Not Just a Price Increase: The Role of PE in Portco Pricing

Pricing is a crucial profit lever for Private Equity-backed industrial company growth. However, many PE and Portco leaders mistakenly believe that pricing only involves price increases.

So today we’re examining how PE partners can help their Portcos embrace a more holistic approach to pricing that propels growth and profitability through continuous pricing strategies, not just one-time initiatives or annual inflationary measures.

Annual price increases

With the continued rise in inflation in recent years, companies across industries have been faced with rising costs and shrinking margins. And out of necessity, many have looked to annual price increases to weather the storm.

While customers are more willing to accept price increases when they understand the economic conditions behind them, standardized price increases don’t always protect the business from the negative effects of inflation. This is especially true given current industrial pricing trends like persistent cost volatility.

When costs are all up during inflation, price response is clear and defensible. But when costs are in flux, more frequent, targeted price updates are required to keep margins stable and growing, instead of standard annual increases.

Ongoing pricing activity

When pricing is treated like a one-time, reactionary event to factors like inflation, daily pricing activity is ignored. Portco sales reps sell at different prices to different customers every day. And if the pricing program only consists of an annual inflationary increase, pricing for new business is left unaddressed.

Sales reps dislike broad price increase initiatives because they create difficult customer conversations. But when the pricing paradigm shifts from a single update to ongoing optimization, reps are equipped with price guidance that’s always up-to-date to price every deal profitably.

This also decreases the risk of customer drop-off after a mass price increase, with the added benefit of pricing new customers more consistently.

The role of Private Equity

PE owners can significantly enhance the growth and profitability of their Portcos by adopting a more dynamic and holistic approach to pricing. 

Moving beyond the traditional reliance on annual price increases — which fails to address the complexities of fluctuating costs and other market conditions — an ongoing approach to pricing provides a more sustainable solution. Sales reps also become more empowered and effective with adaptable price guidance that helps close deals while maintaining stable margins throughout the year.

To learn more about how to institutionalize pricing as a continuous discipline instead of an isolated exercise, schedule an intro with a PE-backed industrials pricing expert.

Or, visit our resource center for more pricing news and insights for PE leaders.