Applying Little's Law from manufacturing, PE-backed companies with too many projects in process produce fewer results. Lower-middle-market companies often suffer from 'too many plans.' A key PE role is to enforce focus by killing low-value projects and aligning the entire company around a single, achievable 90-day goal.

To effectively influence a company's capital allocation, build a long-term relationship and privately educate management on your thought process. Avoid public activism or short-term demands like immediate share buybacks, which management teams often see through and dismiss.

When selling to a PE firm, entrepreneurs must realize the buyer's unit of optimization is their entire portfolio, not the single acquired company. A PE firm acts as an asset manager allocating resources across investments. This means decisions about your former company will be made in the context of their broader portfolio performance.

PE sponsors can accelerate value creation by telling new CEOs that some new executive hires are expected to fail. This pre-approval removes the CEO's fear of appearing to have failed themselves, encouraging them to make necessary talent changes faster and more decisively.

PE investors often fail to unlock a portfolio company's full potential by only interacting at the board level. Engaging deeper with operational leadership is crucial to understand the team's true quality and identify opportunities to transform the value proposition, which are often missed from the boardroom.

The value creation journey begins with the end in mind. Private equity firms immediately consider who the eventual buyer will be—a strategic acquirer or another PE firm—and tailor their operational improvements to meet that future buyer's specific criteria and overcome their likely objections.

The number of operating partners in PE has tripled, but this can be counterproductive. Flooding a portfolio company with functional experts often leads to uncoordinated efforts and confuses management teams. The most effective approach is often more targeted, with a principle that sometimes the best action is no action at all.

Effective private equity boards function as strategic advisory councils rather than governance bodies. Board members are expected to be co-investors who actively help with strategy, networking, and operational challenges like procurement, making them a key part of the value creation engine.

Private equity professionals constantly talk about their "value creation plan." However, this term is rarely, if ever, used by the actual operators inside the portfolio company. CEOs and their teams see themselves as simply doing their jobs—running initiatives and managing the business—not executing a PE firm's abstract value creation framework.