Effective Strategic Planning in a Private Equity backed business

Introduction:

Strategic planning plays a vital role in the success of any business, particularly in the context of Private Equity-backed companies. It is not just a box-ticking exercise or a set of tools and frameworks; it is about getting things done in a timely manner and creating sustainable competitive advantage.

Paul Stanley is a PepTalks Honorary Member and a seasoned executive in Private Equity-backed businesses. He is currently serving as CEO of Achilles Information Ltd, who were acquired by Bridgepoint in 2021. In this blog post, Paul will guide us through the key considerations for effective strategic planning in a Private Equity-backed business.

Subsequently, we explore a concise guide outlining ‘The 5 Steps to Building a Winning Strategic Plan’ available to download at the bottom of the page.

Understanding Strategy:

Strategy is often misunderstood and reduced to various components such as positioning, resources, or processes. However, at its core, strategy is about executing actions that align with the long-term goals of the business and drive sustainable competitive advantage. A solid strategic planning process should begin with a clear sense of purpose and identity. When done properly, there should be no conflict between the business and its financial sponsors.

“Strategy is talked about as being all types of different things – strategy as positioning, resources, process etc. Ultimately though, it is about getting stuff done in a timely manner, that is consistent with the long term aims of the business”

Balancing Short-Term and Long-Term Value:

Strategic planning must strike a balance between delivering long-term shareholder value and meeting the short-term expectations of financial sponsors. Financial sponsors expect revenue growth, increased EBITDA, and improved market share – but they also recognise the importance of a credible platform, process, people, and a compelling vision that resonates with the market.

“You need to deliver value according to the demands of your investors in the short-term but also marry this with long-term shareholder value for the company. Effective strategic planning, where you have successfully identified your optimal market position, can allow you to deliver on both fronts simultaneously”

Investor Expectation Management:

As explained on Managing investor expectations, building a strong relationship with shareholders, particularly financial sponsors, is crucial. While the investors have expectations and aspirations, the strategy should ultimately be the business’s strategy. Management should focus on building the best possible business and creating a process whereby investors can feel bought into a common desired outcome.

Clear and data-driven communication of the strategic vision, leading to a differentiated position, is a critical part of yours and your leadership team’s role.

“Investors will typically focus on numbers when setting out aspirations for the business. Your strategy must focus on building the best business you can. When those two things don’t meet, you need to take ownership of communicating to your investors what success will look like in a market you understand better than they likely do”

External Analysis:

Before delving into frameworks and tools, it is important to conduct a thorough external analysis. Understand the dynamics of your market growth and define your market based on accurate information. From there, you can begin to set up parameters for success.

Fill in the form below to download our in depth guide on ‘The 5 Steps to Building a Winning Strategic Plan’.

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