Ensure the most effective capital allocation: If the business engine is churning out cash — the true determinant of an attractive firm — it is essential to ensure that cash is invested wisely. Each capital allocation decision should be evaluated to determine whether the firm is surpassing a stiff IRR hurdle. Acquisitions to satisfy dreams of grandeur should be shunned.
Sharp focus on customer delight: Sustainability of profit margins is dependent on customer loyalty. It is essential to ensure continual measurement of customer satisfaction and make corrections, apart from product/service improvements to ensure market share is on an upward trend.
Introducing and perfecting management information systems: Without robust management information systems, you are flying blind on almost every controllable business parameter. Perfect visibility to make mid-course corrections can come only from robust systems.
Hiring and empowering the best talent: Owners may often lack both the vision and capacity to execute plans to take the firm to the next level. It is the investor’s job to work with the promoters to convince them that hiring the best leadership may be the best thing to do.
Creating and maintaining an impeccable reputation: All stakeholders — employees, customers, vendors, regulators, lenders and shareholders — should find the firm honest, fair, transparent and exemplary in its governance standards.