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How to Start Your Own Private Equity Fund

Private equity firms have been a historically successful asset class and the field continues to grow as more would-be portfolio managers join the industry. Many investment bankers have made the switch from public to private equity because the latter has significantly outperformed the Standard & Poor's 500 Index over the last few decades, fueling greater demand for private equity funds from institutional and individual accredited investors . As demand continues to swell for alternative investments in the private equity space, new managers will need to emerge and provide investors with new opportunities to generate alpha.

Key Takeaways

• Private equity firms are growing thanks to their outperformance of the S&P 500. 
• Starting a private equity fund means laying out a strategy, which means picking which sectors to target.  
• A business plan and setting up the operations are also key steps, as well as picking a business structure and establishing a fee structure. 
• Arguably the toughest step is raising capital, where fund managers will be expected to contribute 1% to 3% of the fund’s capital. 

Today's many successful private equity firms include Blackstone Group, Apollo Global Management, TPG Capital, Goldman Sachs Capital Partners, and the Carlyle Group. However, most firms are small to midsize shops and can range from just two employees to several hundred workers. Here are several steps managers should follow to launch a private equity fund .

Define the Business Strategy

First, outline your business strategy and differentiate your financial plan from those of competitors and benchmarks. Establishing a business strategy requires significant research into a defined market or individual sector. Some funds focus on energy development, while others may focus on early-stage biotech companies. Ultimately, investors want to know more about your fund's goals.

As you articulate your investment strategy , consider whether you will have a geographic focus. Will the fund focus on one region of the United States? Will it focus on an industry in a certain country? Or will it emphasize a specific strategy in similar emerging markets? Meanwhile, there are several business focuses you could adopt. Will your fund aim to improve your portfolio companies' operational or strategic focus, or will this center entirely on cleaning up their balance sheets ?

Remember, private equity typically hinges on investment in companies that are not traded on the public market. It's critical that you determine the purpose of each investment. For example, is the aim of the investment to grow capital for mergers and acquisitions activity? Or is the goal to raise capital that will allow existing owners to sell their positions in the firm?

Business Plan, Operations Setup

The second step is to write a business plan, which calculates cash flow expectations, establishes your private equity fund's timeline, including the period to raise capital and exit from portfolio investments . Each fund typically has a life of 10 years, although ultimately timelines are up to the manager's discretion. A sound business plan contains a strategy on how the fund will grow over time, a marketing plan to target future investors, and an executive summary, which ties all of these sections and goals together.

Following the establishment of the business plan, set up an external team of consultants that includes independent accountants, attorneys and industry consultants who can provide insight into the industries of the companies in your portfolio. It's also wise to establish an advisory board and explore disaster recovery strategies in case of cyberattacks, steep market downturns, or other portfolio-related threats to the individual fund.

Another important step is to establish a firm and fund name. Additionally, the manager must decide on the roles and titles of the firm's leaders, such as the role of partner or portfolio manager. From there, establish the management team, including the CEO, CFO, chief information security officer, and chief compliance officer . First-time managers are more likely to raise more money if they are part of a team that spins out of a previously successful firm.

On the back end, it's essential to establish in-house operations. These tasks include the rent or purchase office space, furniture, technology requirements, and hiring staff. There are several things to consider when hiring staff, such as profit-sharing programs , bonus structures, compensation protocols, health insurance plans, and retirement plans.

Establish the Investment Vehicle

After early operations are in order, establish the fund’s legal structure. In the U.S., a fund typically assumes the structure of a limited partnership or a limited liability firm. As a founder of the fund, you will be a general partner, meaning that you will have the right to decide the investments that compose the fund.

Your investors will be limited partners who don't have the right to decide which companies are part of your fund. Limited partners are only accountable for losses tied to their individual investment, while general partners handle any additional losses within the fund and liabilities to the broader market.

Ultimately, your lawyer will draft a private placement memorandum and any other operating agreements such as a limited partnership agreement or articles of association .

Determine a Fee Structure

The fund manager should determine provisions related to management fees, carried interest and any hurdle rate for performance. Typically, private equity managers receive an annual management fee of 2% of committed capital from investors. So, for every $10 million the fundraises from investors, the manager will collect $200,000 in management fees annually. However, fund managers with less experience may receive a smaller management fee to attract new capital.

Carried interest is commonly set at 20% above an expected return level. Should the hurdle rate be 5% for the fund, you and your investors would split returns at a rate of 20 to 80. During this period, it is also important to establish compliance, risk and valuation guidelines for the fund.

Raise Capital

Next, you will want to have your offering memorandum, subscription agreement , partnership terms, custodial agreement , and due diligence questionnaires prepared. Also, marketing material will be needed prior to the process of raising capital. New managers will also want to ensure that they have obtained a proper severance letter from previous employers. A severance letter is important because employees require permission to boast about their previous experience and track record.

All of this leads ultimately leads you to the biggest challenge of starting a private equity fund, which is convincing others to invest in your fund. Firstly, prepare to invest your own fund. Fund managers who had had success during their careers will likely be expected to provide at least 2% to 3% of their money to the fund's total capital commitments . New managers with less capital can likely succeed with a commitment of 1% to 2% for their first fund.

In addition to your investment track record and investment strategy, your marketing strategy will be central to raising capital. Due to regulations on who can invest and the unregistered nature of private equity investments, the government says that only institutional investors and accredited investors can provide capital to these funds.

Institutional investors include insurance firms, sovereign wealth funds , financial institutions, pension programs , and university endowments. Accredited investors are limited to individuals who meet a specified annual income threshold for two years or maintain a net worth (less the value of their primary residence) of $1 million or more. Additional criteria for other groups that represent accredited investors are discussed in the Securities Act of 1933 .

Once a private equity fund has been established, portfolio managers have the capacity to begin building their portfolio. At this point, managers will start to select the companies and assets that fit their investment strategy.

The Bottom Line 

Private equity investments have outperformed the broader U.S. markets over the last few decades. That has generated increased demand from investors seeking new ways to generate superior returns . The above steps can be used as a roadmap for establishing a successful fund.

Bain & Company. " Public vs. Private Equity Returns: Is PE Losing Its Advantage? "

United States Office of Government Ethics. " Capital Commitment ."

U.S. Securities and Exchange Commission. "' Accredited Investor' Net Worth Standard ."

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Private Equity Firm Business Plan Template

Written by Dave Lavinsky

Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their private equity firm.

In this article, we will first give you some background information with regards to the importance of business planning. We will then go through a private equity firm business plan template step-by-step so you can create your plan today.

Download our Ultimate Private Equity Firm Business Plan Template here >

What Is a Private Equity Firm Business Plan?

A business plan provides a snapshot of your private equity firm as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Private Equity Firm Business Plan

If you’re looking to start a private equity firm business or grow your existing private equity firm company, you need a business plan.  A solid business plan will help guide your business strategy, your investment strategy and your decision-making. It will also help you raise funding, if needed, and plan out the growth of your private equity firm business to improve your chances of success. Your private equity firm business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Private Equity Firm Businesses

With regards to funding, the main sources of funding for a private equity firm are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for private equity firm companies.

Finish Your Business Plan Today!

How to write a business plan for a private equity firm business.

If you want to start a private equity firm

or expand your current one, you need a business plan. A strong private equity firm business plan should include the following 10 sections:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of private equity firm business you are running and the status. For example, are you a startup, or do you have a private equity firm business that you would like to grow?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the private equity firm industry.
• Discuss the type of private equity firm you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail the type of private equity firm you are operating.

For example, you might specialize in one of the following types of private equity firm businesses:

• Venture Capital Firms : this type of firm focuses on investing in early-stage companies with high growth potential.
• Buyout/Leveraged Buyout (LBO) Firms: this type of firm focuses on investing in mature companies with stable cash flows.
• Growth Capital Firms: this type of firm focuses on established companies that are looking ot expand or restructure.
• Distressed Investments Firms: this type of firm focuses on investing in companies facing financial difficulties.
• Mezzanine Financing Firms: this type of firm focuses on providing subordinated debt to companies.

In addition to explaining the type of private equity firm you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of investments you’ve made, the number of investments you have successfully exited, reaching X number of portfolio brands, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the private equity firm industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the private equity firm industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your private equity firm business plan:

• How big is the private equity firm industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your private equity firm business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your private equity firm business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: Institutional Investors, High Net Worth Individuals (HNWIs), and Retail Investors.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of private equity firm business you operate. Clearly, HNWIs would respond to different marketing promotions than Pension Funds (Institutional Investors), for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. Consider the specific demographics of target customers, including a discussion of the ages, occupations, locations and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other private equity firm businesses.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes less risky investment options like bonds or mutual funds. You need to mention such competition, as well.

For each direct competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What type of private equity firm are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide a variety of investment vehicle options?
• Will you offer products or services that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a private equity firm business plan, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of private equity firm company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide opportunities to invest in private companies, venture capital, or real estate?

Price : Document the prices you will offer and how they compare to your competitors. Essentially, in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your private equity firm. Document where your company is situated and mention how the site will impact your success. For example, is your private equity firm located in the financial district, a business district, a standalone office, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your private equity firm marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Host webinars and industry-specific events
• Advertise in trade publications and journals
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows:

Everyday short-term processes include all of the tasks involved in running your private equity firm, including making and answering calls, sourcing deals, research and due diligence, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to close your Xth deal, or when you hope to reach $X in revenue. It could also be when you expect to expand your private equity firm to a new market.

Management Team

To demonstrate your private equity firm business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing private equity firm businesses. If so, highlight this experience and expertise.  Also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who act as mentors to your business. They  help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a private equity firm or successfully running a profitable business.

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you close 5 deals per week, and/or manage an extensive portfolio? And, will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to ground your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your private equity firm, this will not give you immediate profits. Rather, it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately; that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit, but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets, be sure to include several of the key costs needed in starting or growing a private equity firm business:

• Cost of equipment and office supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or a breakdown of database subscriptions.

Putting together a business plan for your private equity firm will improve your company’s chances of success. The process of developing your plan will help you better understand the private equity firm market, your competition, and your customers. You will also gain a marketing plan to better attract and serve customers, an operations plan to focus your efforts, and financial projections that give you goals to strive for and keep your company focused.

Growthink’s Ultimate Business Plan Template is the quickest and easiest way to complete a business plan for your real estate investing business.

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Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Other Helpful Business Plan Articles & Templates

Business Plan Template for Private Equity Firms

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As a private equity firm, making informed investment decisions is crucial to maximizing returns for your investors. That's why having a comprehensive business plan template is an absolute game-changer. With ClickUp's Business Plan Template for Private Equity Firms, you'll have all the tools you need to evaluate and assess potential investment opportunities. This template allows you to dive deep into a company's strategy, financial projections, market analysis, and growth potential. Streamline your due diligence process, make data-driven decisions, and set your investments up for success. Take your private equity firm to new heights with ClickUp's Business Plan Template today!

Business Plan Template for Private Equity Firms Benefits

A business plan template for private equity firms offers a range of benefits, including:

• Streamlining the evaluation process by providing a structured framework to assess investment opportunities
• Ensuring all necessary information is included, such as financial projections and market analysis, for comprehensive due diligence
• Facilitating effective communication with stakeholders by presenting a clear and concise overview of the investment opportunity
• Enabling better decision-making through a systematic analysis of the company's strategy and growth potential
• Maximizing returns for investors by identifying risks and opportunities early on and developing appropriate strategies for success.

Main Elements of Private Equity Firms Business Plan Template

When it comes to evaluating potential investment opportunities, private equity firms need a comprehensive business plan template that covers all the necessary aspects. ClickUp’s Business Plan Template for Private Equity Firms offers the following key elements:

• Custom Statuses: Keep track of the progress of each section with statuses like Complete, In Progress, Needs Revision, and To Do.
• Custom Fields: Utilize custom fields such as Reference, Approved, and Section to add relevant information and track the approval process.
• Custom Views: Access five different views, including Topics, Status, Timeline, Business Plan, and Getting Started Guide, to easily navigate through different aspects of the business plan.
• Collaboration and Organization: Leverage ClickUp's collaboration features, such as assigning tasks, adding comments, and attaching files, to streamline the business planning process for private equity firms.

How To Use Business Plan Template for Private Equity Firms

If you're a private equity firm looking to create a solid business plan, ClickUp's Business Plan Template is the perfect tool to help you get started. Follow these steps to make the most of it:

1. Define your investment strategy and goals

Before diving into your business plan, it's crucial to clearly define your investment strategy and goals. Are you focused on a specific industry or region? What are your target returns? Having a clear understanding of your investment approach will guide your decision-making throughout the business plan.

Use custom fields in ClickUp to outline your investment strategy and goals.

2. Conduct thorough market research

To create a comprehensive business plan, you need a deep understanding of the market you're operating in. Research industry trends, competitive landscape, potential risks, and opportunities. This information will help you assess the viability of potential investments and make informed decisions.

Use the Table view in ClickUp to organize and analyze your market research data.

3. Develop financial projections

Financial projections are a critical component of any business plan. Use historical financial data and market research insights to forecast revenue, expenses, cash flow, and profitability. Consider various scenarios and sensitivity analyses to assess the potential risks and rewards of your investments.

Utilize the Gantt chart in ClickUp to create a timeline for your financial projections and track progress.

4. Outline your investment thesis and exit strategy

Your investment thesis outlines the rationale behind your investment decisions and identifies the value you aim to create. Clearly articulate the drivers of value, whether it's operational improvements, market expansion, or strategic partnerships. Additionally, define your exit strategy, whether it's through an IPO, sale to another firm, or management buyout.

Use the Docs feature in ClickUp to write a detailed investment thesis and exit strategy.

By following these steps and utilizing ClickUp's Business Plan Template, you'll be equipped to create a comprehensive and compelling business plan for your private equity firm.

Get Started with ClickUp’s Business Plan Template for Private Equity Firms

Private equity firms can use the Business Plan Template for Private Equity Firms in ClickUp to streamline their evaluation and assessment process for potential investment opportunities.

First, hit “Add Template” to sign up for ClickUp and add the template to your Workspace. Make sure you designate which Space or location in your Workspace you’d like this template applied.

Next, invite relevant members or guests to your Workspace to start collaborating.

Now you can take advantage of the full potential of this template to create comprehensive business plans:

• Use the Topics View to organize and structure the business plan by different sections, such as strategy, financials, market analysis, and growth potential
• The Status View will help you track the progress of each section, with statuses like Complete, In Progress, Needs Revision, and To Do
• Utilize the Timeline View to set deadlines and milestones for each section, ensuring timely completion of the business plan
• The Business Plan View provides a comprehensive overview of the entire plan, allowing you to review and analyze all sections in one place
• Use the Getting Started Guide View to provide instructions and guidance for team members on how to use the template effectively
• Customize the Reference, Approved, and Section custom fields to add additional information and categorize different aspects of the business plan
• Monitor and analyze the progress of each section and the overall business plan to ensure accuracy and quality.
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Private Equity Firm Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business Plans » Financial Services

Are you about starting a private equity firm ? If YES, here is a complete sample private equity firm business plan template & feasibility report you can use for FREE .

If you are an investment banker or you have been able to grow through the ladder of the business world with a niche in investment, then you should consider starting your own private equity firm. Private equity firms make use of their available funds or raised funds from investors with the aim of investing in underperforming companies with potentials, with the aim of repositioning the companies.

Starting this type of business does not only require huge capital base but also relevant experience in the industry. If you have not cut your teeth in the industry, you are likely not going to get investors to commit their cash in your business. Investors only invest their hard earned money with those who have track records in investment.

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If you have decided to start a private equity firm, then you should must make sure that you carry out thorough feasibility studies and market survey.

Business plan is yet another very important business document that you should not take for granted when launching your own business. Below is a sample private equity firm business plan template that will help you to successfully write your own.

A Sample Private Equity Firm Business Plan Template

1. industry overview.

The Private Equity, Hedge Funds & Investment Vehicles industry is made up of Private equity funds, hedge funds, closed-end funds and unit investment trusts. This firms basically raise capital to invest in various asset classes. Industry assets have become increasingly integral to institutional investors’ portfolios and the larger asset-management market.

Institutional investors are individuals or organizations that trade securities in such substantial volumes that they qualify for lower commissions and fewer protective regulations since they are assumed to be knowledgeable enough to protect themselves.

Increasing demand from institutional investors has contributed to the surge in the industry’s assets under management (AUM) and revenue over the past five years.

It is a fact that the Private Equity, Hedge Funds & Investment Vehicles industry is growing faster than most industries in the financial services sector not only in the united states but across the global market. Industry value added (IVA), a measure of the industry’s contribution to the overall economy, is projected to increase at a 6.9 percent annualized rate over the next 10 years.

Without a doubt, the Private Equity, Hedge Funds & Investment Vehicles industry is a very large and thriving not only in the developed nations, but also in developing and under developing countries of the world. Statistics has it that the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America is worth $229 billion, with an estimated growth rate of 7.3 percent between 2013 and 2018.

There are about 20,647 registered and licensed private equity firms in the United States and they are responsible for employing about 80,298 people. It is important to state that there is no company with a dominant market share in this industry.

A recent report published by IBISWorld shows that over the past five years, the Private Equity, Hedge Funds & Investment Vehicles in the US industry has grown by 7.2 percent to reach revenue of $229bn in 2018. In the same time frame, the number of businesses has grown by 2.4 percent and the number of employees has grown by 8.8 percent.

The report also shows that an increase in the regulation and taxation of private equity, hedge funds or other investment vehicles may raise their compliance costs, reduce their returns and limit the number of investment activities companies can undertake.

Regulation for the Investment Management industries is expected to increase in 2018, posing a potential threat to the industry.

So also, institutional investors such as retirement and pension plans, are the largest contributors to alternative investment vehicles, such as private equity and hedge funds due to their low liquidity and high-return needs. As pension plans increase their asset levels to fund future retirement benefits, they will invest in private equity and hedge funds and boost industry revenue through asset-management fees.

Demand from retirement and pension plans is expected to increase in 2018, representing a potential opportunity for the industry. The truth is that with the rate at which private equity firms and similar businesses are growing in the United States, it means it is a business that is worth starting most especially if you have the expertise and capital.

2. Executive Summary

Thomas McKenzie® Private Equity Firm, Inc. is a registered, licensed and accredited private equity firm that will be based in Medford – Oregon.

We are well equipped to operate in the Private Equity, Hedge Funds & Investment Vehicles industry and carry out key functions that revolve around raising capital to invest in various asset classes in the United States of America. We are aware that to run a standard private equity firm can be demanding which is why we are well trained, certified and fortified.

Thomas McKenzie® Private Equity Firm, Inc. is a client – focused and result driven private equity firm that provides broad – based services. We will offer trusted and profitable services to all our clients. We will ensure that we work hard to meet and surpass our clients’ expectations whenever they invest their funds with us.

At Thomas McKenzie® Private Equity Firm, Inc., our client’s best interest would always come first, and everything we do is guided by our values and professional ethics. We will ensure that we hire professionals who are well experienced in this line of business with good track record of return on investments.

Thomas McKenzie® Private Equity Firm, Inc. will at all times demonstrate her commitment to sustainability, both individually and as a firm, by actively participating in our communities and integrating sustainable business practices wherever possible.

We will ensure that we hold ourselves accountable to the highest standards by meeting our client’s needs precisely and completely.

Our plan is to position the business to become one of the leading brands in the Private Equity, Hedge Funds & Investment Vehicles industry in the whole of Medford, and also to be amongst the top 20 private equity firms in the United States of America within the first 10 years of operation.

This might look too tall a dream but we are optimistic that this will surely be realized because we have done our research and feasibility studies and we are confident that Oregon is the right place to launch our business before expanding to other cities in the United States of America.

Thomas McKenzie® Private Equity Firm, Inc. is owned and managed by Thomas McKenzie. Thomas McKenzie has a Degree in Business Administration from Northern Michigan University; MBA in Economics from Columbia Business School. Investing is a family trait that Thomas McKenzie inherited from his father, a stockbroker and U.S. congressman.

At the age of 13, Thomas McKenzie made his first investment, and by the age of 13 he was selling horse racing tip sheets and operating a paper delivery service. Thomas McKenzie has over 18 years’ experience working at various capacities in the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America.

3. Our Products and Services

Thomas McKenzie® Private Equity Firm, Inc. is going to offer varieties of services within the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America. We are prepared to make profits from the industry and we will do all that is permitted by the law in the United States to achieve our business goals. Our business offerings are listed below;

• Private equity funds
• Hedge funds
• Closed-end funds
• Unit investment trusts
• Trade in financial products
• Related investment consulting and advisory services

4. Our Mission and Vision Statement

• Our vision is to build a private equity brand that will become one of the top choices for investors in the whole of Medford – Oregon. We want to be known for professionalism and outstanding results.
• Our mission is to position the business to become one of the leading brands in the Private Equity, Hedge Funds & Investment Vehicles industry in the whole of Medford, and also to be amongst the top 20 private equity firms in the United States of America within the first 10 years of operation.

Our Business Structure

The truth is that it won’t be out of place if we decide to settled for two or three staff members, but as part of our plan to build a standard private equity firm, we have perfected plans to get it right from the beginning which is why we are going to hire qualified, competent, honest and hardworking employees to occupy all the available positions in our firm.

The picture of the kind of the private equity firm we intend building and the business goals we want to achieve is what informed the amount we are ready to pay for the best hands in Oregon and environs as long as they are willing to work with us. Below is the business structure that we will build Thomas McKenzie® Private Equity Firm, Inc.;

• Chief Executive Officer
• Private Equity Consultants/Investor Specialists

Admin and HR Manager

Risk Manager

• Marketing and Sales Executive
• Chief Financial Officer (CFO)/Chief Accounting Officer (CAO).
• Customer Care Executive/Front Desk Officer

5. Job Roles and Responsibilities

Chief Executive Office:

• Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job results
• Responsible for fixing prices and signing business deals
• Responsible for providing direction for the business
• Creates, communicates, and implementing the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy.
• Responsible for signing checks and documents on behalf of the company
• Evaluates the success of the organization

Private Equity Consultants/Investor Specialist

• Provides market research and implementing new investment product and strategies
• Create research and review platforms for new, existing and potential investment products
• Exceed client expectations with returns on investments
• Works closely with analysts and traders to ensure trading strategy is carried out correctly
• Construct and review performance reports to show to investors
• Performs due diligence visits and assessing investment management firms and quantitatively analyzing investment pools
• Plans, designs and implements an overall risk management process for the organization
• Performs risk evaluation which involves comparing estimated risks with criteria established by the organization such as costs, legal requirements and environmental factors, and evaluating the organization’s previous handling of risks;
• Establishes and quantifies the organization’s ‘risk appetite’, i.e. the level of risk they are prepared to accept;
• Performs risks reporting in an appropriate way for different audiences, for example, to the board of directors so they understand the most significant risks
• Carries out processes such as purchasing insurance, implementing health and safety measures and making business continuity plans to limit risks and prepare for eventualities
• Conducts audits of policy and compliance to standards, including liaison with internal and external auditors;
• Provides support, education and training to staff to build risk awareness within the organization.
• Responsible for overseeing the smooth running of HR and administrative tasks for the organization
• Designs job descriptions with KPI to drive performance management for clients
• Maintains office supplies by checking stocks; placing and expediting orders; evaluating new products.
• Ensures operation of equipment by completing preventive maintenance requirements; calling for repairs.
• Defines job positions for recruitment and managing interviewing process
• Carries out induction for new team members
• Responsible for training, evaluation and assessment of employees
• Responsible for arranging travel, meetings and appointments
• Oversees the smooth running of the daily office activities.

Marketing/Investor Relations Officer

• Identifies prioritizes, and reaches out to new partners, and business opportunities et al
• Identifies development opportunities; follows up on development leads and contacts
• Responsible for handling business research, marker surveys and feasibility studies
• Documents all customer contact and information
• Represents the company in strategic meetings
• Help to increase growth for the company

Chief Financial Officer (CFO)/Chief Accounting Officer (CAO)

• Responsible for preparing financial reports, budgets, and financial statements for the organization
• Prepares the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper.
• Provides managements with financial analyses, development budgets, and accounting reports
• Responsible for financial forecasting and risks analysis
• Performs cash management, general ledger accounting, and financial reporting for one or more properties
• Responsible for developing and managing financial systems and policies
• Responsible for administering payrolls
• Ensures compliance with taxation legislation
• Handles all financial transactions for the company
• Serves as internal auditor for the company

Client Service Executive/Front Desk Officer

• Welcomes guests and clients by greeting them in person or on the telephone; answering or directing inquiries.
• Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the client with a personalized customer service experience of the highest level
• Through interaction with clients on the phone, uses every opportunity to build client’s interest in the company’s services
• Consistently stays abreast of any new information on the company’s products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients
• Receives parcels/documents for the company
• Distribute mails in the organization
• Handles any other duties as assigned by the line manager

6. SWOT Analysis

Thomas McKenzie® Private Equity Firm, Inc. engaged the services of a professional in the area of business structuring to assist our organization in building a well – structured private equity firm that can favorably compete in the industry.

Part of what the business consultant did was to work with the management of our organization in conducting a SWOT analysis for Thomas McKenzie® Private Equity Firm, Inc. Here is a summary from the result of the SWOT analysis that was conducted on behalf of Thomas McKenzie® Private Equity Firm, Inc.;

Our core strength lies in the power of our team; our workforce. We have a team that can give our clients good returns on their investment; a team that are trained and equipped to pay attention to details and to deliver excellent jobs. We are well positioned and we know we will attract loads of clients from the first day we open our doors for business.

As a new private equity firm, it might take some time for our organization to break into the market and gain acceptance especially from corporate clients in the already saturated Private Equity, Hedge Funds & Investment Vehicles industry, that is perhaps our major weakness. So also we may not have the required cash to give our business the kind of publicity we would have loved to.

• Opportunities:

The opportunities in the Private Equity, Hedge Funds & Investment Vehicles industry is massive considering the number of investors and small businesses who would need investment support from private equity firms to grow their businesses and increase their profits. As a standard and accredited private equity firm, we are ready to take advantage of any opportunity that comes our way.

Private equity services involve a large amount of cash and it is known to be a very high risk venture, hence whoever chooses to manage it must not just have solid investment background, but must also know how to handle risks and discover potential thriving businesses and opportunities.

The truth is that if you are not grounded in risks management as a private equity, you may likely throw away peoples’ monies. Just as in any other business and investment vehicles, regulations, tax, economic downturn, unstable financial market and unfavorable government economic policies can hamper the growth and profitability of private equity firms.

7. MARKET ANALYSIS

• Market Trends

A close observation of happenings in the industry shows that in the dawn of recessionary declines, the industry is expected to continue on a path to growth, but not without a few ups and downs. As a result of this trend, Private Equity, Hedge Funds & Investment Vehicles industry revenue is expected to grow over the five-year period at an annualized rate of 7.3 percent.

The revenue growth for the industry was restrained in the early part of the period as the industry was reluctant to bounce back from the financial crisis and subsequent recession of the prior period that caused stock markets and business activity to dramatically contract in the United States.

The nature of private equity investment requires the services of core investment professionals. As a matter of fact, before any investor can commit their hard earned money under your care as a hedge fund manager, they usually would want to know your profile.

On the average, private equity firms employ strategies that can help them reduce market risk specifically by shorting equities or through the use of derivatives.

This is why many investment strategies, mostly arbitrage strategies, are limited as to how much capital they can successfully employ before returns starts diminishing. Little wonder most successful fund managers place limit on the amount of capital they will accept per time.

8. Our Target Market

Private equity is simply an investment medium that enables big time accredited investors pool cash or capital together to be able to invest in securities and any other form of investment opportunity that requires large initial capital to invest.

The fact that hedge funds requires large capital makes it easier for only the rich and accredited investors to cash in on it. Hedge funds are only open to limited partners with the required cash for investing in capital intensive business portfolios.

Our target market cuts across businesses and investors that are willing to invest. We are coming into the industry with a business concept that will enable us produce good returns on investment for our clients. Below is a list of the individuals and organizations that we have specifically designed our services for;

• Accredited Investors
• Wealthy People in the Society
• Investment Clubs
• Top corporate executives
• Corporate Organizations / Blue Chip Companies
• Small and medium scales businesses

Our competitive advantage

Despite the fact that private equity investment strategies give huge returns on investment, it is indeed risky venture. For you to survival as a private equity firm, you should be able to come up with workable investment strategies; strategies that will help you attract the required cash/capital and above all you should be a good risk manager and one that can spot a potential thriving business from afar.

We are quite aware that to be highly competitive in the industry means that we should be able to give good returns on investments to our clients, turn around the fortunes of a dying company for good , spot potential successful business ideas and invest in them, deliver consistent quality service, our clients should be satisfied with our investment strategies and we should be able to meet the expectations of our clients.

Thomas McKenzie® Private Equity Firm, Inc. might be a new entrant into the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America, but their management staff are highly qualified portfolio management experts in the United States. These are part of what will count as a competitive advantage for us.

Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry, meaning that they will be more than willing to build the business with us and help deliver our set goals and achieve all our aims and objectives.

9. SALES AND MARKETING STRATEGY

Sources of Income

Thomas McKenzie® Private Equity Firm, Inc. is established with the aim of maximizing profits in the Private Equity, Hedge Funds & Investment industry and we are going to ensure that we do all it takes to attract clients on a regular basis. Thomas McKenzie® Private Equity Firm, Inc. will generate income by offering the following investment related services;

10. Sales Forecast

One thing is certain, there would always be accredited investors, small and medium scale businesses and wealthy individuals who would need the services of tested and trusted private equity firms.

We are well positioned to take on the available market in Medford and other key cities in the United States of America and we are quite optimistic that we will meet our set target of generating enough profits from our first six months of operation and grow the business and our clientele base.

We have been able to examine the Private Equity, Hedge Funds & Investment industry, and we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. Below is the sales projection for Thomas McKenzie® Private Equity Firm, Inc., it is based on the location of our business and the wide range of investment management services that we will be offering;

• First Fiscal Year: $750,000
• Second Year: $ 1.5 Million
• Third Year: $3 Million

N.B : This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and there won’t be any major competitor offering same services as we do within same location. Please note that the above projection might be lower and at the same time it might be higher.

• Marketing Strategy and Sales Strategy

As a business that aims to stay at the top of our game and generate consistent income, our sales and marketing team will be recruited base on their vast experience in the industry and they will be trained on a regular basis so as to be equipped to meet the overall goal of the organization.

We will also ensure that our return on investment and excellent job deliveries speaks for us in the marketplace. Our goal is to grow our private equity firm to become one of the top 20 private equity firms in the United States of America.

Which is why we have mapped out strategies that will help us take advantage of the available market and grow to become a major force to reckon with not only in the Medford but also in other cities in the United States of America. Thomas McKenzie® Private Equity Firm, Inc. is set to make use of the following marketing and sales strategies to attract clients;

• Introduce our business by sending introductory letters alongside our brochure to corporate organizations, startups, accredited investors, entrepreneurs and key stake holders in Medford and other cities in the United States
• Advertise our business in relevant financial and business related magazines, newspapers, TV and radio stations.
• List our business on yellow pages’ ads (local directories)
• Attend relevant international and local finance and business expos, seminars, and business fairs et al
• Create different packages for different category of clients in order to work with their budgets and still deliver good returns on investment
• Leverage on the internet to promote our business
• Engage direct marketing approach
• Encourage word of mouth marketing from loyal and satisfied clients

11. Publicity and Advertising Strategy

The uniqueness of this industry is such that it is the result they produce that helps boost their awareness. Private equity firms are strategic when it comes to inviting investors to invest in a project or when it comes to acquiring a struggling company.

It will be out of place to boost your private equity firm if you have not proven your worth in the industry. If you have successfully proven that you have what it takes to operate a successful private equity firm, then you next port of call is to strategically engage the media to help you promote your brand and also create a positive corporate identity.

We have been able to work with our brand and publicity consultants to help us map out publicity and advertising strategies that will help us walk our way into the heart of our target market. We are set to take the industry by storm which is why we have made provisions for effective publicity and advertisement of our private equity firm.

Below are the platforms we intend to leverage on to promote and advertise Thomas McKenzie® Private Equity Firm, Inc.;

• Place adverts on both print (community based newspapers and magazines) and electronic media platforms
• Sponsor relevant community based events/programs
• Leverage on the internet and social media platforms like; Instagram, Facebook, twitter, YouTube, Google + et al to promote our brand
• Install our billboards on strategic locations all around Medford.
• Distribute our fliers and handbills in target areas
• Ensure that all our workers wear our branded shirts and all our vehicles are well branded with our company’s logo.

12. Our Pricing Strategy

Private equity firms are known to generate income from various investment portfolios hence there are no pricing models for this type of business . But on the other hand, they tend to negotiate with their financial partners on percentage whenever they invest their hard earned money in an investment vehicle handled by a private equity firm.

At Thomas McKenzie® Private Equity Firm, Inc. we will ensure that we give good returns on investment (ROI) and always maximize profits for the business.

• Payment Options

At Thomas McKenzie® Private Equity Firm, Inc. our payment policy is going to be all inclusive because we are quite aware that different members prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America.

Here are the payment options that Thomas McKenzie® Private Equity Firm, Inc. will make available to her members;

• Payment via bank transfer
• Payment via online bank transfer
• Payment via mobile money
• Payment via check
• Payment via bank draft

In view of the above, we have chosen banking platforms that will enable our members make payment for their service charges monthly and investment stake without any stress on their part. Our bank account numbers will be made available on our website and promotional materials.

13. Startup Expenditure (Budget)

The cost of starting a private equity firm is in the two fold; the cost of setting up the office structure and the capital meant for investment. The amount required to invest in this line of business can range from 1 million US dollars to even multiple millions of dollars. So you must employ aggressive strategies to pool such cash together.

As regards the cost of setting up the office structure, your concern should be to secure a good office facility in a busy business district; it can be expensive though, but that is one of the factors that will help you position your firm to attract the kind of investors you would need. This is the financial projection and costing for starting Thomas McKenzie® Private Equity Firm, Inc.;

• The total fee for incorporating the Business – $750.
• The budget for basic insurance policy covers, permits and business license – $2,500
• The Amount needed to acquire a suitable office facility in a business district 6 months (Re – construction of the facility inclusive) – $40,000.
• The cost for equipping the office (computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $5,000
• The cost for purchase of the required software applications (CRM software, Accounting and Bookkeeping software and Payroll software et al) – $10,500
• The Cost of Launching your official Website – $600
• Budget for paying at least three employees for 3 months plus utility bills – $10,000
• Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $2,500
• Investment fund – $1 Million Dollars
• Miscellaneous: $1,000

Going by the report from the market research and feasibility studies conducted, we will need $150,000 excluding $1M investment capital to successfully set up a medium scale but standard private equity firm in the United States of America.

Generating Startup Capital for Thomas McKenzie® Private Equity Firm, Inc.

Thomas McKenzie® Private Equity Firm, Inc. is owned and managed by Thomas McKenzie. He decided to restrict the sourcing of the startup capital for the business to just three major sources.

• Generate part of the startup capital from personal savings
• Source for soft loans from family members and friends
• Apply for loan from the bank

N.B: We have been able to generate about $50,000 ( Personal savings $40,000 and soft loan from family members $10,000 ) and we are at the final stages of obtaining a loan facility of $100,000 from our bank. All the papers and documents have been duly signed and submitted, the loan has been approved and any moment from now our account will be credited.

14. Sustainability and Expansion Strategy

The future of a business lies in the number of loyal customers that they have, the capacity and competence of their employees, their investment strategy and business structure. If all these factors are missing from a business, then it won’t be too long before the business close shop.

One of our major goals of starting Thomas McKenzie® Private Equity Firm, Inc. is to build a business that will survive off its own cash flow without the need for injecting finance from external sources once the business is officially running. We know that one of the ways of gaining approval and winning customers over is to give investors good returns on their investments.

We will make sure that the right foundation, structures and processes are put in place to ensure that our staff welfare are well taken of. Our company’s corporate culture is designed to drive our business to greater heights and training and retraining of our workforce is at the top burner of our business strategy.

As a matter of fact, profit-sharing arrangement will be made available to all our management staff and it will be based on their performance for a period of three years or more as determined by the board of the organization. We know that if that is put in place, we will be able to successfully hire and retain the best hands we can get in the industry; they will be more committed to help us build the business of our dreams.

Check List/Milestone

• Business Name Availability Check : Completed
• Business Incorporation: Completed
• Opening of Corporate Bank Accounts: Completed
• Opening Online Payment Platforms: Completed
• Application and Obtaining Tax Payer’s ID: In Progress
• Application for business license and permit: Completed
• Purchase of Insurance for the Business: Completed
• Securing a standard office facility in Medford – Oregon: Completed
• Conducting Feasibility Studies: Completed
• Generating part of the startup capital from the founder: Completed
• Applications for Loan from our Bankers: In Progress
• Writing of Business Plan: Completed
• Drafting of Employee’s Handbook: Completed
• Drafting of Contract Documents: In Progress
• Design of The Company’s Logo: Completed
• Printing of Promotional Materials: Completed
• Recruitment of employees: In Progress
• Purchase of software applications, furniture, office equipment, electronic appliances and facility facelift: In progress
• Creating Official Website for the Company: In Progress
• Creating Awareness for the business (Business PR): In Progress
• Health and Safety and Fire Safety Arrangement: In Progress
• Establishing business relationship with vendors and key players in the industry: In Progress

More From Forbes

How private equity can help build your business.

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President & CEO of  CoolSys . Author of the Amazon bestseller, The Private Equity Playbook, and the upcoming book, The Exit-Strategy Playbook.

If you’re like many entrepreneurs, you might be leaving money on the table — without even realizing it. It doesn’t matter what industry you’re in or whether you’re doing everything right. You may be able to increase how much you make from your business by making one simple shift: utilizing private equity to build your business.

How do I know? I’ve spent the last 20 years building billion-dollar businesses with private equity groups as partners. And, in that time, I’ve realized most business owners (especially small-business owners) don’t leverage private equity to the extent they could, and that means they miss out on big paydays.

I think it’s time to change that. It’s time to turn private equity into your secret weapon for building your business. Here’s how to get started.

Shift your mindset.

Many entrepreneurs are laser-focused on building their businesses. They spend years focusing on strategies to scale and grow. Until they’re getting ready to retire or otherwise exit from their business, bringing in a private equity investor is the furthest thing from their minds.

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For these entrepreneurs, private equity is a “one-and-done” deal. They see it as a potential exit path, one they only consider when they’re ready to leave. For them, it’s a way to monetize their business and get that big payday they’ve worked so hard for.

This mindset, while common, is limiting. However, if you can shift and begin to see private equity as a tool to help you secure large amounts of capital and expertise, you may be able to accelerate your organization’s growth.

Add in the fact that, when you work with a private equity group, you can sell your business not just once, but multiple times, and you begin to see what an asset private equity can be when you’re looking for rapid growth and big payouts.

Partner with private equity groups.

The power of partnering with private equity firms cannot be overstated. Private equity has skyrocketed in recent years: Today, private equity firms have over $4 trillion in assets under management and $1.4 trillion in committed cash out looking for companies to buy right now. About 39% of all deal volume today is attributed to private equity, and that number is expected to hit 50% by 2022.

What does that mean for you? First, that private equity investors generally know what they’re doing and are often incredibly successful at it. Second, it’s the marriage of these astute investors with creative entrepreneurs that makes for some of the best, most successful businesses in my experience.

Combine these two things with the effect they can have on your business over the long term, and it’s easy to see how private equity can level up your organization.

When you partner with private equity, you’ll get liquidity. If you’re smart, you’ll also stay invested. That allows you to diversify your asset base while giving you access to resources to scale your business and rise to the top of your market.

Sell your business multiple times.

Getting access to the capital that private equity investors bring is a huge part of building your business. But utilizing private equity to maximum advantage doesn’t end there. Think about it: If your exit strategy involves selling your business once, cashing out and then rolling on to the next thing, essentially what you’re doing is working for years to build a business for one single payday.

Here’s my question: Why start all over to create a new business when you could keep growing the business you already know? Remember what I said at the beginning: With private equity, you don’t have to limit yourself to selling a business only once. You can sell it multiple times.

Let me give you an example. I bought a business from an entrepreneur for $16 million. Despite his initial protests, I asked him to roll over part of that investment into the new company (he took the remaining money as a payout). Initially, he didn’t understand how rolling that money over benefited him. He had been thinking of private equity — of me — solely as an exit strategy. But it became a growth strategy when I was able to sell the resultant business for a four-times multiple of invested capital, and he wound up doubling his own personal take in less than three years.

Maximize your growth.

My guess is, up to this point, you’ve focused on organic growth as the way to build your business. Sure, that can work, but it’s a slog. By partnering with private equity, you can get access to more components for your overall growth strategy.

Private equity investors bring process improvement, margin enhancement and margin improvement expertise. Plus, they utilize mergers and acquisitions by buying other companies that are similar and combining them to scale faster. I’ve found that if you make them your partners over time, they can massively amp up your growth.

So, what’s the potential downside to working with a private equity firm? First and foremost, a loss of control. The majority of private equity buyout funds will want a controlling stake in the company being purchased. This means you will have a boss for what could be the first time in your company’s evolution! Secondly, there is no guarantee that you’ll be able to hit the targets modeled by private equity to achieve the typical average return threshold of three times MOIC (multiple of invested capital) that many private equity firms seek. As with all investment opportunities, past performance is not a guarantee of future returns, so be sure to be diligent with any firm you consider partnering with. With thousands of firms out there, not all private equity firms are created equal.

The key to realizing all the advantages private equity brings is to stop thinking of them as a one-time exit potential. Instead, make them part of your growth strategy. Bring private equity in early, use their resources and capital to help build your business and roll over a portion of the proceeds so you can continue to enjoy subsequent paydays. If you do that, you just may enjoy accelerated growth and a far higher return from the business you poured so much of your blood, sweat and tears into building.

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Private Equity Firm Business Plan Template

Written by Dave Lavinsky

Writing a Successful Business Plan For Your Private Equity Firm Business + Template

If you’re looking to start or grow a private equity firm business, you need a business plan. Your plan will outline your business goals and strategies, and how you plan on achieving them. It will also detail the amount of funding you need, and if needed, present a case to investors and lenders regarding why they should invest in your business.

In this article, we’ll explain why you should invest the time and energy into creating a private equity firm business plan, and provide you with a private equity firm business plan template that includes an overview of what should be included in each section.

Download the Ultimate Private Equity Firm Business Plan Template here >

Why Write a Business Plan For a Private Equity Firm Business?

There are many reasons to write a business plan for a private equity firm company, even if you’re not looking for funding. A business plan can help you see potential pitfalls in your business strategy, as well as identify opportunities you may not have considered. It can also help you track your progress and adjust your plans as needed.

That said, if you are looking for funding, a business plan is essential. Investors and lenders want to see that you have a solid understanding of your industry, your customers, and your competition. They also want to know that you have a realistic view of your financial situation and how much money you’ll need to get started.

How To Write a Business Plan For a Private Equity Firm Business

While every business plan is different, there are 10 essential components that all private equity firm business plans should include:

Executive Summary

Company description, industry analysis, customer analysis, competitor analysis, marketing plan, operations plan, management team, financial plan.

Keep in mind that you’ll need to tailor this information to your specific type of private equity firm business, but these 10 components should be included in every plan.

The executive summary is the first section of your business plan, but it’s often written last. This is because it provides an overview of the entire document.

In the executive summary, briefly explain what your business does, your business goals, and how you plan on achieving them. You should also include a brief overview of your financial situation, including how much money you’ll need to get started.

The next section of your private equity firm business plan is the company description, where you’ll provide an overview of your business.

Include information about your:

Company Overview

• Success Factors & Accomplishments To Date
• How & When Incorporated

With regards to the company overview, here you will document the type of private equity firm company you operate. For example, a private equity firm company description might look something like this:

Summit Capital Partners is a new Private Equity Firm serving customers in Johnson City, TN. We are a local private equity firm. There are no high-quality local private equity firms in the area, which positions us uniquely to meet the specific needs of businesses within our community. Our commitment to fostering growth and driving success for our clients sets us apart as a premier partner for businesses looking to achieve their strategic objectives.

At Summit Capital Partners, we offer a comprehensive suite of services designed to address the myriad challenges and opportunities businesses face today. Our offerings include Strategic Planning and Operational Improvement, designed to enhance efficiency and effectiveness at all levels of the organization. Financial Restructuring and Optimization services are tailored to improve financial health and ensure sustainability. Our Mergers and Acquisitions (M&A) Advisory service provides expert guidance through complex transactions, while Talent Management and Leadership Development are focused on cultivating the human capital essential for success. Additionally, we specialize in Market Expansion and Growth Strategies, helping businesses to scale and thrive in new markets.

Based in Johnson City, TN, Summit Capital Partners is strategically positioned to serve the businesses within our local community. Our deep understanding of the local market, combined with our expansive expertise, enables us to deliver tailored solutions that drive real results for our clients.

Summit Capital Partners is uniquely qualified to succeed for several reasons. Our founder brings valuable experience from previously running a successful private equity firm, ensuring that we have the leadership necessary to guide our clients to success. Additionally, we offer superior market expansion and growth strategies compared to our competition, along with a broader range of private equity firm services, setting us apart as the go-to partner for businesses seeking comprehensive, effective solutions.

This is just an example, but your company description should give potential investors a clear idea of who you are, what you do, and why you’re the best at what you do.

The next section of your business plan is the industry analysis. In this section, you’ll need to provide an overview of the industry you’re in, as well as any trends or changes that might impact your business.

Questions you will want to answer include:

• What is the overall size of the private equity firm industry?
• How is the industry growing or changing?
• What are the major trends affecting the private equity firm industry?

For example, your industry analysis might look something like this:

The private equity firm industry in the United States is currently thriving, with a total market size of over $3 trillion. This industry has been experiencing steady growth over the past decade, with an average annual growth rate of approximately 8%. With the increasing number of high-net-worth individuals and institutional investors looking for higher returns on their investments, the private equity firm industry is expected to continue to expand in the coming years.

One of the key trends in the private equity firm industry is the rise of middle-market private equity firms, which focus on investing in small to medium-sized companies. These firms have been gaining popularity among investors due to their ability to generate attractive returns by actively managing and growing their portfolio companies. This trend bodes well for Summit Capital Partners, as a new private equity firm serving customers in Johnson City, TN. By targeting the middle-market segment, Summit Capital Partners can capitalize on this growing trend and attract investors looking for opportunities in this space.

This is just an example, but your industry analysis should give potential investors a clear idea of the overall industry, and how your company fits into that industry.

The next section of your private equity firm business plan is the customer analysis. In this section, you’ll need to provide an overview of who your target customers are and what their needs are.

• Who are your target customers?
• What are their needs?
• How do they interact with your industry?
• How do they make purchasing decisions?

You want a thorough understanding of your target customers to provide them with the best possible products and/or services. Oftentimes, you will want to include the specific demographics of your target market, such as age, gender, income, etc., but you’ll also want to highlight the psychographics, such as their interests, lifestyles, and values.

This information will help you better understand your target market and how to reach them.

For example, your customer analysis might look something like this:

Local business owners and entrepreneurs will also be key customers. They will benefit from our expertise in leveraging capital to fuel business expansion, acquisition, and innovation. We will provide them with the financial backing and strategic guidance needed to scale their operations effectively.

We will also focus on institutional investors such as pension funds, endowments, and family offices. These entities will be looking for robust investment opportunities to ensure long-term financial health and growth. We will tailor our investment strategies to meet their stringent requirements for risk management and return on investment.

In summary, your customer analysis should give potential investors a clear idea of who your target market is and how you reach them.

The next section of your business plan is the competitor analysis. In this section, you’ll need to provide an overview of who your major competitors are and their strengths and weaknesses.

• Who are your major competitors?
• What are their strengths and weaknesses?
• How do they compare to you?

You want to make sure that you have a clear understanding of your competition so that you can position yourself in the market. Creating a SWOT Analysis (strengths, weaknesses, opportunities, threats) for each of your major competitors helps you do this. 

For example, your competitor analysis might look something like this:

Summit Capital Partners’s competitors include the following companies:

Alexis Greene – Foundation Realty Group

Alexis Greene – Foundation Realty Group offers a wide range of real estate services, including residential and commercial property sales, leasing, and property management. Their price points vary depending on the property type and location, generally ranging from mid-market to luxury segments.

The company generates significant revenues, although specific figures are not disclosed. They are headquartered in Johnson City, TN, and serve the surrounding areas, including Kingsport and Bristol.

Their key strengths include a strong local presence and a highly experienced team. Weaknesses may include limited geographical reach and a focus primarily on real estate rather than broader investment services.

Evans & Evans Real Estate

Evans & Evans Real Estate provides services such as residential and commercial property sales, property management, and real estate investment consulting. Their price points are competitive, catering to both budget-conscious buyers and high-end clientele.

Revenues are robust, driven by a diverse portfolio of services. The company is based in Johnson City, TN, and extends its services to nearby regions such as Elizabethton and Greeneville.

Key strengths include a comprehensive service offering and strong customer relationships. However, their focus on real estate might limit their appeal to clients seeking diversified investment opportunities.

David & Rachel Moody-Livingston

David & Rachel Moody-Livingston specialize in real estate sales, particularly in the luxury residential segment. They also provide property management and investment advisory services. Their price points are relatively high, reflecting their focus on upscale properties.

Their revenue streams are substantial, largely due to high-value transactions. They operate from Johnson City, TN, with a client base that spans the Tri-Cities area.

Your competitor analysis should give potential lenders and investors a clear idea of who your major competitors are and how you compare to them.

The next section of your business plan is the marketing plan. In this section, you’ll need to provide an overview of your marketing strategy and how you plan on executing it.

Specifically, you will document your “4 Ps” as follows:

• Products/Services : Here is where you’ll document your product/service offerings.
• Price : Detail your pricing strategy here.
• Place : Document where customers will find you and whether you will use distribution channels (e.g., partnerships) to reach them.
• Promotion : Here you will document how you will reach your target customers. For instance, private equity firm businesses often reach new customers via promotional tactics including advertising and online marketing.

For example, your marketing plan might look something like this:

Products, Services & Pricing

Summit Capital Partners specializes in offering a range of services designed to enhance business performance and growth. One of the primary offerings is Strategic Planning and Operational Improvement, which focuses on creating detailed roadmaps for businesses aiming for long-term success. The average selling price for this service is $50,000. This service includes comprehensive assessments and actionable strategies to optimize business operations, reduce costs, and increase efficiency.

Another key service is Financial Restructuring and Optimization. This involves evaluating and reshaping a company’s financial structure to ensure sustainability and profitability. With an average selling price of $75,000, this service aims to address debt management, capital allocation, and overall financial health.

Mergers and Acquisitions (M&A) Advisory is another critical service provided. Priced at an average of $100,000, this service offers expert guidance through the complexities of mergers, acquisitions, and divestitures. Clients can expect comprehensive due diligence, valuation, negotiation, and integration support to ensure successful transactions.

Talent Management and Leadership Development services are also offered to help organizations build strong leadership teams and cultivate a productive workforce. At an average selling price of $40,000, this service includes executive coaching, leadership training, and talent acquisition strategies tailored to the unique needs of each client.

Finally, Market Expansion and Growth Strategies are vital for businesses looking to enter new markets or expand their presence in existing ones. This service, priced at an average of $60,000, encompasses market research, competitive analysis, and strategy formulation aimed at driving growth and capturing new opportunities.

Promotions Plan

Summit Capital Partners employs a multi-faceted promotional strategy to attract customers. Our online marketing efforts include a robust website that offers detailed information about our services, success stories, and team expertise. This is complemented by a strong presence on social media platforms such as LinkedIn, Twitter, and Facebook, where we share industry insights, company news, and engage with our audience.

We invest in search engine optimization (SEO) to ensure our website ranks highly on search engines when potential clients search for private equity services in Johnson City, TN. Additionally, we use targeted online advertising, including Google Ads and social media ads, to reach a broader audience.

Content marketing plays a significant role in our strategy. We publish high-quality blog posts, whitepapers, and case studies that demonstrate our expertise and provide value to our clients. This content not only drives traffic to our website but also establishes us as thought leaders in the private equity industry.

We also leverage email marketing to nurture relationships with potential clients. By offering a monthly newsletter that includes market analysis, investment tips, and company updates, we keep our audience informed and engaged.

Networking and relationship-building form the backbone of our offline promotional tactics. We participate in local business events, industry conferences, and networking groups to meet potential clients and partners. Additionally, we host exclusive events and seminars to showcase our expertise and provide a platform for discussions on relevant industry topics.

Public relations efforts, including press releases and media engagements, help us build credibility and increase brand awareness. We aim to secure features in reputable financial publications and local business journals to reach a wider audience.

As you can see, your marketing plan should give potential investors a clear idea of your marketing objectives, strategies, and tactics.

The next section of your business plan is the operations plan. In this section, you’ll need to provide an overview of your company’s day-to-day operations and how they will be structured.

• What are your company’s daily operations?
• How are your company’s operations structured?

Your operations plan should be detailed and concise. You want to make sure that potential investors have a clear understanding of your company’s day-to-day operations and how they are structured.

You will also include information regarding your long-term goals for your operations and how you plan on achieving them.

For example, your operations plan might look something like this:

• Deal Sourcing: Continuously identify and evaluate potential investment opportunities through networking, market research, and industry connections.
• Due Diligence: Perform thorough due diligence on prospective investments, including financial analysis, market assessment, and risk evaluation.
• Portfolio Management: Monitor and manage the performance of portfolio companies, providing strategic guidance and support to drive growth and profitability.
• Investor Relations: Maintain strong relationships with investors, providing regular updates on fund performance and addressing any queries or concerns.
• Financial Reporting: Prepare and review financial reports, ensuring accuracy and compliance with relevant regulations and standards.
• Compliance: Ensure all operations and transactions comply with legal and regulatory requirements, including SEC regulations and investor agreements.
• Capital Raising: Develop and execute strategies to raise capital from institutional and individual investors, including creating marketing materials and conducting presentations.
• Market Analysis: Stay informed about market trends, economic conditions, and industry developments to make informed investment decisions.
• Operational Efficiency: Continually evaluate and improve internal processes to enhance efficiency, reduce costs, and maximize productivity.
• Risk Management: Identify, assess, and mitigate risks associated with investments and operations to protect the firm’s assets and reputation.
• Networking: Build and maintain relationships with industry professionals, advisors, and other stakeholders to support business development and deal flow.
• Team Management: Lead and manage the firm’s team, fostering a collaborative and high-performance culture that aligns with the firm’s goals and values.

Your operations plan should give readers a clear idea of your company’s day-to-day operations, how they are structured, and your long-term goals for the company.

The next section of your business plan is the management team. In this section, you’ll need to provide an overview of your management team and their experience.

• Who is on your management team?
• What are their qualifications?
• What is their experience?

Your management team ideally includes individuals who are experts in their respective fields. You want to make sure that lenders and investors have a clear understanding of your management team’s qualifications and experience, and feel they can execute on your plan.

For example, your management team might look something like this:

Summit Capital Partners management team, which includes the following members, has the experience and expertise to successfully execute on our business plan:

Ava Brown, President

Your management team should give potential lenders and investors a clear idea of who is on your team and how their qualifications and experience will help your company succeed.

The final core section of your business plan is the financial plan. In this section, you’ll need to provide an overview of your company’s financials.

• What are your company’s projected revenues?
• What are your company’s projected expenses?
• What is your company’s projected growth rate?
• How much funding do you need and for what purposes? 

Your financial plan should give potential investors a clear understanding of your company’s financials. While you may include a summary of this information in this section, you will include full financial statements in the appendix of your business plan.

For example, your financial plan might look something like this:

Below is a summary of your financial projections. If/when you change the Revenue Assumptions, Cost Assumptions, and/or Other Assumptions, the results below will change.

This is just an example, but your financial plan should give potential investors a clear idea of your company’s financial projections.

The final section of your business plan is the appendix. In this section, you’ll need to provide any additional information that was not included in the previous sections.

This may include items such as:

• Full financial statements
• Resumes of key management team members
• Letters of reference
• Articles or press releases
• Marketing materials
• Product information
• Any other relevant information

By including this information in the appendix, you are allowing potential investors and lenders to learn more about your company.

In summary, writing a private equity firm business plan is a vital step in the process of starting and/or growing your own business.

A business plan will give you a roadmap to follow. It can also help you attract investors and partners.

By following the tips outlined in this article, you can be sure that your business plan will be effective and help you achieve your goals.  

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How to Start Your Own Private-Equity Funds

The harsh reality of starting your own PE fund.

For casual followers of Wall Street finance, a career in private equity can look like the ultimate job. Private-equity managers work on high-profile deals, they negotiate with high stakes and immense pressure, and, don't forget, they're ridiculously rich.

Some of you out there may even fancy starting your own private-equity fund one day. If that's your ambition, I salute you, because the road ahead of you is not going to be easy.

Image source: Getty Images.

Write a business plan for your private-equity fund Starting your own private-equity fund is in many ways not all that different from starting any other new business. You're going to need a business plan.

Your business plan serves two major functions. First, it forces you to face the reality of starting the company, including the costs, risks, and challenges you'll face. Second, your business plan tells potential investors exactly what you're going to do with their money if they choose to invest with you.

Your business plan should at minimum answer these questions:

• What's your investment strategy? (What's your market? Your industry? Your niche?)
• How will you find deals?
• How will you raise the money for the fund?
• How much will you charge?
• What will your start-up costs be?
• What will your ongoing expenses be?

The business plan will, of course, require far more than this, but it's a reasonable place to start. To really do a good job, though, you'll need some help.

Hire a lawyer. Actually, hire several lawyers. Navigating the legal and regulatory requirements is a major barrier standing between you and your private-equity firm. There are regulations on whom you're allowed to accept money from and how you can and cannot advertise your fund. There are mandatory filings, registration fees, and so, so much more.

The costs involved in setting all of this up can easily run into the hundreds of thousands of dollars, if not more. You won't be able to do it alone. You're going to need help. You're going to need lawyers. Lots of them. And accountants. The expensive kind of accountants.

You'll also need help setting up your back-office operations, processes, and documentation procedures. Don't think the SEC is going to let up on you once you have your fund set up and running. There are ongoing responsibilities you must maintain, such as record-keeping, periodic filings of all sorts, and more. You're going to need some knowledgeable administrative help to keep this train on the rails.

Raise money Let's assume that you're still committed to starting your fund, even after all of the prep work I've just described. Once you have your legal, regulatory, and administrative systems in place, your next step is to raise money for the fund.

You can start with your own money. You can also accept money from accredited investors -- those who can document that either their individual income has been greater than $200,000 for the past two years, or their net worth is greater than $1 million, excluding their primary residence. If you know the right people, you may even be able to get some cash from large institutional investors such as university endowments or pension funds.

Raising money is a full-time job. You'll have to get on the road and pitch your fund to these potential investors over and over again. You'll have to convince them why you're a better place to park their money than the thousands of other alternatives out there in the investing world.

Invest money With millions of investor dollars now in the bank, it's time to finally get to work. This is the part you've been waiting for.

First you'll have to source some deals. You'll have to spot companies that have room to improve ,and then you have to buy them. In some cases you may have to persuade the current owners to sell, and in other cases you may be bidding against other private-equity firms. In either case, you can't overpay. If you do, you won't be able to hit your return targets.

Depending on how much money you were able to raise, you'll have to find at least a few companies in your target niche every year to buy.

Once you successfully source and then win a deal, you'll have to lead that company to higher profits and a higher valuation. You'll have to know how to improve the company's performance against the competition, and you'll have to decide which costs to cut and where to increase investments. You'll have to have a plan to grow revenue and improve cash flow.

Private-equity investing, if you haven't already put this together, isn't a buy-and-hold kind of process. There's a tremendous amount of work to be done before, during, and after an investment is made.

In private equity, you buy most or all of the company. You're it. You're the board. The CEO answers to you. You'd better know what you're doing.

Sell the company in a few years. Get rich. Assuming that everything has gone well for three, five, or seven years, it's time to sell the company and mint some money. The selling process is full of legal, accounting, and potential regulatory obstacles as well, so you'll need more lawyers and accountants for this process, especially if you're thinking about an IPO.

Oh, and don't forget to pay your taxes.

The deal will close, you'll get a boatload of cash, and it'll be time to either give all that money back to your investors or start the investment process all over again.

Can we be serious for a minute about this? The reality is that unless you're already in the industry, with a proven track record, and with a network of industry connections, the odds that you can start your own private-equity fund are next to nothing.

The start-up costs are too high. The regulation is too complex. The reality of raising the millions of dollars you'll need is just way too difficult. Impossible? No. But highly, highly unlikely.

In my view, the easiest way to play private equity for everyday investors is to model your investing on someone like Warren Buffett. Don't speculate. Don't trade. Use your money, your personal private equity, to buy shares in companies you want to own for three, five, or seven years, or longer.

No, you won't get a board seat, but your investment approach will be closer to that of a private-equity executive than you probably realize. Focus on value. Focus on companies with unlocked potential. Focus on a companies with a competitive advantage.

That's how you can really start your own private-equity fund.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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Key considerations for starting a private equity fund: what you need to know – part 1.

As private equity firms continue to succeed and become ever prevalent in the alternative investment space, more aspiring portfolio managers are joining the race to launch their own private equity fund. The following summarizes the foundational steps that managers should follow to launch a private equity fund.

Outline Your Business Strategy

Establishing a business strategy requires a significant investment of time, effort, and research to determine, and includes your answers to many key questions to establish your private equity fund successfully. For example, will your fund focus on a specific sector or industry? Will you have a geographic focus, such as one region of the United States, an individual foreign country, or certain emerging markets? Ultimately, potential investors will want to know more about your fund’s strategy, so being prepared to address these and other relevant questions will go a long way in helping you to raise capital for your new fund.

Setting up Operations and a Business Plan

Starting your own private equity fund is in many ways not that different from starting any other business. You’re going to need a business plan which, among other things, calculates expected cash flow and establishes your fund’s timeline, including the capital-raising period. Private equity funds generally have an average life of 7 to 10 years, although it is usually up to the manager’s discretion and the execution of a solid business plan. A sound business plan contains growth strategies, a marketing plan, and a detailed executive summary with a conclusive section tying all these areas together.

Once a business plan has been completed, you should begin to meet with external service providers and consultants, such as accountants, attorneys, and other industry specialists, who can assist you with effectively and efficiently refining and executing your business plan.

Another important step is to form a firm to manage the fund and determine a fund name. The fund manager must decide on the roles and titles of the firm’s leaders, such as the role of partner or portfolio manager as well as the establishment of a management team, including the CEO, CFO, CIO, and CCO. At launch, however, it may be wise to outsource some of these functions to allow you time to execute your business plan while keeping costs in check.

Legal Needs

If you plan to raise a fund in the U.S., you may already know that fundraising is heavily regulated and that there are numerous legal and regulatory requirements that a fund manager must adhere to in order to comply with securities laws. The Securities & Exchange Commission (SEC) takes this compliance very seriously and a qualified attorney must be involved in the process early to make you aware of the rules and regulations associated with fundraising, investing, and managing the fund.

Here are some key questions to discuss with your attorney:

• Who will I be able to raise money from? Regulations offer various options for a fund manager raising money, primarily depending on, and related to, the type of investors, the type of marketing, and the amounts being raised.
• How can I raise the money? In addition to understanding which investors can participate in a fund, a fund manager should understand how those investors may be approached to invest. The fund manager will need to think carefully about what the message to investors will be and how it will be delivered.
• What kind of money can be invested? Another concern is the type of money that a fund or fund manager can accept. There are a variety of restrictions in this area, but the two most common are investments from retirement accounts and investments from foreign accounts. Each of these areas creates potential issues regarding how a fund manager can invest, manage and report results to investors.
• How much will the legal work cost? Every fund and every attorney is different, but you can expect start-up legal costs to run from $50,000 to more than $100,000.

By limiting the fact-finding phase of fund formation, a fund manager can focus their attorney’s time and effort on key compliance questions and avoid expensive discussions and rewrites. Having your fund’s marketing materials and a draft of its investment strategy and fee structure ready for review as you begin the legal process will also help to control legal costs as you look to launch your private equity fund.

Starting a private equity fund can be challenging, especially for those who don’t have any experience in doing so. It requires partnering with experienced accountants and other professionals, a tremendous effort to  refine your business strategy, setting up operations, a business plan, and legal considerations. The above steps can be used as a foundational roadmap to establish a successful fund.

For more information about what is involved in launching and operating a private equity fund, please contact a member of Anchin’s  Emerging Manager Platform  or your Anchin Relationship Partner.

Keep Reading – Key Considerations for Starting a Private Equity Fund: What You Need to Know – Part 2

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Writing a Business Plan for a Private Equity Group

Private equity firms source capital from investors including wealthy individuals, other financial solutions, banks, pension funds, and other entities in order to aggregate these funds into highly lucrative portfolio companies. The most common structure that is used when developing a private equity firm is that the management company is an LLC that serves as a general partner within a limited partnership.

The fees that are generated from successful investments typically include a 20% cut of the profits coupled with a 1% to 2% fee on a per annum basis for the amount of money that is managed by the private equity firm. Over the past 14 years, Deutsch and Thomas has worked with a number of private equity firms as well as other related private investment vehicles to develop a business plan that showcases the types of investments we made, anticipated returns on investment, and varying revenue streams that are generated by private equity firms. We are familiar with all aspects of the marketing as it relates to targeting accredited investors.

As with all business plans we develop a Deutsch and Thomas, a private equity firm business plan that we can develop for you will feature a five year profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and all relevant business metrics. In each business plan we complete, we always provide you with all the relevant industry research, market trends as it relates to private investment vehicles, and related information regarding the private equity firm industry. We always worked closely with each of our clients to develop the business plan specific to their exact purposes. We've also developed a number of business plans for private equity groups that focus on not only portfolio companies but also new technology investments and real estate.

If you're interested in having Deutsch and Thomas develop your business plan for a private equity firm, please feel free to contact us anytime at 646-216-9844 or through the contact us form on this website.

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Private Equity Firm Business Plan

Published Mar.20, 2017

Updated Apr.23, 2024

By: Shawn Jensen

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Table of Content

A private equity firm is an organization that invests in new ventures that it sees potential in. Once these companies are fruitful, the firm gets a return on their investment. Sounds quite simple but there is a lot more to it.

Once you think of your new business idea and choose to open a private equity firm you may still find yourself thinking in actuality how to start a private investment company and an elaborate business plan can really help in this case. To help people going through the same dilemma, OGS Capital is there with the range of sample private equity firm business plan s that can aid you formulate your personal one and that can assist you with learning how to start a particular private equity firm business plan . If you want a custom plan written then the team at OGS Capital is fortunate to have a highly qualified staff that will provide you with a detailed and well-researched plan and that too in your provided deadline

How to start a private equity firm?

Private equity firm is often criticized for the fact that they make profit and formulate the firm put the amount in more beneficial areas by ending current jobs. While this may seem like a good approach, you have to realize that there are better approaches that don’t come at the cost of terminating the paid position. The most successful and established businesses produce more paid positions by re-establishing companies on the brink of collapse but that have a good premise behind them. When it comes to actually starting your equity firm to get the best out of it, you should consider the following things:

• Form the right team: Putting the right team is crucial. Investors want to see a team that has worked together, and that too in a good way.
• Give yourself some time: Give your best and show your full potential but do not expect to bloom to the fullest in a short time. Give it 3 to 5 years.
• Keep Track of Balance Sheets: Keep track your balance sheets and income flow statements.
• Give Focus to Stockholder: The center of your focus should be the stockholder, not the stock market.
• Create a Winning formula and stick to it: Once you have come up with a good operational and advertising strategy have faith and stick to it, don’t change course midway.

How OGS Capital can help?

What sets OGS Capital apart from other private equity firm business plan consultants of its sort is the highly experienced team behind it their sole aim to help people. The OGS Capital team consists of a bunch of professionals that have the kind of knowledge that makes the sample business plans very informative and that help in getting you the right idea about whatever private equity firm business plan you seek. Our main focus is helping ambitious individuals establish their private equity firm business plan . We want to take your business idea and help you turn it into the successful venture it deserves to be.

OGS Capital does not just work to get the job done, but we want to ensure that we do it in the best possible way so that the client is happy and gets the results they are looking for.

An equity firm is a company or an private equity firm business plan that provides financial cooperation on easier terms. You can say that it helps a startup or a new venture by investing in the private equity of that business. This is done by a range of financing strategies. So basically equity enterprise is a financial sponsor that will help your firm grow and prosper by funding you.

To do all of this a private equity firm raises giant amount of wealth that supply the equity contribution for all these kinds of transactions. So, what do these equity companies get as a result? Well, private equity firm in return for all of the invested amount receive a cyclic management amount along with some share in all the monetary gain particular business that they invest in earns. The private equity firm in this way acquire substantial amount of shares in an allocation, and then they figure out ways to increase the worth of the invested amount. They receive amount on all their investments by the following ways:

• IPO: In this situation assets of the client’s firms are offered to the public, which normally provides a partial asset to the equity firm which is sponsoring financially and along with the general citizens. More shares can later be sold too.
• Merging or Acquiring the new firm: In this situation a company is sold to another firm in the form of cash or shares, constituting a newly merged firm you can say.
• Recapitalization: In this situation, the earned amount is divided amongst all the firm’s shareholders, financial benefactor and the private equity funds are gotten from all the flow of income generated by the enterprise or in some cases by other securities to provide amount for the distribution.

When you are starting private equity company, you have to look for the motivation and the reasons as to why exactly are you jumping into this equity venture? Someone who has a knack for putting in money and has a nice amount well-established connections should go ahead and start a private equity firm. Why do we suggest it? Well for someone like this, a venture of this sort can bring in a lot of economic wealth, the job can be a bit demanding, but it has a lot of benefits that make up for all the challenging work.

Starting any new venture or firm especially first requires you to think it out thoroughly and to devise a road map of each step that you are likely to encounter during the course of establishing that private equity firm business plan . Whether it is an already established practice in the industry or has an industry of its own or if it is just a brilliant completely new idea that you want to implement, you first require a blueprint. This blueprint or roadmap in industry terms is called a private equity firm business plan , and today we will be looking at how to start with your very own private equity firm business plan or your very own equity firm.

Major Guidelines on What to Research Beforehand:

So if you are wondering how to start a private investment company, then you would want to research the following:

1. Gather data about the business identified:

Now that you are done with identifying the equity industry, and you have come to learn your exact place in it, then comes the tougher but more interesting part, this step involves conducting Internet research or talking to concerned people and getting all the facts figures and statistics of the industry out of all avenues possible.

The private equity industry is growing with the passing day and has become an essential part of the possession management side of the market. With an increase in demand of organizational  investors, the need for asset and incoming money management has increased considerably. Over the next few years the investing party will enlarge their money allocation to other schemes.

So you should collect facts and stats about how is the growth occurring, at what rates and how much investment is being made and how many people are putting their earned money into private equity firms.

2. Conducting Market Feasibility Research:

Next step is checking the trading status for equity venture along with conducting research on the feasibility of the equity trade and how will this venture assist you. Following things come under this:

• Making Demographics and Psychographics: Normally, a private equity firm forms collection of huge amount of cash and then uses that to buy different kinds of businesses. The aim here is to buy these businesses and to sell them at a profit in a matter of few years. So they often target small startups or businesses that are on the verge of breaking but have a good idea behind them or are in accordance with the industry trends. This relation to the trends in this field ensures that the very strong return on the contributed money will be made. So all the crucial most important points of the aimed firm are considered, which includes the merchandising, monetary and lawful aspects.
• Finding all the perfect spots in the Field: A private equity firm can have a large quantity of comfortable spots in the trade. Figure out what suits the best for your interests and what is the place where you feel like you have the ability to benefit the most out of. This depends on the magnitude of your private equity firm, your investment scheme and how you have been planning to carry out transactions in the industry. This is important because concentrating on finding a place in the industry will help pinpoint your drive towards achieving it and move your firm towards success. You can go for private equity investment in healthcare, in agriculture, shipping, airlines, science, and technology, education and insurance. Pick the one that fits your particular situation perfectly.
• Finding out potential competitors and the level of competition: Since the private equity firm industry has become a lot more famous in the past decade, quite a large number equity firms are coming into it and finding a spot. This results in the fact that the industry is becoming increasingly competitive. What you are required to do is to find out how you fit in this competitive industry and you have to identify the level of this competition. Earning a name and getting famous in the equity industry is a tough task, it will not happen overnight, you will have to give it some time and then work as hard as you can to reach an acceptable place. So make a list of your contenders, and then study their patterns and strategies.
• Conduct economic analysis: In this equity market, all the fiscal firms get the collection of funds from various investors, however all of these are distinguisable in one way or another. You have to rank them in order of evaluated assets that are being managed. Since the equity industry has expanded in the past few years so has the AUM. In the future the private equity firms will be responsible for generating even more income in the equity industry, so conduct an economic analysis of how different firms in the industry are doing. This might not include just private equity firms but other categories of firms in the industry as well, such as, hedge companies and alternative investment companies.
• Starting your firm from scrape or purchasing it: You have to build a very strong brand that stands out from the rest. So to be productive, you have to choose what is better for you. Should you start your own new brand, or buy a permit of the business that already has created some brand awareness.
• Assess Obstacles and Menace of Starting a Private Equity Firm: Since there is a big number of triumphant private equity firms these days, you will face a lot of challenges. So, you have to conduct an analysis and assess what the potential threats to your private equity firm that put you in a tough spot are. These challenges can be anything like defining a good equity firm strategy or establishing what investment vehicle you are going to choose, determining a fee structure, and the biggest thing that can act as a deal breaker if not done properly is raising funds and determining a fee structure for all your potential clients.

3. Taking Care of All The Legal Aspects:

One overlook on the part of legal aspects and you can find yourself in a tough spot. So you have to look at all the legal aspects carefully, and you have to make sure that you don’t miss a single thing that can be used against you later on. Here are the main things to do in this case:

• Finding the Best Legal Entity: A private equity firm acts as a partner or legally responsible firm for a limited amount of time. You will decide where investments go and where they come from. But the stock holders will have a part in the decision of which businesses that your private equity firm would have provided the funding for the private equity firm business plan .
• A Unique Name: Your name will set you aside from all the other firms in an aside, and this is how you will be legally enrolled. So think of a name that catches the eye, and that is something that will attract your prospective investors will find good and trustworthy.
• Choosing The Best Possible Insurance Plan: For a private equity firm, like most other equity companies out there, choosing an insurance plan is important. Discuss with all your partners and choose the insurance plan that suits your equity venture the best. There are tons of kinds such as umbrella insurance, Property insurance, Errors and omissions insurance and General Liability insurance, these help in case of bad economic events, such as bankruptcies, fallout with investors, and problems with personal assets of managers and employees. So this part has to be carefully considered.
• Trademarking your Brand and Protecting your Intellectual Property: Your intellectual property is a child of your creative juices, so it needs to be protected at all costs. Make sure you get on to protect the property of your private equity firm and file for it right away, Trademark everything right away. Patent your equity enterprise’s logo, your company name, and all other necessary documents.
• Getting a Professional Certification if needed: If the need arises, you have to get a proper certification in the area of private equity. These certifications make a point that you know what you are doing, and you are certified to do so. Other than that it will also help you comprehend the trade at a deeper level and will help you in various legal aspects. Some of these certifications include private equity expert, CFA etc.
• Gathering all the legal documents that are needed: Now comes the part where you collect all of the legal documents that are essential in legally starting a private equity firm. This consists of financial documents as well. Examples of these documents are plan, license, an agreement, Capitalization table, corporate minutes, business pitch deck, article of agreement and a few others.

4. Identifying your industry and its occupants:

First of all, you need to figure out exactly what is the exact area in which you want to enter like, and what other categories or group of firms come under it that you will have to deal with. For the private equity firms, the field is composed of finance-related firms and other funded options such as equity firms and others that deal in finances of different businesses. These companies benefit on the basis of all the return they get on their money that was invested. They help businesses and startups in establishing.

The trade does not include all fiscal and funding firms. Some of the companies that the trade excludes are coverage firms, worker benefit firms and real estate franchises.

Now that you have done all your preparation and you have a nice idea on all legal, economic and industry details of the equity venture, you can put them together in the private equity firm business plan. This will be done in a way that shows you have an idea about what you are doing and you are going to do it in the best possible way.

What to consider before STARTING A PRIVATE EQUITY FIRM?

Without a doubt, the first step in starting private equity company is getting done with an equity venture business plan. Not only will it help you in clearing everything up and mapping out guidelines it will also help you in presenting your idea to potential investors so it is a very important task and one that must be taken head on with a lot of research and serious interest.

One thing you have to realize is that just writing a private equity venture business plan is something that will get you immediate success. What gets you success is when you take all the information out of it and take full on advantage of it by implementing everything you mentioned with full force and might.

Now that we have established that when it comes to establishing an equity corporation, how to start a private equity firm, in particular, the first step is making a detailed, proposition covering everything in detail. If you are worried about what exactly constitutes a good business proposition that can wow people, and that can act as a booster for your private equity firm. Then do not worry at all, later on, we are going to describe the levels in composing the perfect proposal of a private equity firm to inspire you to create a great one for your own firm. For that first of all you have to be completely sure of what a private equity firm actually is, look into other equity firms and figure out what they are.

Starting private equity company first requires starting with the equity enterprise proposal. This is what will aid you to formulate the comprehensive proposition for the private equity firm and communicate it in a way that attracts all prospective investors to your firm. This will assist you in actually establishing the private equity firm and to completely apprehend the situation. For this you have to find out the answers to the following questions:

• Before wondering how to start a private equity firm, consider the target trade of your firm’s service and how exactly they will be targeted?
• Will there be involvement of some other business or firm in starting your private equity firm?
• What is different, that will attract the target market to your firm to get investment?
• How much time will it take in starting a private equity firm?
• What is the technical and office equipment required and how will it be gathered?
• What should the main team include to get the most success?

Writing a private equity firm business plan

Now this is a very important part of starting a private equity firm and will tell you how to start a private equity firm, and this is what we are here to guide you for. If you have a solid knowledge about all the things discussed in the previous section and have done all your research in the proper way on all the points discussed before, then writing a proposition for the equity enterprise will be a piece of cake for you. Since it is just putting together complete stuff that you have researched, and you have thought about like your objectives.

The equity enterprise plan will include a brief report of what you private equity firm plans to do, what kind of investments will it offer, how will they be different from others of their kind. It will also include a marketing analysis section. Your promotional strategy which also includes how you conduct advertisement and how will you reach people, it will also contain a brief reporting on your target trade.

Since a proposition also acts as a blueprint for your private equity firm business plan so, sometimes it has to include structural information about the equity business as well, for example, the organizing team of the private equity firm and stuff like how will all your ideas will be implemented and how much cost they will take. This helps put your ideas to work later on.

Another thing you have to take care of while composing your private equity firm business plan proposition is predicting the destiny of the equity company financially and socially. Make calculations like monetary flow, depreciation of things over time and the life of your funds, and how exactly these funds will grow with the passage of time.

It also includes an administrative synopsis which will merge everything together and will put everything in perspective by summarizing it you can say.

To help explain this further here is sample template for an equity venture proposal and which will give you an idea about how it should be written and what will it include.

Sample Template for Private activity firm Business plan

If you want to know how to start a private investment company or how to write a proposition for it the following text will give you an idea:

Write an administrative synopsis

This is the most important part of the plan, some investors form an idea about your entire business based on these two pages. So put a lot of effort into making an administrative synopsis for your private equity firm. Like the name suggests this section will summarize everything about your private equity firm, the potential startups or businesses you will fund, the basic genre of the company, you’re most probable clients and how you are intending to achieve everything you are setting out for in a way that you stay distinctive from others in your industry.

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Write a Company overview

In this section, you should write about the current private equity firm and how you fit into the situation. Briefly explain your entire private equity firm, an interpretation of all the functional facet of your equity company and what services will it provide. Begin with intro of the private equity firm, explain it a little then go ahead and write some basic facts. For example, what is the significance of a private equity firm in this day and age? In which way has the private equity trade increased financially at such a rapid pace over the last ten or more years that it is the perfect time to open a private equity firm of your own? Include how you have planned to gain advantage from the private equity firm and how it will assist you to set apart from all the competitors. Write how you will operate the equity enterprise.

Write Vision Statement, Mission Plan and Aim

A vision statement is a must for any booming venture. A strong vision statement not only helps form a vision for your private equity firm but has a strong impact on whoever comes across it. Your vision could be something along the lines of this: “to start a private equity firm that adds value to the financial funding approach in the private investment trade by acting as a pioneer in helping solve the world’s economic challenges.” Your objective should be to attain all your goal so give a short description of that. Your mission statement and vision help drive business strategy in the correct direction so clearly, mention them along with your aims.

Write about the business structure

A business structure can make or break the private equity firm business plan . It can be of no use if the structure acts as a catalyst for collapse. So clearly write down all the roles and responsibilities of all the central positions in your private equity firm. You should recruit the perfect team, and new managers looking to make a career stand a better chance of collecting money or equity. If the team has formed out of a successful firm then the investors will want to see that the team includes several individuals that have already worked together in the past and are now speaking on the same strategy now. Write about the team and essential responsibilities of all posts of the equity business. For example, the role of the chief executive will be to recruit and select individuals for jobs, and for searching and picking potential investors and firms to buy in. Specify the previous experience of all your team members as well and mention if they have worked together before.

You can write about the organizational structure of the private equity firm business plan in the form of a flow chart in order of flow of power. You also have to include the organizational budget that can help show the investors briefly how the budget is going to be distributed and if they like it then that shows that you have budget management skills, so budget wisely.

Write the Strategic and Promotional Analysis

This section contains an analysis of the equity market that you are diving into. By analyzing the trade and how it is composed and your scheme of diving into that trade. Include the following things in this section:

• Fiscal Outlook: This section should contain details of the investment management. It can include the prospective customers and the competitiveness that the private equity firm faces. Currently, the monetary state of the trade in the US, for example, is moderate.
• Trade Analysis: This includes identification of the trade that a private equity firm is a part of. Once the trade is identified, you have to write about what the trade is like some factual words and numbers about it, like the yearly income for a regular employee of the equity company. What firms and subcategories have a place in this industry and how does everything link together. In this particular case, mention the investment management trade of which a private equity firm is a part of. So you write about the place of the new venture in a particular country and how is it doing.
• Target Trade: Include the demographics related the equity market that your private equity firm will be targeting. This can be a categorized table with trade areas and categories that will be targeted using your private equity firm business plan or your potential clients. As far as private equity firm is concerned these funds are targeted to only few individuals, but it has a high rate of return.
• Competitive Analysis: This section is critical. This is where you write about your potential competitors once you enter the industry and how tough of competition will these competitors offer. In the financing industry, the size has grown considerably over the past decade and this is why the competition has also increased. One drawback is that this results in a small barrier to entry into the this trade. The expected expenses to begin the equity venture are, therefore, low.

Write your Marketing Plan

This includes how exactly you will present your equity venture to all your potential customers or your target market. While private equity marketing has been around for a long time, digital marketing has made it easier and has acted as a crucial key to marketing anything. It is easier to track all your targets using it, and it makes all your jobs a lot easier for you. A private equity firm should have extensive marketing done to ensure that it reaches all its targeted clients. Below is an overview of what should be included in this section:

• Marketing objectives: This includes what you intend to attain using your marketing, for example, a private equity firm should intend to get an online presence by making their site and putting venture’s name along with all essential information on their site. Another thing it should do is to determine relationships with other investment counselling services within their reach.
• Marketing Strategy: This should briefly tell how exactly the company has programmed to advertise their private equity firm. A private equity firm can do so by hiring a capital introduction firm that helps them in getting introduced to prospective It should also introduce itself to startups who will be interested in their services once they find out about them. Another marketing strategy is the formation of a website that helps form an online presence and helps in reaching all the targeted demographics.
• Pricing Strategy: In this portion, the pricing that you will charge for your funding services will be written. Do not forget to provide the maximum information you can about your pricing so that it gives anyone reading the plan the elaborate concept about your charges. However, if you are providing quite a few services, shorten your list based on categories. This section in any case should not span more than one page of the document. Keep it short yet full of information.

Write a Financial Plan

As the name suggests this section will help in elaborating the allotted amount and finances of your private equity firm in detail. A sound financial strategy is what exactly will help boost your private equity firm and will assist you in getting maximum return on all your investments, so it should be carefully thought out and clearly put together. Securing funds for the venture is another big issue and a quite tough thing to do, write down who you plan to do that as well, how you think you will be able to attain the required finances to begin your private equity firm. This section should contain the following things about our private equity firm:

• Theoretical Calculations: The first item to mention is the things you already feel like you know for sure. Like total monetary annual return it will earn on its . Also mention the number of equity funds the owner of the venture will get along with and the yield expansion rate of the firm annually.
• Source of Funds: In this portion of the proposition, you have to write down where you will be getting all your required funds from. This involves equity contributions such as management of gained finances, equity financing, bank and lenders funds. You can list these sources or write them in the form of a table.
• General Assumptions: For the coming years, you can make assumptions such as short-term interest rate, long term interest rate, federal tax rate, and personal tax rate and state tax rates in particular year. These assumptions are pretty generic.
• Profit and Loss Statements: Give the profit and loss statements. You can include comparison charts as well.
• Cash Flow Analysis: Give the yearly cash flows, charts of cash inflows-outflows and balance.
• Balance Sheet: Includes the balance sheet and can contain charts as well.

Advertisement Strategy

Advertisement of any new venture is critical, and this is the sole way of telling how the new venture will reach the audience. To captivate the audience to become customers, you have to come up with creative methods to let them know that your firm is the new one in town and why will it be perfect for them. Therefore like any other firm or company a private equity firm also requires a strong advertising strategy, you have to come up with a unique way of approaching customers that they will like. Once you come up with the strategy you have to write about it, so investors know you have that creative side that will help flourish the business. Here are bunch of things you ought to do to come up with an effective advertising strategy:

• A unique is what stands out in people’s mind even if they have heard of the name rarely. People tend to remember unique names so try to come up with different yet relevant names, but it should not be too difficult.
• Make unique business cards that you can hand out to all startups, small businesses and investors you are interested in working with. This way they know how to contact you the moment then need to get in touch with a private equity firm.
• Create relationships with all potential investors and startups you will be investing in. This can be done by going to investment related seminars or by going to networking events.
• This is the age of social media, all business big or small have to have a good social media presence. The advertisement is done through social media these days, so focus on that, use social media to reach your target market.
• Think of unique ways to advertise with catchy tag lines and untraditional ways that catch the public eye and have them talking.

Expansion Strategy and Sustainability plan for the Private Equity Firm

Your private equity firm business plan should elaborate the sustainability strategy of your firm. The fate of your firm depends on how you plan to sustain it to have a long term successful life. Other than that you have to focus on not only maintaining the firm but over time you have to expand it as well. So, think of a strategy to expand it as well. This shows your long-term commitment to you private equity firm and how serious you are about it. Your object should be to increase the cash flows without extra investment and profit to expand it and to branch out, to make the firm bigger and better.

Since a private equity firm is a multifaceted investment firm, to expand it and sustain it a strategy that the management can opt for is to expand each segment separately by developing limited partnerships that will help attract additional capital towards the company. Making it secure and helping expand as well.

Here is a brief overview on how to get started and what to write in a private equity firm business plan.

Operational private equity firm business plan

This part of the private equity firm business plan includes the detailed list of tasks that you have to do for the operation of the company and the respective timeline that will be required for each task to carry it out. This helps stick to a schedule and helps plan out the actual establishment of the company and each milestone that comes with it. It is also a great way for investors to know that you do have a road map planned out and you have a serious attitude about diving in the investment management industry.

How can OGS Capital help you with the business plan?

If you have a bright idea, but do not really know how to achieve it then, come to us. We will not only discuss it polish your demands with you but we will work to make a private equity firm business plan for you that helps you in getting a remarkable business establishment for you that helps your venture reach the very top like it deserves it to be. All you have to do is get in touch with us, and the rest is our job.

What sets OGS Capital apart from other private equity firm business plan consultants of its sort is the highly experienced team behind it. Their sole aim to help people. The OGS Capital team consists of a bunch professionals that have the kind of knowledge that makes the sample business plans very informative and that help in getting you the right idea about whatever business plan you seek. Our main focus is helping ambitious individuals establishing their business. We want to take your business idea and help you turn it into the successful venture it deserves to be.

Here is how everything works

All you have to do is place your order with us by giving us all the necessary information. We will get to work, and we will create your project proposal within a matter of 12-24 hours. It is hard to believe, but yes we do provide an elaborate proposal in such a short time. As the project proceeds, we ask the client to fill in a questionnaire which gives us a gist of the project, and the client will get weekly updates from us so that they will be satisfied.

OGS Capital provides customers with a complete draft report, and at this point, if you feel comfortable we ask for feedback which we appreciate a lot. Since our clients are what make us, so we want to hear them out. The final draft is submitted with all issues resolved. Even if you are in a hurry and have an urgent job, you can contact OGS capital because we have the management skills and the experienced professionals that can do your work in a very short time and you can trust us with your work.

Download Sample From Here

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Start » strategy, how to attract a private equity firm to invest in your business.

Learn how to make your business attractive to private equity firms with this how-to guide.

For a small business eager to grow in capacity and reach, private equity firms can provide the necessary support and capital to reach key organizational goals. Here is a brief overview of how to find and connect with private equity firms and ultimately get them to invest in your business.

What is a private equity firm?

Private equity is a form of capital investment that entrepreneurs can use to grow their businesses. Private equity is a viable pathway for small business owners wanting to access capital and funding by providing the opportunity for investors to directly invest in their companies. Private equity firms can contribute to businesses with investments, seed funding, loans, and other support systems. Growing businesses can benefit from private equity firms because they provide a safety net, capacity for growth, and opportunity for experimentation.

Private equity investors are institutional and accredited investors with the capacity to delegate a large amount of money to smaller companies, so small business owners without an initial public offering (IPO) often consider this type of funding.

[Read more: How to Choose the Right Private Equity Firm for Your Business ]

How to attract private equity investors

If you’re interested in private equity to fund your business, here are a few ways to make your business attractive to potential investors.

Create a detailed business plan

Having an effective business plan is the best way to communicate with potential investors and funders about your company’s goals, current operational structures, and capacity for return on investments. Your business plan should answer any initial questions investors may have and outline the next steps.

There are many types of business plans to consider when writing yours. The most common business plan types are:

• A traditional business plan: The traditional business plan offers a thorough and in-depth view of your company. The plan typically includes an executive summary, company description, market analysis, organization and management outline, service or product line, marketing and sales information, funding requests, and financial projections, and it usually closes with an appendix. This detailed overview allows investors to understand the goals for your business and how you will achieve them.
• A lean business plan: The lean business plan is usually an outline or one-pager that businesses use as an overview of their company. Leveraging charts and graphics, these types of business plans touch on key partnerships, activities, resources, value propositions, customer relationships, and more.

[Read more: How to Write a Startup Business Plan ]

Growing businesses can benefit from private equity firms because they provide a safety net, capacity for growth, and opportunity for experimentation.

Protect your intellectual property (IP)

As you're building and innovating your business, you must secure its value by protecting your intellectual property, which includes intangible creations like domain names and company designs. Protecting your IP with trademarks, patents, copyrights, and the right internal operations will reassure private equity firms that you’ve taken the proper steps to secure your business assets.

Demonstrate your market potential

Attract investors by demonstrating your competitive advantage, market potential, and opportunity for financial returns. Investors evaluate a business’s market potential through its potential revenue of $300 to $500 million, its edge over competitors, its business model with profit margins of at least 50%, and its reputable and effective CEO.

Maintain detailed records

Keeping and maintaining detailed records of your business is essential for the business’s growth as well as appealing to investors. This can be information regarding business inception, operations, finances, organizational history, and more. By updating and keeping track of these records, you’ll attract investors by showing commitment, reliability, and strong management. Keep track of these records through databases, archives, and other online tools.

Outline an exit plan

Private equity firms usually support businesses for an average of five years. This is to provide the business with enough capital either to prepare for an IPO or to be purchased by another company. By providing investors with an exit plan pathway, businesses are able to take that next step.

Such steps may include:

• Selling shares as part of the IPO.
• Securing a strategic acquisition or, in other words, selling your business to another suitable company.
• Allowing private investors to sell their stakes in the business to another private equity firm.
• Repurchasing equity states from private investors.
• Liquidizing company assets (typically as a last resort).

To learn more about how to successfully pitch investors, read our complete checklist for startups.

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Private Equity Firm Business Plan and SWOT Analysis

Private Equity Firm Business Plan, Marketing Plan, How To Guide, and Funding Directory

The Private Equity Firm Business Plan and Business Development toolkit features 18 different documents that you can use for capital raising or general business planning purposes. Our product line also features comprehensive information regarding to how to start a Private Equity Firm business. All business planning packages come with easy-to-use instructions so that you can reduce the time needed to create a professional business plan and presentation.

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Over the past 50 years, private equity firms have become ubiquitous in finance. With the number of new businesses starting increasing each year, the opportunities for a private investment firm to find these opportunities to make investments is significant. Additionally, many people within the United States have become much wealthier over the past 20 years. As such, private equity firms provide these individuals with investment vehicles that they can use in order to indirectly make investments into potentially highly lucrative deals. There is a substantial amount of flexibility for a private equity firm as it relates to the types of investments we can make. Generally, outside of very large firms – most newer private equity groups often focus on a specific industry segment in which the principles have a substantial amount of experience. Specialization within the private equity industry has been one of the more common trends over the past 10 years given the ongoing and increased complexity for most businesses. Unlike venture capital funds, most private equity groups tend to invest in businesses that have established operations are looking for mezzanine capital before businesses are sold or taken public.

A private equity group business plan should focus substantially on how you intend to bring investors into the limited partnerships that will be formed in order to raise the capital to make investments into promising companies. Usually, a private equity firm receives a fee equal to 2% of the assets under management and 20% of all profits generated on a yearly basis. There are some variations to this fee structure, however, this is usually considered to be the industry standard. Your private equity firm business plan should include a three year to five year profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page. It should be noted that the business plan should be geared towards the fees and incentives income generated by the firm and not by the investments themselves. If you are going to have a business plan for private equity firm, you may want to do a second one specific for the limited partnership will be holding investor funds.

Private equity firms are limited and how they can market their services to the general public. Most people that put money into these companies must consider accredited investors. As such, a when formulating the private equity firm marketing plan and attorney should be retained to make sure that all marketing strategies in compliance with FINRA a as well as the SEC.

A private equity firms SWOT analysis is usually done prior to launching operations. As it relates to the strengths private equity firm, the income that can be generated from these businesses is beyond substantial. A highly profitable private equity firm can make tens of millions if not hundreds of millions of dollars per year in fees. For opportunities, most established private equity groups will often develop additional limited partnerships in order to increase the capital base. For threats, these firms are constantly under ongoing scrutiny as it relates to investments. As these funds are regulated by both the state and federal government is imperative that a operator understand how to remain in compliance with all times. For weaknesses, once established this is pretty much diminished given that a track record goes a long way for most private equity groups.

In short, a private equity firm can be a highly lucrative business provided that the individual who starts the firm has the appropriate experience and contacts. These businesses have extremely high barriers to entry given that the individual who is considered the manager of the firm must have an extensive relationship with the number of investors that trust them to place capital to manage in illiquid investments. As such, once the appropriate reputations developed these firms can become extremely profitable over a long period of time.

The Ultimate Guide to Private Equity and Private Equity Consulting

To raise capital, companies can turn to conventional methods like taking out loans, issuing stock, and selling bonds. Or they can use private equity, an unconventional alternative that continues to rise in popularity.

In 2021, private equity fundraising increased nearly 20 percent year over year, reaching a record-breaking $1.18 trillion, according to data from McKinsey’s Private Markets Annual Review . Private equity assets under management also broke a record, reaching $9.8 trillion as of July. 

As more investors turn to private markets and these markets continue to add trillions of dollars in assets, it’s important that you understand what private equity is, how it works, what strategies PE investors and firms use, and how PE consultants can help them be successful.

Private Equity

Private equity refers to capital investments made into private companies, or public companies that are taken private, in exchange for company equity. The goal of these investments is to purchase shares to fund the company’s growth and then sell at a higher value in order to make a profit. 

These investments are controlled and managed by private equity firms. In addition to funding, PE firms often provide mentorship, industry expertise, best practices in strategic planning, and assistance with talent sourcing, among other services.

Now that we have a better understanding of what private equity is, let’s look at how it works exactly. 

How does private equity work?

A private equity firm raises funds from institutional investors, like pension funds and university endowments, and high-net-worth individuals. Acting as the financial sponsor, the firm invests that money in purchasing and selling businesses. These businesses are referred to as portfolio companies. 

Take a look at this image to better understand what a PE organization structure looks like.

In order to make direct investments in portfolio companies, a private equity fund must contain a significant amount of capital. That’s why most funds have a minimum entry requirement ranging from $250,000 to millions. This enables the PE firm to invest in several portfolio companies at once. According to data from Private Equity info , private equity firms hold a median of 7 portfolio companies at a time. 

PE firms typically target companies at a certain point in their lifecycle. For example, different PE firms may target start-ups, established companies, or failing companies, depending on their strategy. The goal of each is to buy the portfolio company at a lower sum, provide financial and intellectual capital in order to guide it through a period of rapid improvement, and then sell it for a much higher return. 

Let’s say a public company is underperforming. A PE firm may buy it, delist the company, bring in new management, and execute several initiatives to improve its financial performance. The goal of this hands-on approach in managing and shaping the direction of the portfolio company is to increase its value in order to sell it to another PE firm or company, or take it public again in an initial public offering (IPO), for more than its original investment. When the company sells, the PE firm may take a percentage of gross profits.

The PE firm aims to yield favorable returns for investors within a specific time frame (usually four to seven years). If it is successful with a fund, then it will more likely be able to raise money for future ones.

What is a private equity firm?

A private equity firm is an investment management company that uses capital from investors (and sometimes its own funds) to invest in businesses with the goal of increasing their value in order to sell them at a profit. 

PE firms tend to be smaller than investment banks — maybe as small as 5–10 employees — according to the CFA Institute . These employees are known as fund managers or general partners. They raise capital from investors, who are known as limited partners. 

In addition to raising capital, general partners are responsible for investing that capital, managing the portfolio of companies they’ve invested in, and exiting these companies at a profit (likely through an acquisition or IPO). As a result, they are typically compensated in two forms. 

The first form is management and performance fees, which are charged as a small percentage (around 1-2%) of the committed capital of the fund. This does vary by firm, though. Some firms may charge management fees as a percentage of the total amount of capital controlled by the general partner, which may include leverage or borrowed money. The second form is a percentage (typically 20%) of gross profits from investments. 

To understand what this percentage might mean in terms of dollar amount, consider that buyout funds unloaded $957 billion in assets globally in 2021, according to Bain & Company’s Global Private Equity Report . This is more than double the total in 2020 and 131% more than the five-year average, so it’s no wonder that private equity continues to attract some of the best talent as well as investors.  

Why do the private equity markets continue to smash records in terms of buyouts, dealmaking, and exits? Most private equity firms are not listed publicly, which means their shares are not traded in the stock market. It also means that these firms do not need to comply with many of the regulations that public companies do. This is one reason that private equity markets can offer greater returns than public equity markets. 

The other (and more prevalent) reason is its strategies, which combine business and investment portfolio management. Let’s take a closer look at them below.

Private Equity Strategies

There are many types of private equity strategies that vary based on the portfolio company’s lifecycle. Let’s take a closer look at the four most common below. 

1. Leveraged Buyouts

Leveraged buyouts are a common PE strategy that takes place late in a company’s lifecycle. With this strategy, a PE firm takes a controlling share of a company (typically one that’s underperforming or undervalued) in a mature industry. This buyout is unique because it’s financed through loans, which are granted using the assets of the acquired company as collateral. This enables the PE firm to put up a fraction of the purchase price. 

Then, if the PE firm is able to guide the portfolio company through a period of rapid improvement, it can sell it or make it public again for a massive return on investment.  

2. Managed Buyouts

Managed buyouts are similar to leveraged buyouts. They also take place late in a company’s lifecycle and with the goal of placing the company under new control to improve its performance and ultimately provide the greatest return for investors.

What’s different with managed buyouts is that the existing management team takes the controlling share of the company. In order to do so, they may need to raise funds through a PE firm, which would ask for a minority share in the company in exchange. Before the existing management team takes over, all investors and stakeholders can cash in on their shares.

3. Growth Capital

Growth capital is a PE strategy that takes place earlier in a company’s lifecycle. With this strategy, a PE firm invests in an established company that’s trying to scale. The company may need funding to hire employees, rent office space, or purchase equipment to meet rising demand. In exchange for this funding, the PE firm will ask for company equity.

The advantage of this type of investment is that the PE firm can gather a lot of data about the target company through client interviews, product demos, its financial track records, and more to estimate what type of return it can provide.

4. Venture Capital

Venture capital is another form of private equity. Venture capital investors make smaller investments in fast-growing companies or startups typically in less mature industries. Since this strategy takes place earliest in a company’s lifecycle, these companies are likely limited by a lack of revenues, cash flow, or debt financing — all of which can be solved by venture capital funding.

In exchange for funding, investors will ask for company equity at a minority stake (50% or less). Then, if the company is acquired or goes public, the investors will see returns. 

Private Equity Exit Strategies

To maximize their returns, private equity firms must devote as much time and careful planning to exiting their portfolio companies as they do to purchasing and transforming them. Below are the most common exit strategies. 

Initial Public Offer (IPO)

An initial public offer is one of the most common exit strategies for PE firms. With this strategy, the firm offers its shares of the private company to the public. At this point, their shares become worth the public trading price so they can choose to sell a portion or all of them. This exit strategy can help a PE firm realize the full profit from their private investment, but it does require them to meet strict requirements by exchanges and the Securities and Exchange Commission (SEC). 

According to data from Bain & Company’s Global Private Equity Report, IPOs increased in global buyout-backed exit value from $67 billion in 2020 to $112 billion in 2021. 

Merger & Acquisition (M&A)

Another common exit strategy is a merger and acquisition (also known as a trade sale). With this exit strategy, the PE firm sells the portfolio company to another company for a profit. Usually, the portfolio company is complementary to the buyer’s so acquiring it is faster and cheaper than building another company from scratch. As a result, the buyer is often willing to pay a premium price.

It’s common for a private equity firm to invest in a middle-market company in the hopes of selling it to a large corporation for impressive returns. This was a particularly effective strategy in 2021. Corporations spent $458 billion buying former portfolio companies, which was double what they spent in 2020, according to Bain & Company’s Global Private Equity Report.

Secondary Buyout

A secondary buyout is an increasingly common exit strategy in which one private equity firm sells its portfolio company to another firm or financial sponsor. The reason may be that the selling firm has already realized significant gains from its investment. Or it may be that the selling firm has reached its limit (financial or otherwise) of being able to improve the portfolio company.

This exit strategy is appealing because it offers the selling firm the instant liquidity of an IPO without all the regulatory requirements.

Another option is for management to buy back the company equity from the PE firm once they’ve ushered it through a period of improvement. This is a great option for both the PE firm and its investors and the portfolio company’s management.

Liquidation

Liquidation is the least desirable exit strategy. It is often a last resort if the private equity firm has not been able to improve the financial performance of the portfolio company, or make other necessary changes.

Private Equity Consulting

Private equity consulting refers to a broad range of services that are designed to help private equity firms make better investment decisions and earn greater returns. 

This type of aid is critical as investors increasingly turn to private markets and PE firms raise more funds. According to S&P Global Market Intelligence , the global private equity industry recorded dry powder of $1.78 trillion in February 2021, which fell just short of the all-time high of $1.81 trillion set in January. Dry powder is capital that’s been committed by investors but has not been allocated to a specific investment. One quarter of this total — or $460.12 billion — is held by the top 25 firms.

Since these firms are raising more and more money, they are doing bigger and bigger deals. According to Bain & Company’s Global Private Equity Report, average deal size rose over the $1 billion mark in 2021 for the first time ever. 

To best allocate this capital, these top firms and others can benefit from private equity consulting to best allocate this capital. 

While the exact services will vary by consulting firm, they will typically help general partners at PE firms throughout the deal lifecycle by:

• Evaluating portfolio companies to invest in : Evaluating which investment options are viable and which aren’t is one of the most time-consuming activities of a general partner. A consulting firm can help with the evaluation process by analyzing current market trends, potential risks, and the financial situation of portfolio companies.
• Choosing which portfolio companies to invest in : After evaluating hundreds of investment options, general partners at a private equity firm must narrow down the viable options to the best few. What “the best” means depends on factors like industry trends and a portfolio company’s market position, stability of revenue, and potential for growth. A consulting firm can help with the research, data collection, and analysis required to make an informed decision. 
• Increasing the value of portfolio companies : Many consulting firms continue to partner with general partners after acquisitions to help increase the value of portfolio companies. They may help create and execute strategies for growth, pricing, and operational efficiency, align management with strategic priorities, and more. 
• Exiting portfolio companies : Consulting firms may also help general partners to plan, prepare, and execute exit events, including acquisitions by a company or initial public offerings. They often help by providing a deep understanding of industry trends, the buyer landscape, and key risks that may affect the business or exit route.

The individuals who help with this strategic planning, cross-functional work, and value creation execution are private equity consultants. Let’s learn more about them below. 

Private Equity Consultant

A private equity consultant is an expert who provides opinions, analysis, and recommendations to PE firms. They can work for a firm or independently.

Independent private equity consultants offer benefits over hiring a full-time employee or a full team from a consulting firm — namely, they can make a more immediate impact in areas like post-merger integration, lead generation, and financial planning and analysis.

For example, a private equity consultant may be hired by a PE firm to help them create value for their portfolio companies. One way they might do that is by reviewing and recommending changes to the portfolio companies’ pricing strategy based on market research, the companies’ positioning, and growth trends. 

Private Equity Consultant Salary

Glassdoor estimates that the median salary of a private equity consultant is $98,458 per year based on salaries collected from its users , with the most likely range from $67,000 to $155,000. 

Where a PE consultant falls in the estimated pay range will depend on their firm, job title, years of experience, and other factors. Take a look at the range of salaries by company below. 

What are the advantages of private equity?

Private equity can offer a wide range of benefits to businesses and investors, many of which we’ve discussed above. Here are three of the biggest advantages:

• Less volatile markets
• Returns that are better over time 
• Freedom from some public regulations and restrictions
• Access to alternative capital for underperforming or undervalued companies 
• Focus on overall growth instead of quarterly performance

What are the disadvantages of private equity?

Private equity does pose risks as well, which we’ve discussed above. Here are three of the biggest disadvantages:  

• Lack of liquidation
• Some sectors perform better than others
• Often requires changes in management and company structure
• Can be a long process
• Limited control for investors

Understanding Private Equity

Private equity — and the firms that manage it — can help companies raise capital, improve their performance, and ultimately increase shareholder value. As PE firms go after bigger and bigger deals private equity consulting can help those firms make the smartest investment decisions and yield the highest returns. 

Learn how Catalant supports PE firms across the entire deal cycle.

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Acquisition Criteria: What Every Private Equity Firm is Looking For

Private equity firms provide meaningful investment capital to growth-oriented businesses. Unlike venture capital firms, they do not invest primarily in start-ups. They focus on the leveraged buyout of companies with proven business models but which need a single round of investment and a strategic direction to get to the next level.

Businesses seeking expansion, change of investors, or even exit may benefit from private equity firms . Because they invest in companies to earn a return, they follow rigorous due diligence processes and stringent criteria for acquisition.

*Note for 2024: While the overall market was down, 2023 saw a more resilient middle market when compared to much larger ‘bulge bracket’ M&A deals. We anticipate a much stronger market for solid middle-market companies in 2024 from both Private Equity and strategic buyers.

If you’re a business owner who wants to sell in 2024, contact our sell-side Advisory team today. 

What Private Equity Firms Seek in M&A Investment Targets

Investment from private equity firms comes with conditions, clauses, and limitations. They want to ensure that they earn a good return on investment and easily divest after a few years. So, they may insist on a new business plan, members on the management board, etc.

Private equity firms thoroughly analyze the investment opportunity and research the business to understand the company’s market position, industry trends, financials, etc. Factors that help them determine if a company is a good investment target or not include:

Operation in a non-cyclical industry

• A competitive business plan
• Multiple drivers of growth
• Repeatable revenue and reliable cash flows
• Low capital expenditure
• Favorable industry trends
• Strong management team
• Clear exit strategy
• A seat on the management board
• Operational discipline.

Because they intend to own companies for many years, private equity firms prefer companies that don’t operate in volatile markets and are easier to exit. A company requiring an economic rebound to be sold, such as a retail business catering to a specific holiday, does not interest them. They opt for companies that operate in non-cyclical industries.

A Competitive Business Plan

Private equity firms want to see an ambitious and realistic business plan before investing in a company. Good sales and profitability prospects are essential, and the target company’s facts and figures must support those forecasts.

Even more specifically, private equity firms want to see at least 20 to 25 percent annual profit, which may require the company to improve EBITDA , obtain economies of scale or synergies, and earn high margins.

Multiple Drivers of Growth

Private equity firms look for companies with multiple avenues of growth , including exploring new markets, new locations, sales strategies, customer acquisition strategies, etc. They assess the company’s growth potential by reviewing factors like customer base, past successes, and the size of current and potential markets.

Repeatable Revenue and Reliable Cash Flows

Companies must have steady and reliable cash flows to enable private equity investors to meet their interest payments. Because a company requires spending to grow, however, rapid growth does not promise an influx of capital, particularly when the cost of acquisition is high. Therefore, private equity firms keep track of operating costs, costs of increasing human capital, overheads, sales, assets, liabilities, and costs associated with upgrades of software, processes, etc.

Low Capital Expenditure

Unlike venture capital investors who expect to invest multiple rounds of investment, private equity firms avoid companies that require multiple rounds of investment or are capital-intensive. Such companies receive lower valuations from private equity firms, which see them as financially risky.

Private equity firms target established companies that they believe will thrive after one investment. This affords management flexibility regarding the allocation of business capital and the operation of the business. Such flexibility offers choices to issue dividends to shareholders, grow their core operations, invest in growth and acquisitions, etc.

Favorable Industry Trends

Private equity firms prefer companies that leverage trends and disrupt technology within their respective industries because these factors result in market growth and the potential for strong equity returns. They want target companies to have plans for innovation that will transform the industry by enhancing automation, introducing AI or other disruptive technology, and adapting to changing consumer behavior, changing demographics, increasing regulations, etc.

Strong Management Team

Private equity firms do not run the businesses they buy; they are investors, not operators. They provide strategic guidance and rely on existing management to execute their operational strategies. In rare cases, they may replace current management with their own team.

PE firms look for companies with a strong organizational structure and management team with a proven record of identifying key opportunities and mitigating risks because it’s easier (and less expensive) to retain existing management than bring in a new team.

Clear Exit Strategy

When private equity firms study a company, they dedicate 50 percent of their time to analyzing the investment and the rest on how they will divest after a few years, so they have a clear idea from the beginning. If they feel that a company could be difficult to exit after a few years, they’ll likely pass on that investment opportunity.

A Seat on the Management Board

To protect their interests, private equity firms insist on being included as decision-makers within the companies they own in whole or in part. This executive-level control makes them feel more secure about their investment because they can influence management regarding the approval of changes to the business plan if needed.

Operational Discipline

Private equity firms want to see a culture of operational discipline in their target companies. They look at management will and commitment, which is the first essential step of operational discipline within an organization. Target companies should have streamlined and effective systems and processes in place to ensure sustainable revenues and growth.

Private Equity Buyers Summed Up:

Private equity firms invest in companies with the intention of creating value within a few years, after which they will sell their stake for the highest possible capital gain. Therefore, they seek businesses with clear growth potential and needing limited investment.

If your company is growing and market trends are positive, but you don’t have the fixed assets necessary to guarantee bank loans, consider selling a majority or minority stake to a private equity firm . By understanding what private equity firms are looking for, you can be in a better position to get a favorable deal.

Our sell-side M&A Advisory team helps our clients lead transactions while also acting as valuation experts and value growth advisors. Our passion for working with CEO Founders has allowed us to perfect our advisory process. Quantive has successfully executed over 150+ transactions– get in touch with our expert advisory team today to get started.

Emily Caldwell

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How we did it: Implementing a private-equity strategic vision

Established organizations are mostly structured to do yesterday’s work. To meet the changing needs of today’s and tomorrow’s customers, businesses must constantly reinvent their structure, human capital, processes, and technology.

In my experience, private-equity (PE) firms do this—and create value—by focusing on the medium and long term, as well as on the short term. Among the best of them, this emphasis on the classic three horizons of growth shows up in their vision, investment, governance, operations, talent, and capitalization. Over my career, I’ve worked to incorporate that basic mind-set into the culture at both Aetna and Clayton, Dubilier & Rice (CD&R). Here’s how we did it.

Vision: Clearly articulate the five- to seven-year vision and plan for the company.

A successful long-term strategy requires historical or baseline products, emerging product lines, and future growth trajectories. Public companies often focus on the first two, but the third is the hardest—even though it often has the biggest impact on long-term value creation. Private-equity firms more actively explore this third horizon and are diligent about identifying and making tactical bets against it.

I served as chairman at PharMEDium, a leader in customized pharmacy sterile compounding, after it was acquired by CD&R. We identified it as a major growth opportunity, and after extensive due diligence, we developed an investment thesis. The thesis focused on enhancing penetration of current customers, launching new products, and ramping up to serve a new customer segment: the outpatient market. Our thesis was well executed by an excellent CEO in 2013. Our $900 million investment paid off to the tune of $2.6 billion when we sold it just two years later, much sooner than expected. Public companies could make similar decisions, but managers there are often hesitant to take the short-term hit to their earnings-per-share (EPS) ratio. That limits their long-term growth investments to things they can offset by cutting costs. The lesson here for public executives is to consider making a set of focused, tactical bets on the long term, and then clearly communicate the value story to the market.

We took a similar approach during my tenure as CEO of Aetna, where we made long-term vision and the innovation cycle a key focus for our management team. This was partly because of industry regulation, which required that we write down every new product we created and file it with public agencies. That eventually allowed competitors to launch copycat products, so we had to innovate constantly to stay ahead of our peers. As a result, we emphasized a three-year planning horizon, devoting significant management attention to “white space” brainstorming on the likely evolution of the industry and ways to leverage technology to create new services and capabilities. Aetna’s market cap over the period grew to $15.3 billion, from $4.7 billion.

Investment: Determine the significant capital and operating investments required to achieve the vision, independent of impact on near-term earnings.

Making substantial investments in growth over the long term can be hard for a public-company CEO. Given that the average tenure of a Fortune 500 CEO is under five years, the returns on long-term investments can easily accrue outside the EPS timeline as CEO.

Managers of PE-backed companies are much more likely to invest in change early, particularly within the first one or two years of acquiring a portfolio company, if it will increase earnings or change the trajectory of the business at the time of exit. The new expenses of PharMEDium’s investment in the outpatient market did not have to be covered by cuts elsewhere, as they might have in an EPS environment. Instead, the board and management agreed on the costs and benefits of investment and were comfortable sacrificing short-term earnings to a tactical bet that it would drive long-term value.

Governance: Ensure alignment and cooperation in the strategic-planning process among the chairman, board, CEO, and executive team.

Public boards tend to focus on key strategic and compliance questions, such as risk management, and often come from a range of industries and backgrounds. A private-equity board, by contrast, will usually be filled with a combination of private-equity professionals and experienced former executives from the industry in which the company operates. A board chair may meet with a CEO several times a week, offering counsel on how to achieve the strategic plan, helping to assess and sponsor growth opportunities, and supervising key operational challenges. This level of board involvement and relevant experience makes it easier to reach alignment on vision, horizons, and investments.

Envision Healthcare is one good example of this. Soon after CD&R acquired Envision in 2011, the board and I approved the rollout of an ambitious revenue-growth expansion plan. Under the implementation of CEO Bill Sanger, the company eventually almost doubled its revenue to $5.45 billion, from $2.90 billion. Because of this successful growth, CD&R took Envision public two years later, in 2013. Board alignment has allowed the expansion plan to continue, with CD&R returning a fivefold multiple of capital on its investment.

Operational improvement: Assess restructuring needs with a fresh eye.

The quarterly timing of earnings that matters so much in a public company doesn’t matter in private equity, as long as earnings at exit meet or exceed the original investment. As a result, PE-backed companies are much more willing to take a restructuring charge in the near term or to weather midterm earnings volatility. This, along with different approaches to governance, also allows PE-backed companies to recover more quickly than public companies during periods of distress.

Restructuring a company in the public market is still feasible if managers clearly articulate a plan and the pathway to long-term value, similar to private equity’s approach. For example, at Aetna in 2002, Jack Rowe and I set out to transform the business and improve performance. Knowing that would take time, we made the decision to withdraw EPS guidance. This, we believed, would minimize distraction and focus the market on the turnaround story. I then did a listening tour with all of our customers to understand their preferences and unmet needs. Those conversations led to the most fundamental component of the restructuring: refocusing the business on all fronts—from product development to sales and finance—to serve customers vertically, by industry segment, rather than horizontally, by geography. This required a significant redesign and streamlining of the organization, as well as extensive value-chain analysis to break apart each segment and assess potential profit pools. It was also crucial to the long-term growth that followed, as Aetna focused on developing new products, services, and capabilities for each customer segment. In addition, it formed the basis of a compelling value-creation story for our investors.

Talent management and incentives: Tie management-performance incentives to long-term shareholder equity returns, focusing on value at exit rather than near-term liquidity.

Public companies often tie executive compensation to shares or options. Executives receive grants annually that vest at a given level of performance or length of time—usually a year. Not surprisingly, this can encourage a focus on near-term earnings.

Perspectives on the long term

In contrast, private equity typically ties executive compensation to a five- to seven-year view. The entire executive team and board receive the standard cash compensation, but their incentives have little connection to near-term liquidity. They do receive one-time equity grants at the outset of a deal, but must usually hold them for the duration of the holding of the company. That compensation structure enables them to focus on investing in and building toward value at the eventual sale or exit from a business. That, in turn, is a key element of private-equity success, because it encourages managers to act as owners, with a focus on cost efficiency, cash flow, and long-term value.

Public management teams should explore tying compensation to longer-term performance metrics and liquidity milestones. Aetna, for example, made several key changes to its compensation structure. First, the company created profit-and-loss statements for each of the end-to-end customer segments. Then it tied incentives not just to running the day-to-day business but also to a specific set of innovation metrics around expanding the products, services, and interactions with that customer segment.

Capitalization: Optimize the capital structure of the business, basing debt load on interest coverage and enterprise value rather than on EPS impact.

In contrast to the public market’s focus on post-interest EPS and retaining an investment-grade credit rating, private-equity firms often choose to utilize more leverage. This gives them increased flexibility with respect to, for example, more earnings potential for acquisitions, without equity dilution.

In fact, as McKinsey research shows, almost a third of the value created by private equity comes from the appreciation of market or sector value, plus financial leverage independent of company outperformance. For instance, CD&R purchased Envision Healthcare in 2011 for $3.2 billion, with $915 million of equity. In addition to the company’s significant operational outperformance, its use of leverage multiplied its equity return. Today, Envision Healthcare has an enterprise value of $6.7 billion, with $3.8 billion of equity.

Ron Williams is the former chairman and CEO of Aetna; a director on the boards of American Express, Boeing, and Johnson & Johnson; and an adviser to the private-equity firm Clayton, Dubilier & Rice.

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3 Keys to Successfully Selling Your Business to Private Equity Here's how to enhance the attractiveness of your business to potential buyers and set the stage for continued success in the future.

By Entrepreneur Partner Studio Staff Jul 25, 2024

A successful entrepreneur has spent years perfecting their product or service, hiring an all-star team, finding new customers, and increasing revenues. It makes sense that if the opportunity to sell that business arises, its owners would want to sell at a premium price.

If that potential buyer is a private equity (PE) firm, the process can be complicated but also quite rewarding. PE firms typically buy or invest in businesses that have an established track record of revenue generation and profitability. A PE firm will also likely have a vision for increasing the business's value—whether by creating new products, expanding into new markets, etc.

When selling a business to a private equity firm, there are several things to know before starting. For a successful sale to private equity, it's important to follow these three key steps.

1. Build a strong management team.

Having a strong management team is arguably the "most critical way to prepare for a sale to private equity," says Craig Arends, Managing Principal of CLA 's Private Equity Practice. With 35 years of professional experience, Arends helps businesses prepare to sell to PE and to get improved terms.

PE firms look for businesses that can operate independently of their owners. While an owner may remain with the business following a sale for a predetermined transition period, the rest of the leadership team can potentially remain for much longer. A PE firm wants to see that your business can thrive under the leadership of an established and capable management team.

A top-notch leadership team can also help in pre-sale preparations such as financial audits and operational improvements, including streamlining processes, improving efficiency, and enhancing decision-making. "That can instill confidence in potential buyers and probably drive up the investment they're willing to put into the business," Arends says.

It's also important to consider culture fit. Arends recommends working with a PE firm whose mission aligns with your company's culture and values. "Ignoring this can lead to conflicts and challenges post-sale," he says.

2. Develop a clear growth strategy.

A well-defined growth strategy should include both organic and inorganic growth opportunities. Organic growth might involve expanding your customer base, increasing sales, or entering new markets. Inorganic growth could involve mergers and acquisitions, strategic partnerships, or other forms of business expansion.

Arends explains the importance of this strategy in the context of private equity: "Post-sale, the involvement of the owner can vary significantly depending on what the private equity firm wants. The owner needs to be able to help during that transition period, to allow a smooth handover and achieving the growth strategies set out for the business."

Additionally, leveraging digital strategies can be a significant driver of growth. "How do you incorporate digital strategy into your business? How do you leverage new systems for better information, automation, and artificial intelligence? These are key components of a modern growth strategy," Arends highlights.

3. Work with experienced advisors.

Navigating the complex process of selling a business to a PE firm requires guidance from seasoned professionals. Arends strongly advocates engaging with experienced advisors early in the process. "Deals get done with good advisors. Work with experienced professional financial advisors and experienced investment bankers," he affirms.

CLA , for example, brings a wealth of knowledge and experience when advising a business on a sale, helping owners avoid common mistakes and enhance the sale process. As the eighth-largest accounting firm in the United States, CLA provides a comprehensive suite of advisory services, providing holistic support throughout the transaction—a valuable and distinctive service offering in the industry.

Working with advisors should include an integrated approach:

• Valuation: Accurately valuing your business so you receive a fair price.
• Negotiations: Skillfully negotiating terms to boost the benefits of the sale.
• Due diligence: Guiding you through the due diligence process so all aspects of your business meet the scrutiny of potential buyers.
• Tax planning: Structuring deals in a tax-efficient manner to increase your net proceeds.

Arends underscores the importance of a collaborative advisory team: "Having advisors who work together seamlessly can make a big difference. At CLA, we provide a one-stop shop with tax advisors, financial advisors, and wealth advisors all working together." This integrated approach connects all aspects of the sale and aligns your succession planning and overall objectives.

Click here to find out more about CLA and how their extensive experience and industry-specific knowledge make them an invaluable advisor in any business sale.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com.

CLA exists to create opportunities for our clients, our people, and our communities through our industry-focused wealth advisory, digital, audit, tax, consulting, and outsourcing services. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.

Entrepreneur Staff

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What is private equity?

How does private equity investing work.

• Who should consider private equity investing?

What are the main types of private equity investments?

Distressed funding.

• Leveraged buyouts 

Venture capital

Specialized limited partnerships.

• Cheaper ways to invest in private equity 

What are the pros and cons of private equity investing?

The upsides of private equity.

• The downsides of private equity 

The bottom line

What is private equity it's like a private investing club, where you buy a piece of non-public companies.

Paid non-client promotion: Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate investing products to write unbiased product reviews.

• Private equity involves investing in businesses or funds not listed on public stock exchanges.
• Private equity investments offer high returns, but are illiquid and have high minimums. 
• Traditional private equity is only open to the wealthy, but newer forms are available to smaller investors. 

When you hear the words private equity, a few things probably come to mind: palatial estates, sleek suits, private islands, and, well, money. Lots of it. But if you're among those who think only characters from "Billions" or other billionaires can be involved in the world of private equity (PE), it's time to think again. 

Mere millionaires can be involved too. Or those with even less.

Private equity investments are called "private" because they involve buying shares or an ownership stake in private companies or funds, rather than ones traded publicly on the stock market.

Adding private equity to your portfolio opens up a broad new world of investment opportunities that can offer above-average returns. Here's what you need to know before getting started with private equity investing. 

Investing in private equity is a little like dining at a private, members-only club, as opposed to eating in a restaurant that's open to the public.

At its core, private equity consists of investment opportunities in companies or business ventures that are not available on any of the open, public financial markets.  They don't have shares that trade daily on a stock exchange, like the Nasdaq or New York Stock Exchange. 

Unlike publicly traded stocks or mutual funds and ETFs, private equity funds are not regulated by the Securities and Exchange Commission (SEC), which means they are typically more appropriate for knowledgeable and experienced investors.

Investing in private equity ventures done through private funds, run by private equity firms with specific investment strategies and areas of expertise.

The vast majority of investors in a private equity fund are known as limited partners (LPs): They simply put up the capital, receiving an ownership stake or shares in the fund in return. In contrast, the fund's general partners (GPs) are responsible for managing and executing the fund's investments. They own a smaller percentage of the shares, too.

In essence, private equity funds gather large sums of money from investors who are in it for the long haul. This money is used to restructure or revamp a struggling company, fund acquisitions and start-ups, or take a company public. 

Private equity often requires long investment holding periods, because it takes a while before projects like turning around a troubled firm or launching an initial public offering (IPO) can garner positive returns. The average lifespan of a private equity fund is about 10 years.

At the end of the period, investors get their money back, plus hefty (hopefully) profits raised from sales and IPOs. In certain cases, like that of a real estate limited partnership , investors may also earn regular income along the way, but most of the return is paid at the end.

Who should consider private equity investing?

Private equity funds are out of reach for many investors because they tend to have substantial minimum contribution requirements. 

How substantial? Let's put it this way: Some private equity funds will allow you to buy in for as little as $250,000. Others have capital contribution requirements that reach up into the millions. 

Many private equity funds are only available to institutional and accredited investors, who are thought to be more experienced and thus able to take on the risk of investing in securities not regulated by the SEC. An accredited investor is one with a net worth exceeding $1 million who's earned an income above $200,000 — or $300,000 if filing jointly — for the past two years. 

Private equity investments take a variety of shapes.

Distressed funding deals with struggling businesses that have filed for Chapter 11 bankruptcy, allowing them to seek help by agreeing to restructure their business model and create a repayment plan for their debts. In some cases, private equity firms intend to help these businesses by changing up the management and turning the business around. In other cases, it's more about selling the business's assets for a profit. 

Leveraged buyouts 

A leveraged buyout also involves buying a struggling business, but this time, the goal is for the business to improve its model before being sold for a profit, or issuing an IPO. This type of buyout is the most common form of private equity investment and is often handled by buyout specialists. 

Venture capital investing involves offering start-up or early-stage funding for entrepreneurs aiming to ramp up their businesses. It can include providing Series A funding, which is aimed at helping the business optimize its user base and product offerings after demonstrating clear potential. 

Some private equity firms set up funds that invest in specific types of assets. Real estate is especially popular for these funds. Specifically, they often invest in commercial spaces, or in multifamily structures like apartment buildings. Other private equity funds invest in infrastructure projects like bridges and roadways.

Cheaper ways to invest in private equity 

Although traditional private equity is only open to high-net-worth or accredited investors, some forms of PE are more democratic — they don't require six figures to play. Here, in rough order of sophistication and means required:

• Angel investing : Angel investors are seasoned entrepreneurs or well-off professionals who put money into start-ups and younger businesses in exchange for part-ownership. Often this is real seed money, for firms too young or small for venture capitalists. Angel investors' stake averages around $75,000. 
• Equity crowdfunding : Like other crowdfunding models, equity crowdfunding involves a company or private business using an online platform to raise money from numerous individuals. However, instead of just getting a gift or a cool product, as with regular rewards crowdfunding, private equity crowdfunders actually get part ownership in the business. Additionally, equity crowdfunding's pooled structure means that minimum contribution requirements can be as low as $2,000 or as high as $100,000 — it depends on the investor's income. As an added bonus, these platforms are subject to SEC regulation.
• Fund of funds: A fund of funds is a pooled investment fund that invests in other funds, especially high-end mutual funds and hedge funds. They're priced similarly to mutual funds and usually come with minimum investing thresholds of around $1,000.
• Private equity ETFs: There's an exchange-traded fund (ETF) for everything these days. A private equity ETF primarily invests in private companies. They're offered by investment companies that sponsor ETFs, like Invesco (the Invesco Global Listed Private Equity Portfolio) or ProShares (the ProShares Global Listed Private Equity Portfolio), to name two popular ones. With these publicly traded funds, you can buy any number of shares you want, usually.  

Like any other type of investment, private equity investing comes with a distinct set of advantages and disadvantages. 

• Private equity offers the potential for substantial returns. Part of the general partner's art is identifying promising companies to invest in, which can be grown and sold off, or taken public, for a big profit. 
• For the limited partner, private equity funds are real set-it-and-forget-it investments — the GP does all the work. Perfect for the passive investment crowd.

The downsides of private equity 

• Private equity funds carry a lot of fees. Since these investments are unregulated, there's no limit to the amount that private equity firms can charge. Performance fees are paid to the general partners/fund managers for producing positive returns, and the "2 and 20" annual fee structure is common: a firm charges an annual management fee of 2% of the assets being managed and a 20% performance fee on profits generated.
• Private equity investments are illiquid. Private equity firms often require investors to keep their money in the fund for at least three to five years.
• Private equity investments can be high-risk. The companies are untried or troubled, and they may not live up to their potential.

While private equity investing is certainly not for everyone, for those with the capital, it can be a fairly easy way to achieve higher-than-normal returns. 

That said, before you decide to go this route, you'll want to do your research on the fund itself, its accompanying fees, and the success of its previous investments. Unfortunately, this information can often be difficult to find, since unregulated funds are not required to share information as readily as public investment funds, like master limited partnerships, mutual funds, or real estate investment trusts ( REIT s). 

That's one reason why private equity investments traditionally have been the realm of institutional investors and sophisticated accredited investors.

But some of the newer private equity investment options, like equity crowdfunding and private equity ETFs, allow investors of smaller means to play — and get in on a promising start-up long before it gets discovered by the public market.

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Considering Private Equity? Think Twice Before Investing in Business Development Companies

BDCs offer investors a way into private equity, and they’re hard to recommend.

Since the global financial crisis of 2007-09, the size of the private credit market has grown dramatically and now exceeds $1 trillion . Antti Suhonen, author of the study “ Direct Lending Returns ,” published in the Financial Analysts Journal , examined the returns, risk exposures, and performance persistence of business development companies. BDCs, created by congressional legislation, are closed-end investment vehicles organized under the Investment Company Act of 1940. They have the following characteristics:

• They generally invest in small and midsize companies through debt and, to a lesser extent, equity securities and derivative securities.
• They are required to invest at least 70% of their assets in nonpublic equity and debt of US corporations.
• Eligible investments also include US government securities, cash, and listed securities of companies with a market capitalization of less than $250 million.
• BDC investment holdings are subject to diversification requirements.
• Senior secured loans form the majority of BDC portfolio assets today, though they may also hold subordinated debt as well as equity warrants and direct equity ownership in their portfolio companies.
• BDCs are permitted to use up to 200% leverage. Virtually all BDCs take advantage of a full turn (100%) of leverage. The use of leverage increases risk and drawdowns while also increasing expected returns.
• 90% of a BDC’s income must be derived from dividends and interest, and 90% must be distributed to shareholders.
• Managers are typically compensated through a combination of fixed and incentive-based management fees (percentage of net interest income and realized gains).
• BDCs are not allowed to issue shares to the public below net asset value without annual shareholder approval.

BDCs: Risky and Expensive

Suhonen’s database consisted of 47 BDCs (with about $112 billion of assets at the end of 2021) and covered the period of December 2009 through June 2022. The following chart shows the market-capitalization-weighted asset allocation of the 47 BDCs in the sample.

Market-Cap-Weighted Asset Allocation of 47 BDCs in Study

Following is a summary of Suhonen’s key findings:

• BDC portfolio yield averaged 10.8% over the sample period (or average USD three-month Libor plus 10%). The yield compressed by 4 percentage points, from a high of 12.8% in 2012 to 8.6% in first-quarter 2022, before the widening in the final quarter of the sample. The compression is likely in part a reflection of the improvement in BDC loan seniority (see chart). The average BDC yield spread over leveraged loans during the sample period was 5.7%, ranging between 0.9% and 7.9%.
• Since 2019, the debt/equity ratio has averaged 102% versus 61% in 2009-17. The increase in leverage is due to congressional action taken in 2019 that raised the leverage limit to 2.0 from 1.0.
• The average annual management fee expense (including incentive fees) over the sample period was 3.19% of total assets, corresponding to 5.46% of net assets. This compares with an average management fee of 3.14% per year of net assets for private direct lending funds.
• The average financing expense was 4.36% per year of total debt, or three-month Libor plus 3.58% given an average Libor rate of 0.78% during the period.
• BDC industry total returns at the market-capitalization-weighted index level were 8.63% per year with a Sharpe ratio of 0.38. The Sharpe ratio was well below that of comparable benchmarks such as leveraged loans (0.61) and high-yield bonds (0.63).
• BDC market value returns were best explained by a combination of liquid leveraged loan performance and equity market, size, and value factors.
• Bundling the equity factors into one by using an equity small-cap value index as an explanatory variable alongside leveraged loans, the two regressors explained 81% of BDC market value index variation in monthly data and resulted in a negative but statistically insignificant alpha.
• BDCs’ volatility was broadly in line with that of small-cap equities. However, their returns exhibited more negative skewness and excess kurtosis than the equity benchmarks, though less than the leveraged loan index.
• Individual BDCs exhibited wide performance dispersion, with the difference between top- and bottom-quartile returns in excess of 15% per year across different performance measures.
• Based on an NAV return metric, BDC performance exhibited strong year-on-year persistence, especially in the bottom and top quartiles of past returns.
• There was a statistically significant relationship between valuation (price/NAV) and performance, with BDCs with greater price/NAV premium (or smaller discount) outperforming those with a smaller premium (larger discount) by all return metrics.*

Investor Takeaways

Once traded in the listed market, BDCs adopt the volatility of common stocks and may deviate from their fundamental value because of changes in investor risk aversion and market liquidity. The result is that they are riskier than the assets they hold, a problem compounded by their use of high amounts of leverage. Add to that their extremely high fees relative to net investor assets (in excess of 5%), and it is hard to make a case for investing in public BDCs, especially when there are less risky and less expensive alternatives, such as Cliffwater Corporate Lending Fund CCLFX and Cliffwater Enhanced Lending Fund CELFX . The high expense ratio is particularly egregious when it is applied to gross assets (as opposed to net assets). The reason is that gross assets include those that are financed with leverage that has had an average cost of about 3.6% above Libor. The result is that the investor is paying full fees on the leveraged assets when they are not earning the full yield paid by the borrower. In contrast, Cliffwater’s fees are applied to net assets.

*When I discussed this finding with Cliffwater’s CEO, Stephen Nesbitt, he informed me that, while the finding was correct for a buy-and-hold strategy, his research found that a periodic rebalancing strategy from high price/book to low price/book produced higher returns than a buy-and-hold strategy.

Larry Swedroe is head of financial and economic research for Buckingham Wealth Partners, collectively Buckingham Strategic Wealth, LLC and Buckingham Strategic Partners, LLC.

For educational and informational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based on third party data and may become outdated or otherwise superseded without notice. Mentions of specific securities are for educational purposes only and are not recommendations of implementing them into a portfolio. Individuals should speak with a qualified financial professional based on their circumstances. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article. The opinions expressed here are their own and may not accurately reflect those of Buckingham Strategic Wealth, LLC or Buckingham Strategic Partners, LLC, collectively Buckingham Wealth Partners. LSR-24-627

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies .

Larry Swedroe is a freelance writer. The opinions expressed here are the author’s. Morningstar values diversity of thought and publishes a broad range of viewpoints.

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About the author, larry swedroe.

Larry Swedroe is the author or coauthor of 18 books on investing. His latest is “Enrich Your Future: The Keys to Successful Investing.” He holds an MBA in finance and investment from New York University and a bachelor's degree in finance from Baruch College in New York.

P-CAPE: A Better Way for Investors to Estimate Future Returns

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Watch: Why Are So Many Firms Building Up in Private Equity Funds?

Law.com International editor-in-chief Paul Hodkinson takes a look at the drivers behind recent moves.

July 17, 2024 at 09:00 AM

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In the last week alone there have been a flurry of law firm hires in the field of U.K. private equity funds.

Kirkland & Ellis hired from Milbank to replace a partner that moved to Paul, Weiss, Rifkind Wharton & Garrison earlier in the year. White & Case hired from Ropes & Gray, and Morgan Lewis & Bockius hired from Paul Hastings .

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Private equity is devouring the economy as boomer entrepreneurs exit—but a new approach to employee ownership can change that

Bill Fotsch is a business coach, investor, and researcher. He is the founder of Economic Engagement LLC.

Private equity roll-ups are gaining traction. The industry is growing five times faster than the U.S. economy as a whole and effectively “devouring” it. And there are rising concerns about PE’s impact on affordability and market power .

Private equity companies are in the business of making money, and industry roll-ups present an opportunity to do so efficiently for several reasons:

• Many private companies exist in fragmented industries, where consolidation provides clear advantages.
• Many private companies are owned by baby boomers who lack sufficient succession planning.
• Buying companies at a relatively low price/earnings ratio, aggregating them, then selling at a higher price/earnings ratio is lucrative.

Private equity companies recognize this model enables them to extract significant financial rewards. But company owners are beginning to realize they can beat private equity with a compelling alternative approach.

This became apparent to me through conversations with several past clients from decades ago. Few had successfully transitioned their companies to new owners. Several had been acquired by private equity firms. While they were pleased to seal the deal, I sensed a level of regret.

One president told me that he had been acquired by a private equity company. He was subsequently asked to stay on as a consultant to help them acquire even more companies and share the same best practices we had applied at his company. The first part went according to plan. They were successful at acquiring more companies. However, he admitted there was little success in sharing best practices. As he put it, PE companies are good at transactions, but not very good at operations.

The truth is, while PE companies have the unique capital and experience to acquire companies, they have little expertise in specific industries or running a company. Yet they extract a fortune for their efforts at industry roll-ups. Why can’t company owners create roll-ups like this themselves, without any private equity involvement?

Another past client, a civil engineering company based in Wisconsin, did just that. They made over 20 acquisitions in their sector with the following characteristics:

• No involvement of private equity firms.
• Implementation of an Employee Stock Ownership Program (ESOP), resulting in substantial tax benefits.
• Integration of acquired companies into the ESOP structure, fostering common stock ownership among a growing number of employees.
• Emphasis on sharing best practices through “communities of practice,” enhancing employee engagement and performance.

The result? Their valuation surged more than sixfold in the last five years, with no sign of slowing. It’s a win-win in which customers benefit, and the wealth created remains in the hands of those who work hard to create it. 

Pooling resources under one ESOP structure means the cost of the ESOP per company plummets. Individual companies can operate autonomously. Meanwhile, the employees become company owners, who can directly improve the value of their stock by sharing and implementing best practices. Their chances of succeeding at this are greater than the PE company’s because they understand their industry and people. And if they apply a management approach like economic engagement , which is shown to double profit growth, this further enhances their competitive edge. This industry roll-up alternative is becoming known as “rewarding roll-ups.”

ESOPs are frequently seen as an exit tool for owners, but rewarding roll-ups uses it as a foundation for considerable additional growth in equity, shared by both employees and owners. And there is at least one additional benefit: job security.

In an inevitable downturn, a PE company likely won’t care about laying off employees. But companies courting this novel model can invite more companies into the roll-up at lower costs due to the downturn. The expansion creates plenty of work for existing employees, improving job security and stock value, and ultimately boosting profits for everyone. It’s worth noting that the aforementioned civil engineering company hasn’t had a layoff in the last 20+ years.

Broad awareness and adoption of this approach are limited but growing quickly. By reframing ESOPs as a platform for growth rather than just an exit strategy, company owners can make something even more meaningful of their life’s work.

It’s time we find a compelling alternative to private equity. It’s time to invest back into the people who create a company’s value: the employees and the stakeholders.

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Wiz Rejects Google’s $23 Billion Offer, Seeks IPO Instead (2)

By Lynn Doan

Cybersecurity startup Wiz Inc. has turned down a takeover bid of as much as $23 billion from Alphabet Inc. ’s Google, sticking instead with a plan for an initial public offering.

The rejection will come as a blow to Google, which is trying to catch up with Microsoft Corp. and Amazon.com Inc. in an intensely competitive cloud services market. Google, which bought cybersecurity firm Mandiant for $5.4 billion just two years ago in its second-largest acquisition, could have used Wiz to round out its security offerings. The New York-based startup connects to cloud storage providers such as Amazon Web Services ...

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Explainer: What are Harris' business views? Friendly to Big Tech, aggressive in climate fight

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Reporting by Greg Bensinger in San Francisco, Valerie Volcovici and Ahmed Aboulenein in Washington, and Chris Prentice, Echo Wang, Megan Davies, Lananh Nguyen and Nupur Anand in New York; editing by Chris Sanders, Leslie Adler and Alistair Bell

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Russian drones knock out Ukrainian power facilities near Kyiv

Russia attacked Ukrainian energy facilities in two regions between the capital Kyiv and the Russian border with drones overnight, leaving tens of thousands of people without power, Ukraine's national power grid operator said on Friday.

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