All businesses, even the small and medium-size ones, can sometimes get lost in the various data sets and spreadsheets their teams are using. With so much information flying around and very little sharing and collaboration, it’s no wonder that some of them lose productivity and efficiency in their activities. Different functions use different spreadsheets and sometimes even applications, which can leave them disconnected from one another. That’s why it’s important for private equity (PE) firms to implement NetSuite ERP in their portfolio companies.

By giving these businesses access to an Oracle NetSuite ERP platform, they are allowing them full data visibility across their organization. Ultimately, they will have more actionable insights that will let PE firms, their investors, make better and more informed decisions for their growth.

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What is a Private Equity Firm?

Before going through the various ways a PE firm and its portfolio companies can benefit from an ERP, it’s important to understand what a private equity firm is: it’s basically an investment partnership that buys and manages various companies, before going on to sell them.

This says a lot about why a PE firm is committed to seeing their portfolio companies grow: they’re invested in them! An ERP, such as Oracle NetSuite would help them ensure their investments are protected and growing.

Some of the drawbacks of a PE firm not having an ERP in place include:

How can Inventory Management improve your business?

It goes without saying that effective inventory management can help save you money. In fact, we’ve already written about the top tips that can help maximize your savings with efficient inventory management. But here are the benefits provided to you from NetSuite’s Inventory Cloud solution:

Customer Churn Rate (CCR)

The rate customers stop doing business with you. The typical formula would be:

CCR = number of customers churned - (customers who joined and churned) - (customer who churned & returned) in the defined period / number of customers at start of period.

Monthly Recurring Revenue (MRR)

The percentage of lost monthly revenue from downgrades and cancellations in a given period. This is typically calculated as both Gross and Net Revenue, an essential metric to evaluate the financial state of the business. Typical formulas are:

Gross MRR = (Churned MRR + Downgrade MRR / MRR at the end of the previous month) * 100
or
Net MRR = (Churned MRR + Downgrade MRR – Expansion MRR) / MRR at end of last month

Annual Run Rate (ARR)

Forecasts future earning revenue based on historical MRR assuming no changes in churn and expansions. Typically the formula would be:

ARR = revenue in period X * Number of periods of X in 1 year

Customer Retention Rate (CRR)

Measures the number of customers a company retains over time. Typically the formula would be:

CRR = [(number of total customers at end of period X - number of new customers added within period X) / number of existing customers at start of period X] * 100

In addition to churn specific KPIs, subscription-based companies further analyze the state of their customer base by calculating periodic and long term value and cost to get a fuller picture of the health of their business.

Popular SaaS KPIs to consider include Customer Lifetime Value, Customer Acquisition Cost, CAC:LTV Ratio, Net Promoter Score, Payback Period, Annual Contract Value, among others…

Lengthy spreadsheets

As this so-called system of using different spreadsheets and applications continues, it can get more complicated and difficult to maintain. This often leads to loss of control, maintenance and more human errors as different members are manually inputting data.

No data visibility

Without full data visibility and collaboration across different functionalities, investors don’t see what is going on within a company and, ultimately, can’t make informed investment decisions.

Difficult for carve-outs, mergers and acquisitions and divestitures

These are all very common scenarios for PE firms and the companies they invest in. In many cases, when certain functions or activities are broken off from their original company, having access to necessary financial statements allows investors to correctly assess each function and its profitability. This then makes it easier to transfer these processes. It also lets decision-makers manage accesses for certain information.

Too many disconnected software and applications

If a company is using different applications for different functions, their teams are not working together. A software integration would seamlessly connect applications so data flows from one to the other immediately. Nonetheless, NetSuite ERP as the core platform for a firm ensures there’s no interruption in business activities. Also, when it comes to NetSuite for retail or ecommerce, sales and operational teams can continue to offer a positive customer experience.

Boomi integration platform gives you intelligent connectivity and automation so you can effortlessly connect applications for a single source of truth.

How NetSuite ERP Can Help PE Firms Make Better Investment Decisions

The first order of business for a PE firm will likely be a financial statement analysis of the portfolio companies they’re invested in or looking to invest in. There’s often the potential pushback from the companies that may not want to share their financial reports, plus this information may be scattered across different software and manually handled by various teams. It just doesn’t feel reliable and, at this point, can become quite cumbersome for a firm.

NetSuite ERP, specifically NetSuite Accounting Software, can help PE firms extract and assess the financial data they need, such as profit and loss statements or consolidated financial statements. This gives them a more concrete picture of the portfolio company and lets them make accurate investment decisions.

NetSuite ERP in Any Industry

Thanks to globalization and the ability to compete with others in almost any industry, Oracle NetSuite ERP can be used for small businesses just as well as it can be for larger ones. Also used across different industries, NetSuite ERP helps firms track their investments by having real-time access to portfolio companies’ important information, such as:

Operations and performance

Requiring more than just a view of financial data, firms can enter NetSuite ERP to keep an eye on other important metrics. Customized NetSuite dashboards can be created to show KPIs for different teams, namely sales, as well as real-time performance metrics like sales targets and objectives. This sensitive information can be viewed by those working in these specific teams or managed and maintained using limited accesses for others.

Financial management

NetSuite for financial management and accounting is an important element in situations such as carve-outs, M&As or when a portfolio company is being sold. Having full visibility of these financial statements and the assurance that NetSuite can follow the accounting guidelines set for any geographical region is vital to a PE firm’s success.

Resource management

Despite the industry, resource management is important for any portfolio company and the PE firm managing it. From internal IT support to managing inventory to ensure orders can be filled without a hitch or interruption of service, NetSuite ERP provides this data. Also, using an integration, it can be connected to other applications currently being used, such as a CRM.

In general, whether it’s a private equity firm eyeing its investments and portfolio companies, or a manufacturing company that operates on a global scale, any business that relies solely on spreadsheets and manual data entry will eventually start to lag. This slowdown and inefficiency breaks down your business’ productivity and reduces overall profitability.

Find out how NetSuite OneWorld can help you manage your business on a global scale.

This is why your firm should choose a trusted ERP implementation partner that has global experience and expertise in using NetSuite across any industry or region. You’ll get full support from start to finish, including any integrations and connections needed along the way. Plus, you know you have our commitment as we are also invested in the project.

Let GURUS Solutions be your guide in your NetSuite ERP Implementation project. We’ll help you build out a successful implementation plan.

You can also learn more about our GURUS Partner Program here.

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Why Private Equity Firms Should Implement NetSuite ERP

What is a Private Equity Firm?

Some of the drawbacks of a PE firm not having an ERP in place include: