One of the key building blocks of value creation in private equity is company transformation aligned with growth. We meet many founder-operators who built great businesses premised on the popularity of their products or services. These folks are experts in their product categories and customer experiences that they honed over the years.
Some of the reasons leading to looking for strategic partners are capacity constraints and a successful track record that puts pressure on management teams as to asking questions such as “what’s next for my business?” and “do we know how to create and execute growth?”. Not everyone is equipped to readily answer these questions.
The core of the strategy is simplicity and the notion of efficiency described as "less is more".
Assembler’s objective is to build on the founders’ passion and help implement their vision in a meaningful way that would benefit all parties involved.
The core of the strategy here is simplicity and the notion of efficiency described as “less is more”. Founders had done the hard work of inventing a new product and building a business around it.
Our 3 main objectives as we partner with management teams are as follows:
(A) Growing sales,
(B) Making sure there are processes and procedures in place, and
(C) Retaining talent across all ranks that can execute.
The three above can also be described as PPP – Product, Process, People, that serve as a foundation for scalable organizations. We have worked with organizations where products were consumer packaged goods and as well as a combination of retail, service and experience.
Unless an organization has well written and run processes, procedures and people executing the strategy, it is so much harder to scale and operate at a profit. Many businesses still do, but they do at a high cost of low margin business or high working capital requirements.
An example of a mature business with a broken process would be one that keeps adding more workers as sales grow. In many cases, this is caused by the lack of investment in technology and too much manual work. Manual operation vs. automated can be seen in retail, manufacturing and service industries. Another words, organizations are forced to adding more fixed costs as their business grows due to a lack of automation and process.
In case of a specialty retail project, we worked with a business that was as complex as they come with multi-state locations across the U.S. Outdated systems and data processing, as boring and uncorrelated with sales as it may sound, were causing an overblown accounting/finance headcount. Alignment of inventory receipts with accounts payable had gargantuan misses and timing gaps that led to conflict with vendors and accuracy of payment processing.
The key to understanding your process gaps and constraints is in performing walkthroughs of all processes and procedures and mapping these on a whiteboard. A key attribute of a successful walkthrough is inviting all key process operators and managers to question, contribute and resolve bottlenecks. Visibility is key here.
PPP has become a golden standard in business transformation and building platforms aligned with growth. It is important to assess and re-assess your PPP as part of annual strategic retreats and empower key management members to drive change, efficiencies and growth.
-A.G.
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