Unlocking Value: 5 Strategic CFO Insights for Driving PortCo Growth

In today's capital-intensive and competitive environment, PortCos are under increasing pressure to generate accelerated growth, sustainable profits, and scalable operations. Whether preparing for an IPO, a strategic sale, or additional investment rounds, increasing enterprise value is the main objective. For portfolio companies, especially those under the ownership of private equity or venture capital, the challenge is not only to grow, but to grow wisely.

An experienced CFO can be engaged to help a PortCo focus on specific areas crucial to fostering sustainable growth, including identifying opportunities for change and/or improvement. This level of leadership offers an unbiased perspective, prioritizing the best interests of the company, its shareholders, and long-term goals with no personal agenda, existing loyalties, or external pressures.

With that in mind, here are 5 CFO strategies for driving PortCo growth.

1. Clarify the Value Creation Thesis

   
   

   Ensuring agreement on the how and why of value creation is the first step towards boosting value. When the business was funded or acquired, what was the investment thesis? Was it a product innovator (with unique IP assets), a roll-up platform, or a troubled asset with potential for recovery?

   
   

   Leadership can concentrate resources and prioritize projects that are in line with the primary drivers of enterprise value from a multiple standpoint (develop/enhance unique technology, patent filings), as well as performance such as EBITDA growth, recurring revenue expansion, market share capture, or margin improvement, by reexamining and refining this thesis.

   
   

2. Accelerate Revenue Growth with Precision

   
   

   One direct lever for raising valuation is top-line growth. However, not all forms of income are created equal. Some strategies to consider include:

   
   

   • Maximize Current Customer Volume: Leverage existing customer relationships to drive incremental revenue growth with no additional acquisition costs.

   • New Customer Segmentation & Prioritization: Determine which segments have low customer acquisition costs (CAC) and high lifetime value (LTV) and adjust go-to-market plans appropriately.

   • Geographic Expansion: Investigate underserved areas or foreign markets with robust demand indicators.

   • Product/Service Diversification: Increase wallet share by expanding offerings or breaking into related verticals. 

   • Pricing Optimization: To increase margin without incurring additional expenses, use value-based pricing or tiered pricing models.

   
   

   Support these tactics by establishing a scalable sales and marketing infrastructure with appropriate automation, performance metrics, and data tracking.

   
   

3. Enhance Operational Efficiency

   
   

   In addition to boosting profitability, operational excellence lowers the company's risk and increases its appeal to possible buyers. Important considerations include:

   
   

   • Supply Chain Optimization: Shorten lead times, cut down on stockouts, and renegotiate agreements with suppliers, identify cost-effective suppliers (ex., those with minimal tariff impact).

   • Process Automation: To cut expenses and errors, automate repetitive tasks in operations, HR, and finance.

   • Lean Transformation: To improve cycle times, cut waste, and streamline processes, apply lean methodology.

   • KPI-Driven Management: Use dashboards to monitor departmental performance in real time.

     
     

4. Increase Recurring and Predictable Revenue

   
   

   Increasing revenue predictability is one of the most effective strategies to increase enterprise value. This is influenced by customer retention tactics, service agreements, and subscription models. Some strategies to consider include:

   
   

   • Convert one-time sales to managed service or subscription models.

   • Boost client retention with integrations, loyalty programs, or packaged deals.

   • Increase net revenue retention (NRR) by reducing churn and implementing upsells and cross-sells.

   • Increase the visibility of contractual revenue (e.g., auto-renewal terms, multi-year contracts).

     
     

   With more predictable cash flow, buyers become more confident and willing to pay more.

   
   

5. Strengthen the Management Team and Culture

   
   

   Risk is increased by poor leadership. To add value and foster growth, make sure the management group is knowledgeable, experienced, and committed to the same goals.

   
   

   • Find and close leadership voids, particularly in operations, sales, customer service, technology, and finance.

   • Establish explicit incentive programs (with an emphasis on equity-based incentives) linked to benchmarks for value creation.

   • Encourage an open, accountable, and flexible culture that is performance-driven.

     
     

A Few More Thoughts…

Increasing the value of a portfolio company requires disciplined and agile execution of a well-defined plan. In addition to growing quickly, the most valuable businesses also grow strategically, run effectively, lower risk, and present themselves to prospective buyers as strategic assets.

A value creation strategy is imperative, regardless of whether you are just starting a new investment cycle or are two years away from an exit. Any strategic hire, price adjustment, or operational enhancement made today could result in millions of dollars in value later.

John Corrigan is a Partner on the Southeast team of SeatonHill. Mr. Corrigan is a senior operations and financial executive with exceptional analytical, communication, interpersonal, and managerial skills and entrepreneurial instincts. He has demonstrated success as a leader with expertise in numerous industries, including internet services, telecommunications, manufacturing, distribution, retail, construction, and medical services, as well as at various stages of development, from start-up to $500 million in revenue. John also has significant experience as a Big 4 auditor, tax adviser, and business consultant, as well as progressive C-Level financial and operational roles.

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