Private equity portfolio management in consumer goods is often hands-off until results fall. By then the commercial plan has run for a year without anyone close to it, and the fix costs more.
Why owners stay hands-off in the first year
The usual reasoning sounds sensible. The management team knows the business, the owner trusts them, and the board meets every quarter. Nobody wants to look like they are second-guessing a new plan.
The result is a long gap. Between two board meetings, the owner sees a deck and a set of numbers. The deck shows what happened, and the commercial work that creates growth is slow and does not show up in it yet.
Our piece on the private equity operating partner describes who can fill that gap inside the fund.
What the quarterly numbers miss
Commercial results need 12 to 18 months to arrive, as we show in our piece on the growth timeline. A quarterly report in the first year says little about whether the plan is working.
A flat quarter can hide a strong pipeline. A good quarter can come from the founder’s old customers while the new accounts have not started. The numbers cannot tell the two apart.
Plans also drift when nobody is watching. We cover what happens then in our piece on growth plans that keep changing direction.
Private equity portfolio management: three early checks
The investors and operators I spoke to for this series describe a different habit. They stay close in the first months, with a few checks that cost little and show trouble early.
First, agree early indicators at the start. One example is 50 new bars in one city within three months. The indicator is concrete and the commercial team knows from day one what the owner will look at.
Second, visit the market with the new sales team. A day in the field with the reps shows who has the customer relationships, who opens doors and where the plan meets resistance. No report shows that.
Third, name one person close to the company who reports back between board meetings. It can be an adviser or an operating partner. This person hears about a lost distributor or a delayed listing weeks before it reaches the board pack.
All three are cheap. They replace the long gap between meetings with a short and regular flow of facts.
The FMCG Growth Sprint is built to close this gap. It sets the early indicators, runs the market visits and gives the owner a regular view of the commercial plan in the first year.
What owners should stop doing
Stop waiting for the quarterly pack to tell you the plan has stalled. Stop treating a visit to the market as a sign of distrust. The board of directors keeps its role, and it gets better information to use.
Frequently asked questions
What is private equity portfolio management in practice?
It is the work an owner does between the deal and the exit to keep the company on plan. In consumer goods, the commercial plan needs the closest attention in the first year.
Why is a hands-off owner a risk in the first year?
Commercial results arrive late. Without early checks, the owner finds out about a stalled plan only when the numbers fall.
Which early indicators can an owner agree with management?
Concrete commercial ones, such as the number of new bars opened in one city within three months.
Who should report to the owner between board meetings?
One person close to the company, such as an adviser or an operating partner, who sees the market directly.
To see how the first year after a deal can be organised, read about the FMCG Growth Sprint.
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