When a private equity firm wants to grow itself, maximizing ROI and reducing operational costs throughout its portfolio companies would be the best starting points. However, as the portfolio grows, so do its investment and finance needs. Many PE firms turn to private equity outsourcing to stay abreast with the growing expansion demands and the need to comply with accounting regulations. Here is a complete guide that would help.
What is Outsourcing and its Benefits for the PE Firm?
In the current age, outsourcing business has become an industry standard, and private equity is no exception. The outsourcing industry has grown significantly due to its access to global talent without local recruiting. Maintaining an in-house team needs more equipment, office space, and full-time payroll employees. Outsourcing can free up the PE firm’s office space, reduce operational costs, and minimize the financial burden.
Outsourcing teams have the latest software and tools to handle repetitive tasks efficiently. As a result, the in-house team has more time to focus on the firm’s core business operations. The PE firm can make its business operations easier and faster by handing mundane tasks to an outsourcing team. Apart from simple tasks, an outsourcing partner may also provide analysis and reporting to make a firm make better decisions.
Which Tasks are Common to Outsource?
With the constant growth in the PE market, the demand for private equity outsourcing is continually rising. The most outsourced PE functions include deal sourcing, target evaluation, portfolio monitoring, advisory, and exit support. Having a virtual assistant offering live deal support can do wonders for the overall PE process.
Outsourcing partners ensure the PE investments are in check, they comply with the regulations and complete the documentation required for the transactions. All these tasks are complex and exhausting for a PE firm’s in-house staff, and outsourcing professionals are the best at handling them. Outsourcing specialists also help PE firms understand the after-effects of their investment decisions, identify the risks involved, and mitigate them efficiently. Having experts in the industry can be a massive bonus for PE firms for obvious reasons, which is why these tasks are common to outsource across the PE industry.
Picking the Right PE Outsourcing Partner
An efficient outsourcing partner can help a PE firm scale up rapidly, while a wrong choice leads to severe issues in the future. So, here are some crucial points to keep in mind while picking a PE outsourcing partner:
Cost: Calculate the cost of hiring an in-house team and compare it with the fees charged by an outsourcing partner. Outsourcing should always be cheaper than hiring an in-house team. However, do not compromise with expertise to save money. Explore their pricing models and pick a plan most suitable to the PE firm’s requirements.
Experience: Give attention to the outsourcing partner’s experience in the PE industry and ensure they have a proven track record of satisfying clients with quality service.
Communication: Experienced outsourcing partners have knowledge and proficiency in PE-related topics, and their expertise automatically shows through their communication. Besides clear and efficient communication, they must provide timely answers, enabling the PE firm to make decisions at the right time.
Whatever the PE firm’s needs are, it’s hard to overlook the advantages of private equity outsourcing. Outsourcing creates room for scaling and increases ROI. It helps save money on staffing and salaries, which the PE firm can allocate to more investments. With skilled members, the latest information, and advanced tools, a PE firm gets valuable consulting to make investment decisions and impact conditions.