How adopting an investor mindset doubled our EBITDA

My clueless banker’s life

I began my career as a corporate banker. Fresh out of school, I thought I had it figured out.

My world was simple: businesses needed capital, bankers provided it, and value was created through leverage.

Of course, outside the banking world, things weren’t so simple.

Some viewed bankers as predators, ready to seize businesses at the first misstep.

But the truth is far less dramatic.

Banks aren't in business to run companies.

They’re matchmakers.

They pair those who have excess capital with businesses hungry for growth.

A banker’s only question is straightforward:

“Can this business reliably generate enough cash flow to repay its debt?”

With that single-minded question, I confidently transitioned into private equity, believing I'd cracked the code.

I quickly discovered I was asking the wrong question.

When private equity invests in a business, their goal isn't merely stable cash flow. It’s the exit.

The entire investment thesis hinges on one critical metric: EBITDA.

A PE firm will buy a company for $30 million with a laser-focused goal to sell it for $100+ million within 3-5 years.

And there’s only one reliable path: aggressively grow EBITDA by expanding revenue while maintaining or improving profitability.

Suddenly, finance wasn’t about looking backward.

It was about aggressively influencing the future.

If you’re still thinking like an accountant, your job is simply to report on what's already happened.

But if you think like private equity, your role becomes shaping what's yet to come.

“To move finance from the back-office to the boardroom, you must shift from an accountant’s mindset to an investor’s mindset.”

Here’s exactly how you do it…

🛠 THE CFO EFFECT PLAYBOOK (Part I)

Step 1: What exactly is the “Investor Mindset”?

To truly understand the investor mindset, let’s briefly peel back the curtain on how private equity really works.

A typical private equity (PE) firm has three critical parts:

• General Partner (GP): Manages the fund.

• Limited Partners (LPs): Institutional investors, family offices, or wealthy individuals with excess cash.

• The Fund: Capital raised from LPs to invest in private companies.

Here's the twist most finance professionals miss:

PE firms aren't rewarded for simply managing money; they're incentivized to dramatically outperform expectations.

Let me show you exactly why.

1. Inside the Private Equity business model

Imagine a PE firm raises a $100 million fund from their LPs, promising them at least a 10% annual return.

For managing the fund, the GP takes a small annual management fee (usually around 1-2%).

But here’s where it gets interesting:

Beyond that 10% baseline return, there's something called carried interest.

Any profits exceeding this threshold typically get split—80% to LPs, and 20% to the GP.

This means the real reward for a PE firm kicks in only after they've surpassed expectations.

No value creation, no significant payday.

No extraordinary results, no future fundraising.

That’s why private equity doesn’t just want to meet budgets.

They’re obsessed with exceeding them.

For PE, good isn’t good enough; exceptional is the standard.

2. Adopting the Investor Mindset in your finance team

A few weeks ago, we discussed value creation and value capture through our CFO Effect framework. If you recall, we made one thing crystal clear:

“Finance isn't about tracking budgets; it’s about relentlessly allocating resources toward maximum returns.”

An investor mindset within your finance team means becoming ruthless about capital allocation and continuously challenging your assumptions.

Let's make this practical.

Say sales start to decline. A typical accountant’s reaction might be:

"Sales are down; we need to lower prices to boost volume."

But an investor mindset reacts differently.

Instead of jumping to solutions, you begin by relentlessly questioning the assumptions behind the problem:

• Is our sales team incentivized correctly?

• Are we generating enough qualified leads?

• Do we have enough salespeople—or too many?

• Is it a lead generation issue or a conversion rate issue?

• Is our pricing aligned with our product positioning?

• Is our product quality exceptional or merely average?

• Are there supply-chain bottlenecks hindering fulfillment?

With the right KPIs in place, the root cause should become immediately obvious.

If it doesn't, you don’t settle. You keep digging until you uncover the fundamental issue.

This is the essence of the investor mindset:

You’re not satisfied until you pinpoint precisely where value can be unlocked.

Ready to apply this mindset? Here’s how to start...

Step 2: The 5 Core Principles of the Investor Mindset

Adopting the investor mindset isn’t just about theory.

It's about systematically embedding five key principles into your finance team's DNA.

Each principle builds on the last, creating a powerful flywheel of strategic value creation.

Here’s how you can immediately implement these principles within your team:

1️. Relentless value creation

Private equity firms don't passively hold assets; they obsessively search for hidden opportunities and cut losses swiftly.

For your finance team, this translates into proactively identifying underperforming activities, assets, or processes and acting immediately to eliminate or optimize them.

Practically speaking, your finance team must:

• Continuously assess: Where is capital underperforming?

• Ruthlessly cut or retool low-value activities.

• Redirect freed resources towards high-leverage initiatives.

2️. ROI-Centric decision making

Investors never rely on gut feelings; they make decisions based on clear data, potential returns, and calculated risks.

This means every decision your finance team makes should explicitly answer these three questions:

1. What’s the expected return? (Quantifiable benefits and financial impact)

2. What are the potential risks? (Clear downside scenarios)

3. What’s the probability of success? (Backed by data-driven analysis)

This disciplined, ROI-first approach ensures capital allocation becomes strategic, rather than merely budget-based.

3️. Active resource reallocation

Most companies treat budgets as static, pre-allocated "buckets" of money.

But here’s the twist:

Budgets assume every dollar is equally valuable, but private equity firms know this simply isn’t true.

In the PE world, money is fluid.

It should flow continuously towards what works and quickly away from what doesn’t.

Instead of locking resources in annual budgets, embrace a culture of rapid reallocation.

Shift resources aggressively from underperforming initiatives towards areas that clearly outperform, creating a true performance-driven organization.

The key insight:

"Resources aren’t allocated; they're reallocated continuously based on real-time performance."

4️. Long-Term vision, short-term urgency

Investors maintain two distinct lenses at all times:

• Long-term vision: Clear strategic objectives and value creation targets.

• Short-term urgency: Rapid execution, experimentation, and immediate responsiveness.

This balance is crucial.

You must never lose sight of your strategic goals, but simultaneously push your teams to quickly experiment, pivot, and capitalize on opportunities as they arise.

Finance teams that embrace investor thinking never settle for slow decision cycles.

They foster a culture that values rapid insights, fast experimentation, and decisive action.

“Think strategically. Act urgently.”

5️. Accountability through ownership

This might be the most underrated, yet critical principle of all:

In private equity, there’s no hiding behind reports.

Every decision-maker has real skin in the game, and every financial outcome has a clear owner.

In your finance organization, you must replicate this same sense of accountability.

Define expectations explicitly, tie each KPI directly to clear responsibilities, and never allow outcomes to become abstract.

Remember our previous newsletter on KPIs and the powerful "5Ws Framework"?

One crucial "W" is Who.

Who owns the outcome, who drives the corrective action, and who bears responsibility for results.

Without explicit ownership, KPIs remain powerless.

Accountability isn't just best practice; it’s foundational to investor-level performance.

 ————————————

By embedding these five principles, you create a culture where finance isn’t just observing the game from the sidelines.

They’re proactively driving outcomes, strategically shaping the future, and generating exceptional returns for your organization.

Ready to put these principles into practice? Here's your tactical roadmap...

Step 3:  Applying the Investor Mindset – Practical framework

By now, you clearly understand the private equity mindset.

But how do you put theory into action inside your organization right away?

Here’s your step-by-step playbook, directly borrowed from top-performing private equity firms.

Each of these four steps introduces powerful new tactics, tools, and frameworks that you can immediately apply to begin transforming your finance team’s impact from passive to proactive.

 Step 1: Run an actual PE-style value audit (The ROI Heatmap)

Private equity doesn't guess; they assess.

They rapidly pinpoint where to optimize resources for maximum returns.

Here’s how to perform your own simple but highly effective ROI Heatmap Audit:

How it works:

1. List all major projects, departments, or initiatives.

2. Score each on two dimensions:

   • Strategic Impact (1-10 scale): Does this drive core strategic objectives?

   • ROI (1-10 scale): Expected financial returns relative to investment.

3. Plot each item on a simple 2x2 Heatmap:

Step 2: Set up investor-quality KPI dashboards

Traditional dashboards typically drown executives in data, obscuring the key metrics that truly matter to investors.

Your dashboards need to be different.

Simpler, clearer, and ruthlessly actionable.

How it works:
Build an "Investor Dashboard" that tracks only the metrics a PE firm would immediately look at after acquiring your business:

• Revenue Growth (YoY, QoQ)

• EBITDA Margin (% and absolute)

• Customer Lifetime Value vs. CAC (Ratio and trend)

• Cash Conversion Cycle (CCC improvement targets)

• Productivity per Employee (Revenue/FTE)

• Strategic Initiative ROI (actual vs. forecast)

Include concise, plain-language explanations directly next to each metric that highlight performance vs. target.

Step 3: Install quarterly ROI checkpoints

Instead of typical monthly meetings, implement structured "Quarterly ROI Checkpoints".

Rigorous investor-style deep dives where managers must answer specific questions that reveal genuine business health and strategic direction.

Sample "Quarterly ROI checkpoint" questions:

1. What were the top 3 value-driving initiatives this quarter?

   • What were the specific returns versus expectations?

2. Which investments failed to meet ROI expectations? Why?

   • What immediate corrective actions have been taken?

3. If we were an external investor, would we still fund each ongoing initiative today?

   • If not, why are resources still being allocated?

4. Which emerging opportunities have the potential to deliver outsized ROI next quarter?

   • What actions must we take immediately to seize these?

📌 Step 4: Launch a bi-annual "Value-Creation Workshop"

PE firms regularly hold intensive sessions to uncover untapped opportunities within portfolio companies.

Replicate this best practice by introducing a structured "Value-Creation Workshop," a powerful cross-functional event designed specifically to foster collaboration, break silos, and identify fresh levers of growth.

Suggested workshop agenda (half-day):

 Quick implementation checklist:

Here’s your immediate action summary to implement these powerful new tools this month:

• Schedule your first ROI Heatmap audit within two weeks.

• Launch a pilot Investor Dashboard immediately. Focus on no more than 5-6 critical metrics.

• Plan your next Quarterly ROI Checkpoint for this quarter-end. Prepare managers with key investor questions in advance.

• Calendar your first bi-annual Value-Creation Workshop with cross-functional leaders to occur within the next 30 days.

You’ve now moved from passive financial management to proactively creating strategic value. The best part is that you’ve only just begun…

Ready to see how this actually looks in the real world? Let’s explore a concrete case study next

Step 4:  Real-life example – How we doubled our EBITDA by adopting an investor mindset

Last year, we launched an exciting new product line.

From a marketing perspective, it was an instant home run: customers loved it, sales surged, and the buzz was overwhelming.

But from a profitability standpoint, it was a disaster.

Behind the scenes, rapid growth quickly spiraled into chaos.

We weren't managing a successful business, we were fighting fires, desperately throwing money at problems.

After three stressful months of constant firefighting, I sat down with the owners and delivered a stark message:
"We need to stop the bleeding. Immediately."

We took a step back and began thinking like private equity investors, asking ourselves:
"If an investor bought our company today, what would they immediately address?"

The first step was clear; a rigorous, strategic audit of every expense in the business.

We quickly identified 5 critical expense categories that represented over 80% of our total spending.

We dove deep, challenging every assumption and ruthlessly hunting for hidden value.

What we discovered surprised even us:

✅ Shipping & Warehousing Costs:
We replaced legacy logistics providers with a new strategic partner, instantly reducing our shipping and warehousing costs by a remarkable 30%.

✅ Inventory Management:
We implemented tighter inventory controls and leaner processes, substantially boosting our inventory turnover rate and slashing costly warehouse fees.

✅ Marketing ROI:
We aggressively reallocated marketing dollars from lower-return activities into higher-ROI initiatives, immediately improving our customer acquisition efficiency.

✅ Repurposing Marketing Samples:
We turned marketing samples (previously discarded at massive expense) into profitable revenue streams, recovering hundreds of thousands of dollars in the process.

✅ Strategic Product Bundling:
We completely restructured our product bundles, shifting from volume-driven bundles to profit-focused bundles, directly enhancing margins.

✅ Pricing Strategy Overhaul:
We strategically adjusted our pricing model, aligning it clearly with value perception, improving our profitability without compromising market share.

✅ Customer Service Transformation:
Perhaps most significantly, we transformed our customer service team from a reactive cost center into a proactive profit center. They became experts at saving abandoned carts and systematically upselling customers, driving incremental revenue.

Each of these initiatives individually was impactful, but together, their effect was nothing short of transformational.

These investor-inspired changes didn’t just incrementally improve our numbers.

They completely transformed our financial performance.

Our EBITDA doubled.
Yes, you read that correctly: doubled compared to the previous year.

This experience reinforced a fundamental truth I want every finance professional to embrace:

When you adopt an investor mindset, finance stops being a spectator sport and starts becoming your company's most strategic value creator.

Bonus: Common pitfalls

Even great finance teams stumble when adopting the investor mindset.

Here are three traps you must actively avoid, along with practical strategies to sidestep them completely:

 1. Budget fixation

Pitfall: Becoming overly attached to historical budgets.
Why it hurts: Historical budgets anchor your thinking to past decisions, limiting your ability to seize new, high-ROI opportunities.

Solution:

• Conduct regular, objective "clean-sheet" evaluations of your initiatives based purely on ROI, not on how resources were historically allocated.

• Foster a culture where your team actively expects resource reallocation, not static budgeting.

2. Short-term thinking

Pitfall: Prioritizing short-term gains at the expense of long-term value creation.
Why it hurts: Short-termism might boost immediate numbers but will eventually erode strategic growth, making sustained success impossible.

Solution:

• Balance immediate execution with explicit long-term goals clearly communicated and revisited quarterly.

• Ensure your KPIs and incentive structures reward strategic growth, not just quarterly targets.

3. Weak accountability

Pitfall: Failing to establish clear ownership and accountability for outcomes.
Why it hurts: Without explicit accountability, nobody truly feels responsible, causing your investor mindset to quickly fade away.

Solution:

• Clearly assign every major outcome to an accountable owner. Someone who knows exactly what's expected, by when, and how results will be measured.

• Reinforce accountability consistently through your monthly and quarterly reviews, ensuring everyone understands the tangible stakes involved.

What I love about thinking like a private equity is that it’s not about cutting costs.

It's about relentlessly focusing your resources on where they generate maximum value.

And my friend, this is how you transform finance from a support function into a true strategic force driving your company's future.

You can start right now.

Next Week’s Episode:

🔜 Forecasting in Chaos – Why Adaptability Beats Accuracy

In finance, accuracy feels reassuring, but when markets shift overnight, rigid forecasts become useless.

The real competitive advantage isn't predicting the future perfectly, it's responding to change swiftly.

Next Sunday, I'll reveal exactly how modern finance leaders:

✅ Build adaptive forecasting systems that thrive on uncertainty
✅ Shift from static predictions to dynamic scenario planning
✅ Develop flexibility as a strategic muscle (not a reactive scramble)

Because the goal isn't perfect predictions; it's perfect adaptability.

If you want your finance team to confidently guide your business through uncertainty, volatility, and chaos, you can't afford to miss this.

Talk soon,