What PE Really Looks For: 10 Metrics You Must Own Before They Walk In

Private equity does not guess. It models. It deconstructs. It prices every risk, calibrates every return. When PE firms walk into a room, they do not look for charisma. They look for clarity. Their thesis is built on control, precision, and replicability. And their questions, though direct, are never random. Every inquiry maps to a fundamental truth: how much risk are we buying, and how fast can we compound it?

For CFOs, this means one thing: control your metrics before PE controls the narrative. In the world of institutional capital, data is not detail. It is destiny. There are ten metrics—not exhaustive, but essential—that PE firms expect not just in spreadsheets, but in conviction. These metrics tell the story of operating leverage, pricing power, capital discipline, and scalable governance. They are the numbers that separate a financial target from a financial partner.

The first is revenue quality. Not just topline, but its texture. PE cares about ARR versus project revenue. Contract length, renewal rate, churn. How much of your future is already bought? They want revenue that repeats. Revenue that compounds. And revenue that does not leave when one customer changes their mind.

Next is gross margin. PE firms don’t just read the number. They read its drivers. Are margins expanding or flat? What lever moves them—pricing, volume, cost of goods, mix? High gross margin with low scalability is a red flag. Moderate gross margin with clear levers is an opportunity. Margins are not fixed. They are engineered.

Third is customer acquisition cost and payback. PE wants to know how long it takes to recover your marketing dollar. They model CAC payback against churn. Against LTV. Against market velocity. They want short loops. They want capital that comes back quickly. Because the faster it returns, the faster it redeploys.

Then comes net revenue retention. The real measure of product-market fit. If customers stay and spend more, the product works. If they churn or downgrade, the story falls apart. NRR above 110% is proof. Below 90% is pain. PE models growth without new sales. They want the machine to feed itself.

Fifth is SG&A efficiency. What percent of revenue does it take to run the business? They want SG&A that scales slower than revenue. That shows leverage. PE firms don’t buy overhead. They buy throughput. Every dollar in SG&A must show a dollar-and-change in return.

Next is cash conversion cycle. Not just how much cash you burn, but how fast you collect. Working capital is a thesis. Can you turn inventory into receivables quickly? Can you delay payables without consequence? PE firms love negative working capital. It funds growth without dilution.

Seventh is EBITDA margin. This is not GAAP purity. It is operational truth. PE firms price off EBITDA. They look for unlevered free cash flow. They model interest, taxes, depreciation as financial levers. But they want to know: how much does it really cost to run this business?

Eighth is capital intensity. How much investment does scale require? PE wants low capex, high ROIC. They avoid models that need heavy fixed investment to grow. Every dollar out is a dollar not compounding. They want returns not just fast, but asset-light.

Ninth is cohort performance. How do customers behave over time? Do they expand? Do they shrink? What is the shape of a cohort at month six, twelve, twenty-four? PE firms buy patterns. Cohort stability shows predictability. Predictability shows maturity.

Tenth is forecast accuracy. PE firms know models are guesses. But they want disciplined guesses. If a CFO misses every quarter, credibility dies. Forecast accuracy is a proxy for operational control. It shows internal accountability. It says: we know what’s coming.

These ten metrics do not guarantee a deal. But they frame the conversation. They create gravity. They shift the dynamic from seller to peer. The CFO who owns these metrics—deeply, confidently, and in narrative form—walks into the PE meeting with posture.

Because in private equity, the deal is not won in the room. It is won in the data. And the CFO who knows this doesn’t wait to be asked. They lead.