Pricing Is Set. Margin Leaks Anyway.
Walk into most PE-backed mid-market companies and ask about pricing, and you will get a confident answer. The price list was refreshed last year. Increases went out in January. The problem, they will tell you, is the market.
The price list is usually fine. The margin is leaking downstream of it.
Where the leaks live
Pricing realization — the gap between the price you set and the money you keep — erodes in small, unglamorous places. Discount authority that drifted during a soft quarter and never reset. Change orders executed but never billed. Quotes built on cost assumptions that are two years stale. Freight, expedite fees, and surcharges given away by whoever answers the phone. Mix shifting toward products or customers that were never costed properly to begin with.
No single leak is large. That is precisely why they persist. Each one is below the threshold of a board conversation, and the people closest to them have no mandate to close them. Added up across a portfolio company, they are routinely worth several points of EBITDA — sitting inside the register of the 2–10 pts we see across commercial engagements.
Finding them is a measurement problem
The fix starts with instrumentation, not exhortation. Waterfall every meaningful revenue stream from list price to pocket price. Cost every job, site by site, on current inputs. Flag every negative-variance job — work that loses money at the moment it is quoted — and find the pattern. In one platform-wide effort, simply standardizing costing and approval thresholds inside a quote-to-order system cut the negative-variance jobs and compressed quote cycles from 5–10 days to 24–72 hours. Speed and discipline turned out to be the same project.
Keeping them closed is a controls problem
Leaks reopen. Discount drift resumes the next soft quarter unless authority thresholds live in the system, not in a memo. The durable version of this work leaves behind a leakage dashboard the CFO checks monthly, approval gates the sales team cannot route around, and a pricing owner with the standing to say no.
None of this is glamorous. It is also some of the fastest, least risky EBITDA available in the portfolio — no volume assumptions, no market bet, no capex. Just money the company already earned, kept.
Rohit Urankar is an Operating Partner at Meridian Capital & Portfolio Partners, an embedded operating-partner platform for mid-market private-equity-backed companies. Get in touch.