In short
EBITDA is earnings before interest, taxes, depreciation and amortisation – put simply, what the day-to-day business earns. In the first year after a private equity investor buys a company, the levers fall into three groups:
- Revenue quality: pricing, work that never gets invoiced, unprofitable customers.
- Costs: purchasing, people, overheads.
- Processes: less manual work, fewer duplicate structures.
Order matters. Months 1 to 3: get the numbers and the starting point right. Months 3 to 6: pull the quick levers. From month 6: the structural ones. Finance does not implement the measures on its own – but it makes them measurable and checks whether the effect actually shows up in the P&L.
Why margin matters in year one
For its Global Private Equity Report 2025, Bain & Company analysed around 760 software buyouts over ten years. 52 percent of value creation came from revenue growth, 42 percent from higher valuation multiples – and just 6 percent from better margins, almost all of it in the best deals.
Two conclusions follow. Nobody can plan for a higher multiple; margin you can plan for. And improving it sets you apart from the average. Then there is the arithmetic at exit: if the business sells at ten times EBITDA, every additional euro of sustainable earnings is worth roughly ten euros of enterprise value. That is why the measures belong in the value creation plan, not on a list of good intentions.
Before the first lever: the baseline
Without a clean baseline you cannot prove any effect. Four things need to be in place before the first measure starts:
- Adjusted EBITDA for the last twelve months, with a bridge that shows every adjustment separately. What may be adjusted is covered in the glossary entry on EBITDA normalisation.
- A month-end close on a fixed rhythm, ideally by working day ten. See the month-end close calendar.
- Contribution margin by customer and product – revenue minus the costs you can attribute directly.
- Personnel costs by function, not just as a total.
The weeks right after closing are covered in detail in The first 100 days.
The action plan
| Lever | What actually happens | What finance delivers | Typical timing |
|---|---|---|---|
| Pricing | Review list prices, cap discounts, use price-adjustment clauses in contracts | Discount analysis by customer, price-volume bridge | Months 3–6 |
| Revenue leakage | Work not invoiced, expired contracts without a price increase, forgotten pass-through costs | Contract-to-invoice reconciliation | Months 2–4 |
| Customer mix | Reprice unprofitable customers or agree minimum volumes | Contribution margin by customer | Months 4–9 |
| Purchasing | Consolidate suppliers, renegotiate, cancel unused software licences | Spend analysis by supplier and category | Months 3–6 |
| People and organisation | Headcount against plan, challenge open roles, review agency and freelancer spend | Monthly headcount reporting | Months 4–12 |
| Overheads | Rent, consultants, insurance, travel | Cost-centre reporting | Months 3–9 |
| Processes | Automate invoicing, collections and bookkeeping | Time and cost per process | Months 6–12 |
| Add-on acquisitions | Remove duplicate costs after a bolt-on | Synergy tracking per measure | Months 6–12 |
Pricing is usually the strongest single lever. McKinsey showed back in 2003 that for an average S&P 1500 company, a 1 percent price increase at stable volumes lifts operating profit by about 8 percent. The figure is old, but the logic still holds: the extra price drops straight to the bottom line with no extra cost.
What is not an EBITDA lever
- Working capital. Collecting faster and paying later frees up cash, not EBITDA. It still matters – see Cutting working capital.
- Moving costs around. Capitalising expenses or generously labelling them as one-offs improves the number, not the business. A buyer will test exactly that at exit – see which adjustments a buyer accepts.
- Cuts that cost revenue. Saving on sales or customer service makes EBITDA rise first and fall later.
The sequence over twelve months
Months 1 to 3: numbers and baseline
Stabilise the month-end close, lock in adjusted EBITDA, calculate contribution margins. First list of measures with a rough estimate of their effect.
Months 3 to 6: quick levers
Pricing, revenue leakage and purchasing. They need no reorganisation, and their effect often shows in the P&L within a few months.
Months 6 to 12: structural levers
Organisation, processes, synergies from acquisitions. At the same time, the budget for year two takes shape – with the measures as a separate line, so their effect does not disappear into the plan.
How finance keeps track
- One list of measures with an owner, expected effect in euros, start date and status.
- A monthly EBITDA bridge: from prior year to actual, measure by measure.
- An effect counts once it is booked – not when the contract is signed.
- One page for the board, every month in the same format.
When outside support makes sense
In year one, finance is often fully busy with reporting to the new shareholder – or there is no CFO yet. An interim CFO can then set up and track the measures until your own team takes over. How nugrow supports portfolio companies is described on the private equity page; day rates by role are on the pricing page.
Frequently asked questions
Which EBITDA levers work fastest in year one?
Pricing, uninvoiced work and purchasing. They need no reorganisation, and their effect often shows in the P&L within a few months.
Does lower working capital increase EBITDA?
No. Collecting faster and paying later improves liquidity, not earnings. Both matter for the valuation at exit, but separately.
Who owns the measures – finance or management?
The business units implement, management decides. Finance measures the baseline, calculates the effect and reports every month what has actually been booked.
How does this differ from the value creation plan?
The value creation plan describes what the investor wants to achieve over the whole holding period. The action plan is the list of concrete steps in year one that get you there.
What does an interim CFO cost for this phase?
At nugrow, CFO support starts at EUR 1,800 per day, excluding VAT. The budget is the day rate times the agreed number of days. A first suitable profile is usually available within 24 hours.
Further reading
- Interim CFO for private equity portfolios – how nugrow supports portfolio companies after the deal.
- The first 100 days after closing – reporting, liquidity and planning week by week.
- Interim CFO in private equity.
- Building a finance team – which roles this work needs.
- Financial due diligence – when the numbers later have to stand up to a buyer.
- Value creation plan and EBITDA normalisation in the glossary.
Sources
Value creation in software buyouts: Bain & Company, Global Private Equity Report 2025 (DealEdge data on 762 software deals over ten years). Margin improvement as a neglected lever for buyout funds: Bain & Company, Global Private Equity Report 2024. Pricing lever: McKinsey Quarterly, “The power of pricing” (2003). Action plan and sequence: nugrow engagement practice. As of October 2026.
