The private investment world has skewed what profitability really means

I would argue 99.9% of my clients operate on “adjusted EBITDA” for one reason or another. Now, I do work almost exclusively in the private equity portfolio company world where companies have clear ROI-driven objectives from ownership and those in charge of governance. Usually, when a company is acquired in the PE/VC context, it no longer exists to be a lifestyle business. Private equity folks aren’t (usually) interested in a “buy and hold forever” strategy. Usually, companies that get acquired by PE are on a 5–7 year hold pattern where an exit at the end for a multiple is the objective.

Is your management team focused on things that don’t matter?

There are so many shiny things to distract management teams from actually moving the needle in a company. You probably know what I’m talking about — that new business line that sounds exciting but will cost a lot of money and time. All the while, this particular management team hasn’t fully optimized their existing business.

Appreciating your competition

There are many areas in which your competition probably excels. Are you dismissive of great features you should ultimately be rolling into your own brand?

The key differentiator between successful private equity funds and mediocre ones

Just because a fund can raise a lot of money doesn’t mean they’re good at investing it, operating the companies after acquisition, or making money through exits.

The CEO transition zone. When founders fizzle or rise to the occasion.

CEOs in the lower middle market operate in a transition zone. It’s a proving ground for founder-CEOs to become great leaders and operators… or get replaced.

Don’t call it a budget. Call it an operating model (Part 3: Expenses & Profitability)

Achieving profitability targets can only be attained by holding everyone to their expense budgets.

This is the most important model I build for companies.

If you want to be an extremely valuable asset to a company, get really good at forecasting cash.

Don’t call it a budget. Call it an operating model (Part 2: Sales forecasting)

One of the first frameworks on which the management team must align is the sales forecast. Final sales projections will ultimately be approved by the CEO, but the team must understand and agree on how they plan to forecast sales. The sales forecasting methodology should start by determining the underlying metrics or KPIs by which the company’s sales and marketing team measure growth. From there, it is important to layer in any business seasonality or planned metric improvements.

Don’t call it a budget. Call it an operating model (Part 1: Bottoms-up frameworks)

Tying functions to the financials at the most granular level is why they pay us the big bucks.

Good at reading tea leaves? You’re needed in FP&A.

Demystifying the differences between financial analysis and financial reporting. Yes, they are different.