Why This Matters
Private equity operating partners are known for their proactive approach. When a portfolio company misses its revenue targets, the pressure intensifies. The instinct is to act swiftly, diagnosing issues and taking action to get back on track. However, common mistakes can occur, leading to the potential for confusion when clarity of execution is needed most.
At Cortado Group, we’ve observed patterns that represent the most common missteps. Understanding these can help operating partners avoid pitfalls and implement strategies that truly address the underlying issues.
Mistake #1: The White Knight Fallacy (“I Know a Guy”)
A frequent response to revenue shortfalls is bringing in a trusted individual from a previous success. This “white knight” is expected to replicate past achievements and quickly turn things around.
However, success in one context doesn’t guarantee the same outcome in another. The conditions, team dynamics, and market environment may differ. Spending time thinking through the fit helps set the right expectations should this route be selected.
Why This Is a Mistake: Relying solely on past relationships overlooks the unique aspects of the current situation. It assumes that previous solutions are universally applicable, which may not be a fit.
What To Do Instead: Before bringing in external help, conduct a comprehensive assessment of the current challenges. Partnering with firms like Cortado Group can provide an objective analysis, ensuring that any interventions are tailored to the specific needs of the portfolio company.
Mistake #2: Assuming You Already Know the Answer
Experience is invaluable, but it can also lead to overconfidence. Operating partners might believe they’ve seen every scenario and can quickly identify solutions based on past experiences.
However, markets evolve, customer behaviors shift, and internal dynamics change. What worked previously might not be effective now. Assuming knowledge without current validation can lead to misdiagnosis.
Why This Is a Mistake: Overreliance on past experiences can result in overlooking new variables or emerging challenges. It can also lead to resistance from the current team, who may feel their unique challenges are being ignored.
What To Do Instead: Approach each situation with fresh eyes. Engage with the current team, gather data, and understand the nuances of the present challenges. Consider leveraging external expertise to provide a new perspective and validate assumptions.
Mistake #3: The Wrong Consultancy for the Problem
Selecting a consulting firm based on reputation or past relationships without assessing their fit for the current problem can be detrimental. Not all consultancies specialize in every area, and misalignment can lead to ineffective solutions.
Why This Is a Mistake: A consultancy that excels in one domain might not have the expertise required for another. Engaging the wrong partner can waste time and resources and potentially exacerbate the problem.
What To Do Instead: Clearly define the challenges and desired outcomes before selecting a consultancy. Ensure their expertise aligns with the specific needs of the portfolio company. Firms like Cortado Group offer specialized services tailored to address unique challenges in revenue generation and operational efficiency.
Mistake #4: Expecting Deliverables in a Vacuum
Engaging a consultancy and expecting them to operate independently without internal collaboration can limit the impact. Without access to internal insights, data, and support, even the best consultants can struggle to deliver impactful solutions.
Why This Is a Mistake: Lack of collaboration can lead to misaligned strategies, resistance from internal teams, and solutions that don’t integrate with existing processes.
What To Do Instead: Foster a collaborative environment where consultants and internal teams work together. Ensure open communication, provide necessary resources, and involve key stakeholders in the process. This collaborative approach enhances the relevance and adoption of proposed solutions.
Summary: Don’t Miss Again
Addressing revenue shortfalls requires more than quick fixes; it demands a thoughtful, strategic approach. By recognizing and avoiding these common mistakes, operating partners can implement solutions that set the foundation for sustainable growth.
At Cortado Group, we specialize in diagnosing and addressing revenue challenges in portfolio companies. Our tailored approach ensures that interventions are aligned with the unique needs of each company, driving meaningful and lasting results.
Main takeaway: Avoiding common pitfalls in diagnosing and addressing revenue shortfalls can significantly enhance the effectiveness of interventions.
Action: Engage with experts who can provide objective assessments and tailored solutions. Consider partnering with Cortado Group to navigate these challenges effectively.
