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A messy, poorly organised data room during a deal process gets treated, understandably, as an inconvenience, something that slows diligence down and creates extra work for everyone involved. 

What it’s actually telling you, if you read it as a signal rather than just an obstacle, is usually more valuable than the inconvenience suggests. 

A data room’s quality is rarely just about data room quality. It’s a fairly reliable proxy for the underlying discipline of the finance and operations function more broadly, because a business that maintains clean, consistent, well-documented reporting as a matter of routine tends to produce a clean data room almost as a side effect, without much special effort dedicated to the data room specifically. 

A business that produces a chaotic, inconsistent data room, multiple versions of the same metric calculated differently in different places, missing documentation, ad hoc analysis assembled specifically and hastily for the process, is usually telling you that this same chaos exists in how the business runs day to day, not just in how it’s being presented for a deal. 

This matters beyond diligence itself, because the same underlying disorganisation that produces a messy data room tends to produce operational friction after close too, slower decision-making because nobody’s confident in the numbers, more time spent reconciling conflicting reports, more surprises discovered after ownership than diligence managed to catch. 

A clean data room isn’t just easier to work through, it’s meaningful evidence about the operational discipline you’re actually buying. 

The practical implication for anyone in a deal process: treat data room quality as a genuine diligence signal in its own right, not just an administrative hurdle, and be more, not less, cautious about a target whose data room quality is meaningfully below what the rest of the business narrative would suggest it should be. The gap itself is the information.

Quality of earnings reports get commissioned as a matter of routine in most deal processes, and they get read, mostly, for the headline adjustment number, the bridge from reported EBITDA to normalised EBITDA. 

What gets read far less carefully, and matters considerably more than most people give it credit for, is the detail underneath specific adjustments, because that detail is where the genuinely useful operational insight actually lives. 

A quality of earnings report that flags a one-time cost addback for a specific system migration, for instance, is telling you something more useful than just “add this back to EBITDA.” 

It’s telling you the business had a system that needed migrating, which is itself a signal about the state of the underlying infrastructure, and it’s worth asking what else in that infrastructure might need similar investment that hasn’t yet been flagged as a one-off cost because it hasn’t happened yet. Similarly, a revenue adjustment relating to a customer concentration issue is telling you something about customer diversification risk that’s worth understanding well beyond the specific number being adjusted. 

The habit worth building, whether you’re the one commissioning the QoE report or the one receiving it as an operating partner post-close, is reading past the headline bridge into the specific line-item commentary, and asking, for each significant adjustment, what it implies about the underlying business beyond the immediate number. 

The report itself usually contains more operational intelligence than the topline adjusted EBITDA figure suggests, and most of that intelligence goes unused because attention stops at the summary page.

Exit readiness gets treated, in most portfolios, as something that starts roughly a year before a planned sale process, when advisors get engaged and the data room starts getting assembled properly. 

By the time that work starts, most of what actually determines how the process goes has already been decided, quietly, over the preceding two years, by decisions nobody was making with an exit specifically in mind. 

The clean, defensible metrics that survive a buyer’s diligence team, the ones discussed in the NRR piece above, aren’t something you build in the run-up to a sale. They’re something you either have been building consistently for years or you’re scrambling to reconstruct under serious time pressure, and reconstruction under time pressure rarely produces numbers a buyer’s advisors find convincing. 

The same is true of management team depth. A buyer evaluating whether the business is genuinely resilient beyond one or two key people is looking at hiring and succession decisions made two or three years earlier, not anything that can be fixed in the twelve months before a process starts. 

The practical implication is that exit readiness isn’t a phase, it’s a lens that should quietly inform ordinary operating decisions from fairly early in the hold. Not by running the business as though a sale is imminent, that produces its own distortions, but by asking, periodically, whether a given metric or a given management decision would hold up to genuinely sceptical outside scrutiny, and treating any gap that surfaces as worth closing now rather than later. 

Two years before a sale process starts is roughly when it stops being possible to fix the things that matter most, which is exactly why it’s worth thinking about that far ahead, even when a sale itself feels a long way off. 

“Founder-led sales” shows up in almost every early-stage CIM as a positive, and it usually is one, right up until it becomes the single biggest risk in the deal. 

It’s genuinely a good sign early on. A founder who can sell the product themselves has proven there’s real demand, and founder-led sales often produces better win rates and shorter cycles than a professionalised sales team would manage at the same stage, because the founder brings credibility and conviction a hired rep can’t fully replicate. The CIM isn’t wrong to flag it as a strength. 

The problem is what it implies about repeatability, which the CIM usually doesn’t spell out as clearly. A sales motion that works because of one specific person’s relationships, credibility, and instinct is not the same thing as a sales motion, and the two get conflated constantly in early diligence. 

The real question isn’t whether founder-led sales has worked, it obviously has, revenue exists. The question is whether anyone has actually tried to replicate it with a second person, and if not, why not. 

The honest answer, more often than anyone wants to admit at the point of a deal, is that nobody’s tried yet, because it’s been easier to keep leaning on the founder than to build the harder thing underneath. That’s fine as a starting point. It’s a real problem if the growth plan assumes scaling revenue without ever addressing how the sales motion becomes less dependent on one person. 

The test worth applying before treating founder-led sales as validated rather than merely present: has a second salesperson, ever, closed a deal of comparable size using a comparable process, without the founder in the room. 

If the honest answer is no, the growth plan needs to include building and proving that motion as an explicit early milestone, not an assumed consequence of hiring more sales headcount.

Add-on acquisitions are a genuinely good strategy, which is exactly why they’re so easy to get wrong. 

The logic is sound often enough that people stop interrogating it case by case, and that’s when the bad ones slip through. 

The pattern I keep seeing: a bolt-on gets pitched on revenue synergy that assumes cross-sell will happen roughly the way it does on the slide. 

Combined customer base, combined product suite, obvious upsell opportunity. What the slide doesn’t model is that cross-sell motion has to be built, not assumed, and building it usually requires sales team retraining, product integration work, and often a repricing exercise, none of which show up as a cost in the original deal model because they weren’t really costed, they were assumed away. 

Eighteen months later, the acquired business is still operating largely as a separate unit, the cross-sell numbers never materialised because nobody actually built the motion, and the combined entity is now carrying two sets of overhead for the revenue benefit of one. This isn’t a failure of the underlying logic, it’s a failure to plan for the fact that synergy is a project, not a consequence. 

The question worth asking before any add-on gets approved, and the one that gets skipped most often under deal timeline pressure: who specifically owns building the cross-sell motion, what does month one of that actually look like operationally, and what does the model assume happens for free that will actually require dedicated headcount and time.

If nobody can answer that with specifics, the synergy case is a hope, not a plan, and hopes are exactly the thing that look great in the deck and evaporate by year two.

Diligence teams are good at the things diligence teams are built to check. Financials, contracts, customer concentration, legal exposure. 

What they’re structurally not good at is anything that only shows up when you’re actually running the business day to day, because six weeks of data room access doesn’t replicate that no matter how sharp the team is. 

The pattern I see most often, talking to people who’ve come in post-close to clean things up, is a gap between what the numbers say and what the operating reality is underneath them. 

A company can show healthy gross retention on paper while quietly propping it up with discounting that never made it into a clean cohort analysis. A company can show strong logo growth while masking that half the new logos came through a channel partner relationship that’s about to end. None of this is fraud. It’s just the kind of operational nuance that doesn’t survive being compressed into a data room spreadsheet, and diligence teams working against a tight timeline can only dig so deep into any one thread. 

The other consistent miss is culture and capability at the layer just below the management team presenting to you. Diligence talks to the CEO and CFO extensively. It rarely gets meaningful time with the VP of Sales or Head of Customer Success, the people who actually know whether the growth story is repeatable or whether it’s been carried by two exceptional individual performers who could leave at any point. That gap is invisible in a data room and glaringly obvious three months into ownership. 

If you’re the one walking in post-close, the fastest way to close this gap isn’t more analysis of the numbers you already have. It’s structured conversations with the layer of the organisation diligence didn’t have time to reach, asking specifically what’s propping up the numbers that isn’t visible from outside. 

People at that level are often surprisingly candid, partly because nobody’s asked them directly before, and partly because they’ve usually been waiting to tell someone. 

There’s a specific, uncomfortable moment that comes up in most holds at some point: the CEO has a growth story they genuinely believe, and the numbers, looked at carefully, don’t actually support it. 

Handling this well is one of the harder skills in the operating partner toolkit, because getting it wrong in either direction, too soft or too blunt, tends to cost you something you need for the rest of the relationship. 

The mistake on the soft end is raising the concern so gently, hedged with enough qualifiers, that the CEO doesn’t actually register it as a serious challenge to their thesis. 

This feels kind in the moment and is genuinely unhelpful, because the CEO walks away from the conversation still believing the story holds, and the actual disagreement resurfaces later, in a worse form, once the numbers have made the gap undeniable to everyone. 

The mistake on the blunt end is presenting the disagreement as a verdict rather than an open question, “the numbers say your story is wrong,” rather than “here’s what I’m seeing in the numbers that I can’t reconcile with the story, help me understand it.” The second framing invites the CEO into genuinely examining the gap with you. The first framing invites defensiveness, because it positions you as having already decided they’re wrong, and very few people update their view constructively from that starting position, however sound the underlying analysis actually is. 

The version that tends to work best treats the conversation as a joint investigation rather than a challenge. Bring the specific numbers, be precise about exactly what doesn’t reconcile, and frame it explicitly as something you want to understand rather than something you’ve already concluded. 

Sometimes the CEO has context that resolves the apparent gap and the growth story was fine all along. Sometimes the conversation reveals the story genuinely doesn’t hold, and having got there together rather than through a delivered verdict, the CEO is far more likely to engage constructively with revising it. 

A founder who’s sold a controlling stake but remains operationally involved, in some capacity, is one of the more common and more delicate situations an operating partner encounters, because the founder’s continued presence is often genuinely valuable, deep product knowledge, real customer relationships, real credibility with the team, while also frequently being the source of exactly the friction that slows the plan down. 

The instinct, when a founder is visibly resisting a change the plan requires, is often to treat it as a control problem to be managed or overcome. This usually escalates rather than resolves the situation, because a founder who feels they’re being managed out tends to dig in harder, sometimes overtly, more often through quieter forms of resistance that are considerably harder to address directly because they’re never quite explicit enough to confront head-on. 

The more effective approach, in most cases, starts from genuinely understanding what the founder is actually protecting, which is often not what it appears to be on the surface. Resistance to a specific operational change is frequently really about something else, concern about the culture the business is known for, concern about specific employees the founder feels loyal to, or simply difficulty letting go of a level of day-to-day involvement that’s been core to their identity for years. Addressing the surface-level resistance directly, without understanding what’s actually underneath it, tends to produce compliance without commitment, which shows up later as slower execution or quiet reversion once attention moves elsewhere. 

The practical approach worth trying before escalating to a more adversarial conversation: have a genuinely open conversation with the founder about what they’re actually worried about, separate from the specific change being resisted, and look for ways to address that underlying concern directly, even if the specific operational change still needs to happen. Founders who feel genuinely heard on what they actually care about tend to become considerably more flexible on the specific mechanics, even when the mechanics themselves haven’t changed at all. 

Incentive structures get set once, usually near the start of a hold, and then rarely get revisited with genuine scrutiny until something’s clearly gone wrong, at which point the fix is reactive rather than preventative, and considerably more disruptive than a periodic review would have been. 

The most common problem isn’t that incentive structures are poorly designed at the outset, most are reasonably sensible given what was known at the time. The problem is that the business changes, priorities shift, and the incentive structure quietly stops matching what the business actually needs, without anyone deciding to change it, simply because nobody scheduled a moment to check. A sales incentive structure built around new logo acquisition, entirely sensible in year one, can become actively counterproductive in year three if the growth plan has shifted toward expansion revenue and retention, because the sales team is still being paid, in practice, to prioritise exactly the behaviour the business no longer needs most. 

The tell that this drift has happened is usually visible before anyone formally reviews the incentive structure, if you’re looking for it. Behaviour that seems individually rational for the people involved but collectively unhelpful for the business, a sales team chasing new logos in low-value segments while ignoring higher-value expansion opportunities, a customer success team optimising for satisfaction scores in ways that don’t actually correlate with retention, is usually a symptom of an incentive structure that’s drifted out of alignment with what the business currently needs, not a symptom of the people involved lacking judgement. 

The practical discipline: review incentive structures against current strategic priorities on a genuine, scheduled cadence, not just when a problem becomes visible enough to force the conversation. An incentive structure that made sense a year or two ago deserves active reconfirmation that it still makes sense now, rather than an assumption that it does simply because nobody’s complained yet. 

There’s a specific hiring pattern worth watching for in portfolio companies, because it shows up often enough to be a genuine pattern rather than a coincidence: the hire who looks like the safest, most obviously qualified candidate on paper is frequently not the one who ends up making the biggest difference, and the hire who generates some internal hesitation, usually because their background doesn’t match the role as cleanly as expected, is disproportionately likely to be the standout a year later. 

The reason this happens isn’t mysterious once you notice it. 

Portfolio companies at a certain stage often need someone who can build a function largely from scratch, with genuine ambiguity about scope and no established playbook to follow, rather than someone who can competently run an already well-defined process. 

A candidate whose CV shows a long track record in a similar, well-established role at a larger company often demonstrates competence at exactly the wrong thing, running a mature process well, rather than the thing actually needed, building a function under real ambiguity. Meanwhile a candidate with a slightly unconventional background, someone who’s built something from nothing before, even in a different context, often carries exactly the muscle memory the role actually requires, and gets passed over in the first screening round because their CV doesn’t pattern-match as cleanly to the job description. 

This isn’t an argument for hiring recklessly or ignoring genuine red flags. 

It’s a specific caution about a specific bias: when a hiring panel’s hesitation about a candidate is really hesitation about pattern mismatch rather than a genuine competence concern, that hesitation is worth interrogating rather than automatically trusting. 

The safest-looking hire on paper is sometimes exactly that, safe, and safe is not always what an early-stage portfolio company function actually needs.