Cost Control Strategies for Private Equity CFOs to Drive EBITDA in 2025

Mastering Cost Control: Strategies for CFOs of Private Equity Firms in 2025 

In private equity, cost control is far more than a back-office task—it is a critical driver of EBITDA growth, a cornerstone of investor confidence, and a key factor influencing valuation multiples. CFOs and operating partners face intense pressure to deliver measurable margin improvements quickly while demonstrating to boards, limited partners (LPs), and potential buyers that these savings are structural, sustainable, and aligned with the overall investment thesis.

This urgency and potential for amplified returns make cost control a strategic imperative, requiring continuous optimization of cost structures and processes to maximize value across the portfolio.

In this blog post, we’ll explore the importance of cost control in private equity, how CFOs can drive EBITDA growth and valuation multiples, and the crucial role of advanced accounting systems and KPIs in this process. Along the way, we’ll share real-world case studies and proven strategies that help streamline cost control and deliver lasting savings you can count on.   

Why Cost Control is Different in Private Equity vs. Corporate Finance 

Accelerated Timelines and Value Creation Pressure

In a corporate setting, CFOs can spread programs across three to five years. In PE, value creation windows are shorter, usually 4–6 years, forcing CFOs to deliver results early in the hold period. Cost initiatives must be sequenced to show both quick wins and structural impact.  

Investor Expectations: Boards, LPs, and Exit Buyers

Unlike public companies, PE-backed firms face layered scrutiny. LPs demand transparency, boards demand accountability, and exit buyers focus on whether savings are sustainable. Temporary cuts are stripped out of QoE analyses, reducing valuations. Structural initiatives — like multi-year vendor contracts or shared services agreements — withstand diligence.  

Linking Cost Control to EBITDA Expansion and Valuation Multiples 

Cost discipline in PE is not just about margin improvement. It’s about expanding exit-ready EBITDA. For example, a $10 million SG&A reduction in a $500 million business, capitalized at 8x EBITDA, can add $80 million in enterprise value. That amplification effect makes cost control the most powerful lever in the CFO’s toolkit.  

Proven Cost Control Methods for Private Equity CFOs 

Top CFOs use proven cost-control levers tailored to private equity realities. Key methods include vendor management, budgeting, and process optimization to reduce expenses and boost profitability.  

Zero-Based Budgeting (ZBB)

ZBB requires managers to justify every expense from zero, eliminating unnecessary costs and stopping “budgetary creep.” For example, a $200 million healthcare company cut SG&A by 400 basis points in one cycle, boosting EBITDA margin from 14% to 18%, adding $8 million annually and over $70 million in enterprise value at a 9x multiple.

ZBB also fosters a culture of discipline, aligning teams with the private equity mindset.  

Procurement Optimization and Cost Minimization 

Vendor consolidation and smarter category management yield significant savings. One PE firm consolidated IT licensing, freight, and raw materials across seven companies, cutting freight costs by 12% and saving $30 million annually, half secured through multi-year contracts.

Procurement teams use unit rate calculations to benchmark suppliers and accelerate value creation, especially in roll-ups.

Shared Services and Back-Office Consolidation

Consolidating redundant finance, HR, payroll, and IT functions reduces headcount and SG&A while accelerating reporting. For instance, a roll-up of five firms cut headcount by 20%, lowered SG&A from 18% to 13% of revenue, and freed finance talent for strategic roles.

Shared services improve cost control and enhance standardization and compliance, boosting investor confidence. 

Working Capital Discipline: Boosting Cash Flow and Controlling Project Costs

Improving receivables, stretching payables, and optimizing inventory unlock liquidity to fund growth or reduce debt. A PE-backed distributor shortened its cash conversion cycle from 75 to 62 days, generating $40 million in free cash flow used for acquisitions without extra equity.

Working capital improvements support both EBITDA expansion and cash generation, offering dual value levers for CFOs.  

Aligning Cost Control with Value Creation

The most effective CFOs understand that indiscriminate cuts can harm competitiveness. Private equity is about expanding EBITDA and improving valuation multiples, not starving companies of growth. The real discipline lies in ensuring every cost initiative is tied directly to the investment thesis and long-term value creation. Disciplined cost control ensures that portfolio companies remain profitable while pursuing growth, maximizing profit margins through precise budgeting and reliable forecasts. 

CapEx Priorization

CapEx discipline is one of the clearest ways to align cost control with strategy. In many portfolio companies, projects are approved because “we’ve always done it” or because of internal politics. A PE-backed CFO must instead apply a capital allocation framework that screens every project through hurdle rates — typically requiring IRRs of 15–20% or higher.

Projects that fail to meet these thresholds are eliminated, freeing capital for initiatives that truly move the needle. CFOs must calculate IRRs and hurdle rates to ensure capital is allocated to the highest-return projects. This not only sharpens ROI discipline but also demonstrates to boards and LPs that capital is being deployed against value-creation priorities rather than legacy habits.  

SG&A Rationalization

SG&A is often a prime focus post-acquisition, but the trick is knowing where the floor lies without undermining growth. PE CFOs must benchmark SG&A levels across industries and portfolio peers.

In industrial companies, SG&A can often be reduced to 12–15% of revenue without impacting competitiveness. In SaaS, where customer acquisition requires heavy investment in sales and marketing, 25–30% is often a more realistic benchmark. By tailoring targets to sector norms, CFOs avoid the common pitfall of pushing for cuts that erode long-term value. Maintaining competitive prices is also essential for preserving market share while controlling SG&A costs.

Reinvestment of Savings

Cost control only creates value when it fuels growth. The most successful CFOs treat savings not as the end goal but as capital to be redeployed into higher-return initiatives.

A healthcare services company that applied ZBB found $10 million in savings across discretionary marketing and underutilized consulting contracts. Instead of banking the entire savings, the CFO reinvested $6 million into digital patient acquisition. That investment drove top-line growth, which magnified the EBITDA impact far beyond the initial savings. By reinvesting cost savings, the company was able to increase revenues and achieve higher profitability, demonstrating how effective financial planning can link cost management directly to revenue growth.

This approach also builds buy-in with management teams. Leaders are more willing to embrace cost discipline when they see the savings being reinvested into growth rather than simply removed from their budgets.  

Linking Discipline to Exit Readiness

Every PE-backed CFO must think ahead to the exit. Buyers don’t just want to see cost improvements on paper; they want to know whether those savings will endure under their ownership. That means embedding initiatives structurally — through multi-year vendor contracts, shared-service agreements, or automation.

When cost initiatives are clearly structural, CFOs can defend EBITDA adjustments during diligence. A firm that demonstrates savings locked into procurement agreements or embedded in technology platforms has a much stronger case than one relying on one-off cuts. It is also essential to document cost control initiatives and savings, ensuring a clear record is available to support exit readiness and due diligence. In this way, cost control doesn’t just deliver in-year savings — it also underpins a higher exit valuation multiple.  

Building the Foundation: Cost Accounting Systems for Private Equity 

A robust cost accounting system is essential for effective cost control in private equity. It equips project managers with real-time financial data to track spending, analyze trends, and optimize costs. Tailored systems help businesses monitor actual versus budgeted expenses and respond swiftly to market changes.  

Selecting and Implementing Cost Accounting Systems

Choosing the right system is crucial. It should handle multiple cost centers, provide real-time tracking of actual and budgeted costs, and offer clear reporting. User-friendly design and thorough training ensure stakeholders can effectively monitor costs and analyze variances, supporting informed decisions.  

Integrating Systems Across Portfolio Companies

For firms with multiple portfolio companies, integrating cost accounting systems provides a consolidated view of costs and performance. Cloud-based solutions enable seamless data sharing and collaboration, improving efficiency and standardizing cost control practices across the portfolio.  

Case Studies: Cost Control in Action

Theory becomes more convincing when applied to real portfolio situations. The following examples highlight how different levers can unlock value across industries.  

• Industrial roll-up: Five portfolio companies consolidated HR and finance functions and renegotiated vendor contracts. Job costing practices were used to track expenses and resources for each consolidation project, ensuring budgets were controlled and performance was monitored. SG&A dropped from 18% to 13% of revenue in 18 months, delivering a $15 million EBITDA uplift. At a 7x multiple, the firm added more than $100 million in enterprise value.
• Consumer goods company: A new CapEx approval process required IRRs of at least 20%. A $20 million plant expansion was rejected, while a $12 million e-commerce fulfillment initiative with a 24% IRR was prioritized. Within two years, e-commerce represented 15% of total revenue growth. 
• Technology services firm: Procurement of cloud infrastructure was centralized across three portfolio companies, reducing hosting costs by 17% and strengthening negotiating leverage with providers.

Each of these examples illustrates the same principle: when cost discipline is tied directly to value-creation levers, it drives not only efficiency but also defensible EBITDA improvement and exit readiness.   

Financial Visibility, Earned Value Management, and Scenario Modeling 

The case studies show how powerful cost control can be when it is tied to value creation. But pulling those levers consistently across a portfolio isn’t possible without visibility. CFOs can’t enforce discipline or defend savings in diligence if they’re operating in the dark. That’s why financial visibility and scenario modeling have become non-negotiable parts of the PE cost-control playbook.

In fragmented portfolios, consolidating financials across multiple ERPs and business units is often the first hurdle. One industrial group that integrated six portfolio companies onto a single cloud reporting platform cut close cycles from twelve days to five. Beyond the efficiency gain, the real impact was predictive: scenario models identified margin erosion two months ahead of reporting, allowing management to renegotiate vendor terms before the problem hit quarterly results.

Dashboards are also transforming board and LP meetings. Instead of presenting static historicals, CFOs now walk stakeholders through real-time “what if” scenarios: 

• What happens to EBITDA if SG&A runs two points above plan?
• How does free cash flow shift if receivables slip by 10 days?
• What is the impact on exit valuation if procurement synergies come in 5% below target?

This level of transparency does two things. First, it builds investor confidence that the CFO is in control of the levers. Second, it gives management teams the foresight to act before issues erode performance.

By 2025, predictive analytics and benchmarking tools are no longer optional. These tools significantly enhance forecasting accuracy, enabling CFOs to make better cost control decisions. They allow CFOs to compare KPIs across portfolio companies, spot underperformers, and prioritize interventions with precision. Instead of relying on lagging indicators, CFOs can manage proactively — and in a PE environment where timing is everything, that distinction can be worth millions at exit. 

The KPIs Every Private Equity CFO Should Track

Every CFO knows that what gets measured gets managed. In private equity, the wrong metrics can create the illusion of progress while masking real risks. The right ones, tracked consistently across portfolio companies, give CFOs a common language with operating partners, boards, and LPs — and directly tie cost control efforts to valuation outcomes. Communicating budget information effectively to all stakeholders is essential for managing expenses, preventing overspending, and ensuring successful cost control. 

The most important principle is that metrics in PE are not just about operational health. They must link back to EBITDA expansion, free cash flow, and exit readiness. Tracking SG&A without tying it to revenue mix or benchmarking against sector peers, for example, tells investors very little about whether the company is outperforming or falling behind.     

Here are the KPIs that matter most: 

These aren’t just dashboard metrics. They are levers that CFOs can pull and defend in diligence.

For CFOs, the challenge is less about knowing these metrics and more about embedding them into management discipline. Leading firms now standardize these KPIs across their entire portfolio, creating a benchmarking ecosystem where outliers are quickly visible. The result is not just operational improvement, but a portfolio that runs on comparable, defensible numbers — exactly what LPs and buyers expect.  

Pitfalls and How to Avoid Them

Even seasoned CFOs can fall into traps when driving cost control across PE-backed companies. The most common mistakes aren’t about miscalculating savings — they’re about undermining credibility, weakening competitiveness, or misaligning with the investment thesis. Recognizing these pitfalls early can save both EBITDA and valuation multiples.   

Short-Termism

The pressure to show quick wins often tempts CFOs to cut too deeply, too fast. Eliminating key R&D projects or underfunding sales may boost EBITDA in year one but erodes growth in year three — exactly when the firm is preparing for exit. Buyers can spot this pattern in diligence, and it usually results in a haircut on valuation.

How to avoid it: Build cost programs with both near-term and long-term horizons, and reinvest a portion of savings into high-return growth initiatives. This demonstrates discipline without starving the company of future upside.  

One-Size-Fits-All Playbooks

What works in an industrial roll-up doesn’t work in SaaS or healthcare. Applying the same SG&A reduction target across a diverse portfolio ignores sector realities. For example, pushing SaaS sales and marketing spend down to industrial benchmarks can choke growth and distort customer acquisition metrics.

How to avoid it: Benchmark by sector and portfolio peers, and tailor targets accordingly. PE boards value savings, but they value credible savings even more.  

Cultural Resistance

Cost control initiatives often stall because operating leaders see them as “PE-driven mandates” rather than tools for growth. In one portfolio company, managers openly resisted ZBB because they believed it was just about cuts. The CFO reframed it as an opportunity to free up capital for digital initiatives, which turned skeptics into advocates.

How to avoid it: Communicate the strategic “why” behind cost programs, involve business leaders in identifying savings, and reinvest visibly in growth areas.  

Data Blind Spots

Without reliable financial visibility, CFOs are forced into reactive firefighting. Monitoring deviations between planned budgets and actual expenses is critical for preventing overspending and ensuring financial discipline. A portfolio with fragmented ERPs may only discover margin erosion after the quarter ends, when corrective action is too late.

How to avoid it: Invest early in reporting consolidation and scenario modeling so issues surface before they erode EBITDA.  

Overestimating Synergies

Procurement and shared services often promise big savings, but without disciplined execution, synergies can fall short. Buyers in diligence will test assumptions — and any gap between projections and actuals damages credibility.

How to avoid it: Underwrite conservative savings estimates, phase implementations realistically, and track execution rigorously.

The unifying theme across these pitfalls is credibility. In private equity, cost discipline that looks impressive in a spreadsheet but fails in execution is worse than doing nothing at all. Boards, LPs, and buyers all reward CFOs who combine ambition with realism and execution discipline.   

Conclusion 

Cost control in private equity is not about slashing budgets. It is about aligning costs with strategy, embedding structural efficiencies, and presenting a credible, defendable story to investors and buyers.

CFOs who deploy ZBB, procurement synergies, shared services, and working capital discipline will not only expand EBITDA but also strengthen investor confidence and maximize exit valuations. Those who embrace predictive analytics and ESG-linked cost initiatives will be positioned to stay ahead of both market pressures and investor expectations.

Ready to strengthen financial discipline and maximize value creation across your portfolio companies?
At Forgestik, we help private equity firms modernize their financial reporting processes with powerful cloud-based ERP solutions. Schedule a free consultation with one of our experts to discover how these solutions can automate financial management, accelerate efficiency gains, and support your growth and value creation objectives.