages include:

To make the most of JTBD, companies should:

• Separate jobs from solutions

• Include emotional and social dimensions of jobs

• Revisit and update job maps as markets change

This customer-focused approach lays the groundwork for precise market expansion, setting up the next stage of growth in Strategy 3.

2. Cut Costs and Scale Operations

Reducing costs while scaling operations lays the groundwork for growth. This disciplined approach supports the dual transformation strategy discussed earlier, creating room for new growth opportunities.

Find Cost Savings Through Integration

Bringing different business units together can uncover major cost-saving opportunities. Horizontal integration, such as combining overlapping functions, has shown strong results. For instance, merging sales teams in manufacturing companies led to an 18% reduction in SG&A expenses ^[4].

Centralizing back-office operations can also deliver measurable gains:

To avoid disrupting customer service during integration, some companies implement "customer experience firewalls." For example, a consumer goods company maintained a 98% on-time delivery rate during an ERP migration by running parallel systems temporarily ^[1].

Use Tech Tools to Lower Costs

Strategic use of technology can lead to quick and impactful cost reductions. Robotic Process Automation (RPA) in financial operations, for example, has delivered 60% cost savings with payback periods of less than six months ^[4].

Cloud ERP systems can cut IT costs by 25-40% in the first year by eliminating the need for physical hardware ^[1].

For manufacturing companies, tools like digital twin simulations and computer vision systems have driven operational improvements. One industrial group increased production throughput by 22% using digital twins, while another reduced scrap rates by 31% with computer vision ^[4].

The secret to effective tech adoption is focusing on quick wins. Lean process redesigns (which account for 70% of success) should take priority over automation infrastructure (30%) ^[4].

Collaboration across portfolios can amplify these benefits. Some industrial groups have created centers of excellence to share best practices, with one group saving $8M annually ^[4].

This operational efficiency sets the stage for more targeted investments in customer-focused innovation, aligning with Strategy 1's Jobs-to-be-Done (JTBD) approach.

3. Grow Revenue in New Markets

Using JTBD-mapped customer needs from Strategy 2, portfolio companies can expand into new markets systematically, unlocking new revenue streams. McKinsey's research highlights that well-executed market expansion can lead to EBITDA growth at 2.5 times the rate of companies that lack a clear strategy ^[2].

Evaluate New Market Entry

When evaluating new markets, it's important to analyze four key factors to ensure success:

Take Canada Goose as an example. With Bain Capital's guidance, the company expanded into China by implementing focused digital and retail strategies. This move increased its Asia revenue share from 9.4% to 26.6% [12].

To reduce risks, businesses should conduct a pre-entry compliance audit at least six months before launching in a new market. Additionally, maintaining a 15-20% contingency buffer can help address unforeseen challenges [12]. KKR's BMC Software used this approach, working with regional cloud providers in Asia-Pacific, which resulted in a 28% year-over-year revenue increase.

Target Customer Segments Better

Advanced data analytics have revolutionized customer targeting, making it more precise and effective. The best strategies rely on three main tools:

For instance, McKinsey's PinPoint tool uses natural language processing to identify high-potential customer segments through automated trend analysis ^[2]. Paired with traditional metrics, this approach ensures focused targeting:

To maximize outcomes, companies should avoid overexposing themselves to a single market ^[8]. By combining JTBD insights with precise, data-driven strategies, businesses can scale market expansion efforts effectively. This also sets the stage for leadership development, which is covered in Strategy 4.

4. Build Strong Teams and Leaders

While expanding into new markets (as discussed in Strategy 3) requires careful planning, the real driver of success is people. Developing strong teams and effective leaders is crucial. According to KKR data, companies with structured development programs see 28% higher employee engagement and 15% better operational efficiency ^[10]. These improvements are essential for executing Strategies 1-3.

Improve Leadership Skills

The best leadership development programs focus on three key areas:

A great example of this is Blackstone's work with Hilton. By prioritizing leadership development, they helped drive a $35 billion increase in enterprise value ^[8]. Their approach focused on integrating global operations and building cross-market expertise.

Connect Teams Across Departments

Breaking down silos between departments is another critical step for growth. Silver Lake’s partnership with Dell is a case in point. They used an integrated operating model to significantly improve performance ^[8]. Here’s what they did:

These strategies not only strengthen leadership but also set the stage for achieving financial goals, like the 15-30% CAGR target mentioned in the Article Introduction. The secret? Clear accountability and collaboration across all levels of the organization.

5. Increase Financial Results

Strong leadership (covered in Strategy 4) drives the execution of three financial levers that directly impact the 15-25% EBITDA margin targets mentioned earlier. According to McKinsey, successful PE portfolio companies achieve 15-25% higher EBITDA through structured improvement programs ^[9].

Boost EBITDA Performance

Three main drivers consistently fuel EBITDA growth in portfolio companies:

For example, a mid-market manufacturer achieved a 22% EBITDA increase by focusing on three initiatives: SKU rationalization (reducing SKUs by 35%), automating accounts receivable (improving DSO by 18 days), and implementing strategic pricing (leading to a 3.7% revenue boost) ^[11]

Set Clear Financial Reports

Transparent financial reporting builds trust and confidence among potential buyers. The most effective reporting includes:

In one case, a SaaS company allocated 70% of its resources to core EBITDA initiatives (resulting in a 15% margin increase) and 30% to strategic transitions, which doubled its revenue multiple ^[13].

6. Plan Company Exit with Roadmapping

Exit planning starts with aligning operational and product improvements to what potential buyers value most. Companies that follow an exit readiness roadmap see 2.4x higher shareholder returns ^[7].

Build a Value Growth Timeline

A phased approach can help maximize your company's exit potential:

Take KKR’s exit from Alliance Boots in 2014 as an example. They made a $7.1 billion profit after a seven-year plan that included market expansion and timing their exit when market conditions were favorable ^[4].

Boost Company Value Before Selling

Investing in technology can directly enhance the operational groundwork laid in earlier strategies. Thoma Bravo’s $2-5M digital upgrades have shown 3-5x exit ROI ^[6]. Some value-driving initiatives include:

For example, a mid-market industrial company achieved:

• 35% less downtime using IoT predictive maintenance

• 15% productivity gains through streamlined operations

• A 9x EBITDA multiple, far above the industry average of 6.5x, thanks to a proprietary analytics dashboard ^[4].

"Comprehensive documentation reduces due diligence requests by 40% and accelerates the due diligence process significantly" ^[7].

To prepare for a sale, ensure your documentation includes:

• Three years of audited financials with fewer than 5% adjustments

• Customer concentration below 20% for top clients

• Complete intellectual property records ^[6]

• EBITDA growth metrics that align with the targets outlined in the introduction

Blackstone’s 2021 exit from Bumble Inc., via an IPO, is a great example of this strategy in action. They achieved a $2.3 billion return on their $3 billion investment in just two years, thanks to smart tech investments and market expansion ^[10]. This success hit their goal of a 2.5x+ equity multiple, as outlined earlier.

Conclusion

Private equity firms that apply all six strategies systematically tend to see much higher returns. According to McKinsey's Innovation Quotient, growth initiatives executed with discipline can increase portfolio returns by 2.4x ^[7].

Key Takeaways for PE Leaders

The six strategies, which range from operational focus (Strategies 1-3) to financial discipline (Strategies 4-6), work together to drive value over time:

Here’s what to focus on:

• Align operational improvements (Strategies 1-3) with forward-looking innovation efforts.

• Use digital tools thoughtfully at every stage of growth.

• Track key performance metrics consistently:

  • 15%+ EBITDA margin growth

  • 30%+ ROI from innovation

  • 2.5x+ equity multiples ^[4][5][7]