• The strategic plan defines a company's trajectory for the next 3-6 years and acts as its north star for near-term decisions.
  • Strategic plans can be particularly pertinent to private equity portfolio companies. However, not all sponsors require them.
  • The presence of a strategic plan can enhance the decision-making and resource allocation efforts of portfolio company management.

The creation and proper implementation of a well-crafted strategic plan maximizes exit value and drives top-down alignment. The PE-backed CFO has a fiduciary duty to ensure any such plan is financially sound.

Strategic plan best practices for PE-backed CFOs include seeking transparency from the sponsor, appropriately prioritizing outcomes, and treating the plan as a living document.

Seek Transparency

As reported by Deloitte, only about 20% of PE professionals believe portfolio company CFOs truly understand their role in driving exit value.

The original investment thesis rarely unfolds exactly as planned. As such, portfolio company management must aggressively pursue calibrations on the firm’s perceived endgame. Vital topics include:

  • When does the sponsor anticipate an exit?
  • What do they expect revenue and EBITDA margin to look like at exit?
  • What multiple do they anticipate? Why?
  • How do they envision the company’s products, capabilities and customers at that time?

Many sponsors do a poor job of proactively volunteering this information.

Per research by Accordion, 92% of PE professionals believe they live up to the expectations of their portfolio company CFOs. Meanwhile, just 29% of CFOs agree. This disconnect indicates sponsors are often oblivious to the needs of their CFOs, and that divide includes a lack of strategical calibration.

Portfolio company management must actively seek clarity on these items rather than assume the firm will be forthcoming. Full alignment on the route and expected timing of exit is essential to infor...