The Winning PE Value Creation Formula – GTM (Revenue Growth) Improvements + Operational Improvements

PE Winning Formula is both: a) GTM Excellence + b) Operational Discipline

To succeed, PE firms must now differentiate through genuine value creation, as they face intense competition, longer holding periods, and high-interest rates that limit leverage. Firms must focus on both GTM improvements and operational improvements within portfolio companies to meet investor expectations, as LPs increasingly prioritize tangible distributions (DPI) over speculative IRR gains.

GTM vs. Operational Improvements

  • GTM Improvements (Profitable Revenue Growth Acceleration): Focused on sustainable, high-margin revenue growth through pricing optimization, sales efficiency, customer segmentation, and expansion strategies. GTM improvements enhance capital efficiency in customer acquisition and drive top-line performance.
  • Operational Improvements: Centered on cost optimization, efficiency gains, and margin expansion through automation, procurement, and supply chain enhancements. These efforts improve EBITDA but do not inherently drive revenue growth.

How PE Firms Generate Top-Decile, Superior, Risk-Adjusted Returns (Alpha)

To outperform, leading PE firms integrate both a) GTM Excellence (profitable and capital-efficient Revenue Growth acceleration) + Operational Excellence (operational efficiencies, automation, and cost structure optimization) to:

  • Accelerate Revenue Growth Profitably – Optimize pricing, improve sales execution, and expand customer segments while maintaining capital efficiency.
  • Improve Cost Structure – Identify and eliminate inefficiencies across procurement, technology, and operations.
  • Improve Operational Efficiencies – Leverage automation, AI, and process enhancements to reduce waste and increase productivity.
  • Improve EBITDA Margins – Drive sustainable earnings expansion through a balanced focus on revenue growth and cost management.

PE firms that master this dual approach will generate superior risk-adjusted returns and command premium valuations upon exit.