Strategy is what you refuse to do.
There’s a question that gets asked in every serious deal committee, usually about twenty minutes into the discussion, and it’s the question that quietly decides whether a business gets a real offer or a polite pass. It’s never phrased the same way twice, and it never gets written down on a slide, but the meaning is identical every time. What is the one move that, three years from now, makes this a different kind of asset? Not what’s the strategy. Not what are the priorities. The one move. The bet. The thing that, if it works, re-rates how the next buyer thinks about everything else.
If the answer to that question is clear, the conversation moves quickly. If the answer is a list of five priorities arranged in a pyramid by a McKinsey alumnus, the conversation also moves quickly, just in a different direction. Towards the door.
Founders rarely think about strategy this way, which isn’t a criticism so much as an observation about what they’ve been trained to do. They’ve been taught that strategy is a planning exercise. You assess the market, identify opportunities, allocate resources, build a roadmap, and then execute against it with discipline. It’s the kind of thing that produces beautifully formatted decks and quarterly reviews that nobody enjoys but everyone agrees are necessary. And it’s the kind of thing that, in private equity, gets you marked down rather than up. Not because PE doesn’t believe in execution. Because PE doesn’t believe that a list of priorities is a strategy. It’s hedging. And being unclear doesn’t move multiples.
The multiple is a function of two things, and only two things really. How the next buyer perceives the risk in the business, and how the next buyer perceives the trajectory. Everything else, every initiative, every operational improvement, every customer win and team build, is only worth something to the extent that it changes one of those two perceptions. A 10% revenue increase distributed evenly across forty product lines doesn’t move either. A 10% revenue increase that proves you can dominate a specific vertical, or strip out a competitor, or convert a low-multiple revenue stream into a high-multiple one, changes the story the next buyer will tell their own investment committee about what you’re worth. Same EBITDA delta. Wildly different impact on price.
The job of strategy, properly understood, is to identify the single bet that does that. And then to organise every dollar, every hire, every quarter, every uncomfortable conversation around making it work. Not as one priority among several. As the priority that everything else exists to serve, or doesn’t get to exist at all.
I learned this watching one of the better operating partners I worked with sit across from a founder who’d just shown us his three-year plan. The plan had nine workstreams. Each workstream had its own owner, its own KPIs, its own quarterly milestones. It was, objectively, a well-built document. The operating partner read it carefully, asked a couple of questions, and then said, with the quiet politeness that PE people use when they’ve already decided something, “Which one of these, if you got it completely right and the others went sideways, would double the value of this business?” The founder couldn’t answer, because the plan was designed not to require him to. It had been designed to spread risk evenly across nine bets, so that no single bet had to carry the company. Which is a perfectly sensible way to run a business if you intend to keep it forever. And a catastrophic way to run a business if you intend to sell it.
What PE does instinctively is the opposite. It identifies the one bet, usually before the deal even closes, and then it builds the entire investment thesis around that bet. The 100-day plan, the operating model, the board agenda, the management incentives, the bolt-on pipeline, all of it points at the same outcome. Margin expansion in a specific segment. Geographic consolidation in a specific region. Repricing a specific customer base. Conversion from project-based revenue to recurring. Whatever the bet is, it’s singular, and everything else either supports it directly or gets quietly defunded. Not killed, necessarily. Just allowed to wither, in the way that things wither when no senior person fights for them at the budget meeting.
The four bets I’ve seen actually move multiples, more or less reliably, are these:
1. A sector consolidation play where the business becomes the buyer rather than the bought, diversifying the revenue base and compounding operating leverage.
2. A margin transformation, where the cost base is engineered down by 200 to 400 basis points without compromising growth, which sounds boring but certainly isn’t, because every point of margin is worth several points of multiple in the right sector.
3. A revenue quality conversion, where some material portion of low-multiple revenue, project work, one-off licences, customer churn, gets re-architected into something the next buyer will pay a premium for.
4. A defensibility build, where a structural moat, a proprietary technology, an exclusive distribution channel, a regulatory position, gets established or deepened to the point where the next buyer underwrites the cash flow with more confidence than they would otherwise. Of course, there are others. But those four are where I’ve seen the biggest valuation deltas come from.
What founders find almost impossible to do, and I include the smart ones in that, is to pick one and let go of the others. Picking one bet feels reckless. Letting go of the others feels like admitting you don’t believe in them. So you keep them all alive, on a low simmer, just in case. And the just-in-case is what eats your strategy. Because every bet that’s running at half-pace is consuming attention, capital, and senior leadership bandwidth that should be deployed against the one bet that actually matters. Founders mistake this for prudence. It’s the opposite. It’s the most expensive thing you can do with a business you intend to sell, because the cost shows up not as a line item, but as a multiple two turns lower than you should have got.
The discipline isn’t pretty when you watch it up close. It looks like saying no to a perfectly reasonable proposal from a senior person who’s been with you for eight years and has built half the business with you. It looks like sunsetting a product that still has loyal customers because the customers aren’t the ones the next buyer is going to underwrite. It looks like declining a market entry that everyone in the room agrees is interesting, on the grounds that interesting isn’t a strategy. It looks like a budget meeting where seven good ideas get refused so that one important idea gets the resources it actually needs to work. Done badly, it feels like cowardice. Done well, it feels like clarity, eventually, after the initial discomfort has passed and people realise they’re being asked to focus rather than to fail.
The test of whether you’ve got a strategy, by the way, isn’t whether you can articulate it. It’s whether you can articulate what you’ve refused to do in service of it, and why. If you can’t name three credible things you’ve turned down in the last twelve months because they would have distracted from the one bet, you don’t have a strategy. You have a list of options. Those are not the same thing, and the people who underwrite businesses for a living can tell the difference in about a minute.
So here’s the reframe I’d offer, for what it’s worth. Strategy isn’t the thing you’re going to do. It’s the thing you’re willing to give up in order to do one thing properly. The founders who win the multiple are the ones who can answer two questions in one sentence each. What’s the bet? And what did you decline to make it work? Everything else is a hobby or a distraction. Hobbies are wonderful and I encourage them. Just not on the income statement of a business you’re eventually trying to sell.
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