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4 ways private equity firms can improve operations ROI

by Jim Kirby
 
More and more, private equity deals feature substantive operational improvements that result from the application of broad industry and functional experience. Increasingly, private equity firms and their operating partners are in the trenches with their portfolio companies, actively influencing and investing in core operations as often as they are cutting costs to build value.

Private equity partners and consultants working with portfolio companies should consider these four often overlooked operational drivers of ROI.
support specialist

Outsource lifecycle services and focus on the business's core competencies

Outsourcing can have a poor perception, yet partners working with a private equity firm's portfolio companies should put every aspect of operations under a microscope and look for ways their portfolio companies may be able to benefit by outsourcing specific service and support processes.

One area where private equity firms can better manage program costs and deliver stronger returns is in the area of lifecycle services. If your portfolio company already has an in-house call support center or field service program, it's worthwhile to look at the costs and benefits of keeping those programs in-house. The truth is that in-house service programs require resources: space, equipment, ongoing training, and employee staffing expenses. Plus, services programs are usually considered peripheral or discretionary to the core business, and rarely seen as revenue generators. Service providers who specialize in this work are already set up to perform more efficiently and economically and may even provide solutions that can turn supporting programs into revenue generators for all involved.

If you have startup companies in your portfolio, don't build service programs from scratch, outsource this work and keep company resources focused on core product innovations.

Improve operational efficiencies

Optimizing business performance is a driver of ROI. Private equity firms can find stronger returns and savings by examining customer service processes and outsourcing to produce better results where it makes sense.

Example: An electronic instruments manufacturer was displeased with the disruption and inefficiency caused by calls related to a warranty program. In addition, the call resolution times for this program had increased to almost a full day due to staffing and budget constraints.

A comprehensive solution provided:

  • Decreased warranty call response time from 24 hours to minutes per call.
  • 100% first call answer rate.
  • 40% reduction in overall technical response time.
  • A 50% resource savings by outsourcing technical service calls.
  • A distributed solution to outsource the handling of warranty replacement items and reduced 300 separate warranty transactions to one monthly report.

Enable consistent scale

 

Good customer experiences are essential to creating multiple avenues of growth. Fully-optimized customer service and support operations provide consistent scalability without upfront capital expenditure, enabling a private equity portfolio company to further leverage returns as the company expands. Engaging the right partner network empowers a company's customer service operation to flex as needs dictate, whether it's scaling for cyclical surges or planned market expansion.

For example: An emerging robotics company needed to expand its call service presence at the request of several new customers. At this stage, the company was not positioned to extend its staffing footprint to provide coverage 24/7/365 and sought a partner who could give them the engaged support customers require as they expand globally.

  • 100% coverage for after-hours calls is provided from a U.S.-based network of call center analysts, as well as remote monitoring and service resolution for the company's deployed robots.

Take your portfolio companies to the next level

Find out more about how you can drive operational improvements and market expansion for your investment businesses.

Elevate business value without upfront capital expenditure

Private equity firms typically place debt on a portfolio company, which can constrain the ability to operate. Maximizing profit and growth while keeping capital expenditures to a minimum is a crucial driver of ROI. Outsourcing keeps capital investment in people and equipment to a minimum without sacrificing the customer experience. Private equity firms should ensure capital-efficient, profitable growth and a superior customer experience that drives value.

Example: A leading provider of cash handling technology solutions embodies the idea of switching service providers to streamline and improve ROI with its call center support processes. The goals were to reduce monthly costs while maintaining service effectiveness, and accommodating volume increases in certain key countries.

Results:

  • Scaled call volume by 1,200% while improving call wait times.
  • Improved call answer times by 83% (3-4 minutes to a 30-second average).
  • Providing additional language support, which increased coverage in 3 countries.
  • Achieved significant annual savings.

Takeaway: Partner for improved ROI

Private equity partners should explore these central areas of operations to uncover any hidden costs, and then streamline the service business processes of their portfolio companies. Partnering with service providers can be much more efficient and effective than a company's in-house team because they provide turnkey operations capabilities. Leveraging these capabilities enables a private equity firm to spend less and achieve more with their portfolio companies, and that's more important than ever when trying to increase revenue and squeeze everything out of the top and bottom lines.
 
jim kirby
Jim Kirby, Vice President of Business Development and Alliances, is responsible for building and nurturing a portfolio of partnerships for Ricoh Service Advantage. As a sales and marketing leader, Jim has focused on organizational planning and strategy and helping companies navigate how customers think about their value chain and examining what kind of external dots need to be connected to help key partnership relationships produce real results for their respective customers.