The finance function a PE portfolio company actually needs in year one

The operating partner did not buy a month-end reporting pack. They bought decision-speed, and the finance function has one hundred days to prove it can deliver it.

Every acquisition is underpinned by a model. That model carries an EBITDA number, a working-capital normalisation, a margin bridge and a cash-conversion profile, and by the time the deal completes those assumptions have hardened into a plan the whole thesis rests on. I have sat on the sell-side of a two-billion-dollar acquisition, working alongside the bank on the deal packs and the shareholder case a buyer's diligence process would test. What I learned there is the thing every year-one finance hire has to understand: the deal model is a set of assumptions, and someone has to test them against operating reality. In a portfolio company, that someone is the finance leader, and the clock starts at completion.

The operating partner is not, whatever the job specification says, buying month-end reporting. Reporting describes the past. What a sponsor needs in year one is the ability to make a decision faster than the market moves against it, and that rests on three things being true by day one hundred: cash you can see, unit economics you can trust, and one version of the truth the board can question live. Everything else should be sequenced behind these priorities, except where control, compliance or reporting reliability requires immediate attention.

What the deal model assumed

An entry model is built to support a transaction, not to run the acquired business. The margin is a blended average, the working-capital line is normalised to a level that supports the investment case, and the synergies arrive as tidy line items with a phasing that no one has yet had to live through. Having worked on the sell-side pack for a real transaction, I know how much judgement sits underneath each of those figures, and how little of it survives into the plan the buyer inherits. The buyer inherits the assumptions, and much of the reasoning that produced them is diluted in the handover. Year one is the work of converting those assumptions into operating reality, before the interest bill and the reporting calendar make the gap the buyer's problem.

I have run the closest thing to a sponsor's playbook, though it was not for a sponsor. At Chiron I was promoted into the financial controller role for European distributor operations with a specific mandate: give an underperforming business with high growth potential the dedicated focus it lacked, and turn it around. The business was a third-party distributor network across seventeen countries, many of them emerging markets. And a distributor is not a subsidiary. These were independent companies with their own P&Ls, carrying other principals' products alongside ours, some of them faster-growing lines with larger portfolios behind them, all competing for the same salesforce attention. Whatever we needed done would be done through influence, not authority. The investment case went into the three-year long-range plan under my name and the regional Managing Director's: proof the market demand existed, with competitors' products already selling in-market to evidence it; a bridge from why we were underperforming to what would close the gap; and the capital ask that followed from it. The plan won the investment. Then came the part a deck cannot do. The annual plan set goals that drove straight into the budget, built from the plan rather than last year plus a percentage, and execution ran on a quarterly rhythm: quarterly business reviews with every distributor operation, alongside the commercial director and medical director, with legal and supply chain in the room when a market needed them. Action plans had named owners and dates. The reviews turned noise into decisions, and the clarity is what won the battle for attention: a partner who knows exactly what is asked of them, why it pays, and when it will be reviewed keeps your products at the top of their agenda rather than the others in their bag. My job between the reviews was to absorb what the markets threw at us and re-cut the plan. The outcome is on the record: record 20% revenue and income growth across the network, with inventories brought down to 45 days. That is a value-creation plan delivered through an operating rhythm, which is precisely the machine a portfolio company needs in year one.

I have also run the compressed version. That two-billion-dollar sell-side seat was itself a compressed one: seven months at Mayne's group centre, rebuilding the board's management reporting and owning the long-range forecast for a global generics business while it prepared for sale, the numbers a transaction of that size gets judged on. And the same muscle ran in different rooms: at GSK, pitching licensing investments to internal boards under explicit capital rationing, where every case had to show why this asset beat the next best use of finite capital; at Parexel, where I drove the analysis and the business strategy behind the case that moved investment into an underperforming unit's growth engines, in partnership with divisional leadership.

A sponsor changes three things, and the differences matter: the clock, because an exit horizon concentrates every decision; the balance sheet, because leverage puts covenants and interest cover inside every cash conversation; and the yardstick, because value creation is measured the way economic-value-added thinking formalised it, returns above the cost of the capital tied up. What does not change is the craft underneath: put your name on a plan, win the capital, and deliver it through an operating rhythm that makes accountability routine.

Deliverable one: cash you can see, every week

Cash is the hardest number in the business to argue with. In a leveraged business it is also the survival horizon: the annual budget is the destination, the thirteen-week cash flow is whether you actually arrive. The first thing I would stand up in a portfolio company is a rolling thirteen-week cash forecast, rolled forward weekly, owned by finance, reconciled to the bank, and constructed the direct way from receipts and payments rather than derived from a P&L that reports the past with a lag.

I learned this discipline the way it teaches best, with my own money on the outcome. Eleven years running a self-funded direct-to-consumer business, with no credit line, meant paying Far-East suppliers months before the customer cash came back. Cash conversion was not a KPI on a slide; it was whether the next order shipped. The same instinct has a corporate rhyme: leading finance for Parexel's Early Phase unit, I took accounts receivable from 65 days to 40, turning reported profit into collected cash, and drove utilisation of the fixed-cost clinical sites, with business development tenders feeding the studies that filled them. Cash freed at one end of the cycle, capacity earning at the other, at NASDAQ scale. The year-one test is simple. On any Friday, the finance leader should be able to tell the operating partner what cash looks like thirteen weeks out and which three assumptions would change the answer.

And there is a younger version of the same deliverable. In a venture-backed company that has just raised, at or before launch, cash you can see becomes runway you can defend: months of cash at the current burn, the bridge from this burn to the next proof point, and the honest answer to what has to be true before the next raise. The mechanics change, because the constraint is not an interest bill but dilution, and the clock is not a covenant test but the milestone the last round priced. The discipline does not change at all: a rolling view of cash, owned by finance, telling the board every week how much decision-room the company actually has.

Deliverable two: the unit-economics bridge

The deal model has one margin. The business has a distribution of them, and the value is in the tails. The second deliverable is the bridge from the assumed blended margin to the actual contribution earned by the unit that matters in that business: the product, the customer, the channel, the contract.

This is where founder economics earn their place in a boardroom. Running my own P&L, I could tell you which product on which marketplace made money after landed cost and acquisition spend, and which one was quietly subsidised by the others, because contribution by SKU and customer-acquisition cost by channel were the numbers I lived inside. The corporate version is the same craft: at Parexel, pricing multi-year early-phase clinical contracts meant signing off margin before execution, not discovering it afterwards. Portfolio companies often grow the wrong units fastest. Without the bridge, a plan discounts its way to the revenue target and files it under growth. With it, the operating partner can see the distribution, stop funding the loss-makers, and put money behind the winners. That is not a reporting improvement. It is a different set of decisions.

The deal model is a set of assumptions. In year one, the finance function is the machinery that tests them against operating reality.

Deliverable three: a board pack that answers before it reports

A report describes last month. A portfolio board needs a pack that answers the operating partner's next question before it is asked, and that requires one version of the truth: demand, price, mix and cash reconciled in a single model, not four spreadsheets owned by four people that meet quarterly and disagree. The deliverable is not a prettier monthly pack. It is a model the board can interrogate live, in the meeting, and get answers that show their workings.

This has become genuinely achievable, and I build it myself. A working driver model can now be built in days rather than quarters, though data quality, ownership and adoption still decide whether a board can rely on it: I use Claude Code to write the tooling and Claude in Excel to interrogate it where the finance team actually works, under the same controls I would apply to any close, with every AI-assisted output stating its assumptions and validated against source. The point of the pack is that when a number moves against plan, the variance arrives explained, with the bridge and its assumptions attached, on the spot. Forecast discipline underwrites it: modelling work I led at Chiron, earlier in my career, took forecast error against actuals from roughly 15% to 4%, and that is the standard a board pack has to hold before anyone will let it drive a decision.

What to fix first, and what can wait

The instinct on arrival is to fix everything at once: replace the ERP, rebuild the chart of accounts, close in three days, buy the business-intelligence stack, build the five-year model. I say this as a career troubleshooter, and it is precisely the troubleshooter's discipline that argues against it: diagnose before you treat, find the constraint that is actually binding the plan, fix that first, and sequence the rest deliberately. The sequencing is itself a judgement with real parameters behind it: the scale of what each fix moves, the probability it lands, the speed to a visible result, the complexity of what it touches, and how much change the organisation can absorb at once. Those parameters pull against each other, and the answer is rarely straightforward; weighing them well is where a troubleshooter earns the fee. Most of the infrastructure list can wait its turn, and pretending otherwise is how a year-one finance leader spends the value-creation window building systems instead of buying decisions.

Sequencing is also how the change itself gets made. In any change programme, an early visible win does more than its arithmetic: it shifts culture and perspective, buys credibility, and widens stakeholder buy-in for the harder moves that follow, so I deliberately sequence one or two in. And the discipline that holds it together is altitude: close enough to the detail to know which fix is real, high enough on the strategy to know which fix matters, because results come from managing the change through the business, not from the diagnosis alone.

Year one is the window the sponsor judges, not the pace anything moves at. Inside it the clock runs much faster: the first quick wins land in weeks, and the three things that buy decision-speed, cash, unit economics, one version of the truth, are genuinely working by day one hundred. The calibration is the business itself: size, state and the urgency of the plan set the pace, and where a situation needs immediate impact the sequence compresses to match, which is exactly the troubleshooter's terrain. Much of the rest is a transformation programme wearing a year-one costume. A perfect close delivered a day faster rarely changes a decision on its own; a thirteen-week cash view changes several, so do the second one first. This is the discipline the Chiron plan, the Mayne clock and the founder years made permanent: diagnose the few levers that move the number, architect them so they survive your departure, and resist the sprawl that outlives its own usefulness. On a mandate, I would rather hand a sponsor three things that genuinely work at day one hundred than ten things that are half-built at month twelve. The first earns trust and the next brief. The second earns a review meeting no one enjoys.

Because that is the operating partner's real question at day one hundred, underneath all the others: can I trust this number, and can this person move quickly without losing control. The credible answer is not a slide about the operating model to come. It is a working finance function built to produce cash you can see, unit economics you can act on, and a board pack that answers before it reports.