Lee McCabe Debunks ‘Wish List’ Value Creation Plans in Private Equity

In a recent LinkedIn post, Lee McCabe critiques the common pitfalls of Value Creation Plans (VCPs) within the private equity sphere, arguing that many fall short of being actionable strategies. McCabe contends that most VCPs are merely aspirational documents, lacking the rigorous detail needed to drive tangible results.

McCabe highlights a significant disconnect between the stated goals of VCPs and the practical execution required for value creation. He points out the superficial nature of many plans, which often read like generic directives:

“Most Value Creation Plans are just lists of hopes with formatting. They read like this: ‘Fix pricing. Improve sales. Add AI. Grow faster.’ Brilliant. Someone call the Nobel committee.”

The core of McCabe’s argument rests on the necessity of addressing the ‘boring stuff’ that underpins successful value creation. He elaborates on the essential components that are frequently overlooked:

The Unsexy Details of Value Creation

McCabe emphasizes that effective VCPs must be grounded in concrete data and meticulous planning, rather than relying on vague sentiments. He identifies several key elements that differentiate a robust plan from a mere wish list:

• Baseline Numbers: Insisting on quantifiable data rather than subjective ‘vibes’.
• Specific Timing: Moving beyond broad timelines like ‘Q3’ to detailed, actionable schedules.
• Required Investment: Clearly outlining the costs associated with each initiative, even seemingly minor ones.
• Clear Ownership: Assigning responsibility to named individuals, as vague team accountability often leads to inaction.

According to McCabe, the ‘good’ version of a VCP is characterized by its unglamorous, yet essential, detail. He states:

“What good looks like is painfully unsexy: Each initiative has a P&L impact range, by month, with the assumptions written down. Leading indicators you can see weekly, not a post mortem in the board deck. Named owners with a weekly cadence and a clear ‘done means done’ definition.”

The Impact of Granularity

McCabe illustrates his point with an example from the home services industry. He contrasts a vague objective like ‘improve conversion’ with a detailed, measurable goal:

“In home services, this is the difference between ‘improve conversion’ and ‘raise contact rate from X to Y, cut speed-to-lead to under 60 seconds, move booked rate by Z points, and track it every week by market, channel, and rep.’ Same industry. Same words. Completely different outcomes.”

This distinction, as Lee McCabe argues, highlights how specificity transforms aspirations into achievable targets. He notes that in the current economic climate, where holding periods are extending and multiple expansion is not a reliable strategy, the rigor of a VCP is paramount.

The Spreadsheet Test for VCPs

Ultimately, McCabe challenges the efficacy of VCPs that cannot withstand financial scrutiny. He concludes with a stark warning:

“Holding periods are stretching and multiple expansion is no longer a strategy. So if your VCP can’t survive a spreadsheet, it’s not a plan. It’s a wish list with a logo on it.”

McCabe’s insights underscore the critical need for private equity firms and their portfolio companies to move beyond superficial planning and embrace the detailed, data-driven approach necessary for genuine value creation in today’s challenging market conditions.