How do you track and measure the value creation of your portfolio companies?

2 Establish your metrics and targets

The next step is to establish your metrics and targets for each value driver, to quantify and measure the progress and performance of your portfolio companies. Metrics are the specific and measurable data points that reflect the value drivers, such as sales volume, gross margin, net promoter score, or product launches. Targets are the desired or expected levels of performance for each metric, based on your investment thesis, industry benchmarks, and market conditions. You should set realistic and achievable targets, and review and adjust them periodically as needed.

3 Collect and analyze your data

The third step is to collect and analyze your data for each metric and target, to evaluate the actual and relative performance of your portfolio companies. Data collection can be done through various sources and methods, such as financial statements, operational reports, surveys, interviews, or dashboards. Data analysis can be done through various tools and techniques, such as spreadsheets, charts, graphs, ratios, or models. You should use consistent and standardized data formats and methods, and ensure data quality and accuracy.

4 Report and communicate your findings

The fourth step is to report and communicate your findings for each metric and target, to inform and influence your decision making and action planning. Reporting can be done through various formats and channels, such as memos, presentations, newsletters, or webinars. Communication can be done through various modes and frequencies, such as emails, calls, meetings, or site visits. You should use clear and concise language and visuals, and tailor your messages to your audience and purpose.

5 Provide and receive feedback

The fifth step is to provide and receive feedback for each metric and target, to foster a culture of learning and improvement among your portfolio companies. Feedback can be positive or negative, formal or informal, structured or unstructured, depending on the context and situation. You should provide constructive and actionable feedback, and acknowledge and celebrate successes and achievements. You should also receive feedback from your portfolio companies, and listen and respond to their concerns and suggestions.

6 Implement and monitor your actions

The final step is to implement and monitor your actions for each metric and target, to ensure that you are adding value and supporting your portfolio companies. Actions can be strategic or operational, proactive or reactive, short-term or long-term, depending on the needs and opportunities. You should implement your actions in collaboration with your portfolio companies, and allocate adequate resources and support. You should also monitor your actions in relation to your metrics and targets, and track and measure their impact and outcomes.