The Manual Tax. Why Industrial Portcos Lag in the Commercial Office
For the last two decades, Private Equity has extracted extraordinary value from the factory floor. Through Lean, Six Sigma, and targeted automation, Operating Partners have mastered manufacturing efficiency. But while the plant is often a showcase of modern engineering, the commercial office of that same portfolio company frequently operates like it's still 2005.
This gap creates what I call the Manual Tax, a silent drag on EBITDA that standard go-to-market playbooks miss because they focus on sales training instead of systemic architecture.
The Lean Paradox
Here's the paradox I see repeatedly in the industrial space:
A company can track a single component through a CNC machine with sub-millimeter precision. That same company tracks its $50M sales pipeline in a patchwork of disconnected spreadsheets.
The plant floor is Lean. The commercial office is bloated with administrative friction.
When sales teams spend more time on data entry than customer engagement, you're paying a Manual Tax. Based on patterns observed across mid-market manufacturers, this tax can erode 2-5% of EBITDA margin through lost productivity and pricing leakage.
Where the Tax Gets Collected
The Manual Tax shows up in three predictable places:
1. The CRM/ERP Disconnect
Legacy ERP systems run the plant, but they were never built to be customer-facing. When your CRM and ERP don't communicate in real time, the result is manual handoffs: sales reps chasing inventory data, relaying outdated order statuses, and burning hours on tasks the system should handle automatically.
2. Spreadsheet-as-System-of-Record
When the CRM is clunky, the real work migrates to Excel. These spreadsheets become silos of intelligence invisible to the PE sponsor. Without clean data flowing through a central system, accurate forecasting becomes nearly impossible, and so does trusting the reported margin during the hold period.
3. The Hero-Led Sales Model
Without digital infrastructure, companies become dependent on "hero" sales reps who carry customer relationships in their heads. This creates massive risk at exit. In 2026, buyers aren't just acquiring a customer list, they're buying a repeatable revenue engine. If that engine requires a specific individual to function, the valuation multiple will reflect that dependency.
2026: The Shift to Agentic Operations
In 2025, the conversation centered on generative AI and chatbots. In 2026, leaders are deploying Agentic AI, autonomous agents that don't just summarize information, they act on it.
These agents bridge the gap between legacy ERP systems and modern CRMs. They can:
Automatically remediate data gaps across tens of thousands or more, of legacy records
Monitor order delays in the ERP and trigger proactive risk mitigation workflows in Salesforce
Sync distributor data into your GTM stack without human intervention
This isn't about replacing people. It's about removing the administrative burden that prevents your commercial team from focusing on revenue growth. Notice the trend here, though, AI won’t replace a human yet - despite the signaling, but it will take highly repetitive tasks off the plate of high-value resources.
Underwriting the Exit
The ultimate goal of any Operating Partner is to de-risk the investment thesis.
By modernizing the commercial engine and eliminating the Manual Tax, you're not just improving today's P&L, you're underwriting the next exit. Buyers in 2026 will pay a premium for industrial assets that can prove their growth is driven by systematized, digital architecture rather than manual heroics.
The first step is a 90-day GTM audit. You need to identify exactly where the Manual Tax is being paid before you can deploy the tools to eliminate it.
