What Makes a Business Attractive to Private Equity?

At last Friday’s Harrogate Business Group breakfast meeting, one of our members, Warren Beese, shared his experience of what makes a business attractive to private equity investors.

Warren Beese

Not in theory. In practice.

Warren’s background spans turnaround, operational improvement, commercial leadership, and private equity-focused business growth. During the session, he explained that businesses looking for investment are not judged on growth alone. Investors also look closely at how the business operates behind that growth.

Growth Alone Is Not Enough

One of the examples Warren shared was a business generating £100k in revenue with £10k profit.

At first glance, that might appear to be a stable business. But when benchmarked against competitors, it was underperforming.

This is where private equity investors see opportunity.

The goal is not always to completely rebuild a business. Often, it is about identifying where performance can improve through operational efficiency, stronger margins, better financial control, and focused growth.

Warren outlined how relatively modest changes can have a significant impact:

• Improving sales

• Reducing costs

• Tightening margins

• Focusing on the areas that drive the best returns

By making those improvements, the example business increased profit from £10k to £19k.

Why Valuation Matters

One of the most interesting parts of the session was the discussion around valuation.

The value of the business did not simply rise because profit increased. The valuation multiple also improved.

According to Warren’s example, the business moved from being valued at 5x profit to 8x profit because it had become a stronger, more efficient, and more investable business.

That is an important distinction.

The value of a business is not based purely on profit. Investors also look at:

• Operational efficiency

• Financial performance

• Market position

• Leadership and people

• Future growth potential

A business that runs well and has clear opportunities for growth will often attract a higher valuation.

A Useful Reminder for Business Owners

The session was a useful reminder that growth is not always about doing more.

Sometimes the biggest improvements come from tightening what is already there, improving how the business runs, and understanding where the real value sits.

These are exactly the kinds of practical business discussions we encourage at Harrogate Business Group.

Join Us at a Future Meeting

Harrogate Business Group meets every Friday morning for breakfast, networking, and practical business discussions from members and guest speakers.

If you would like to visit a future meeting or speak about your own area of expertise, we would love to hear from you.