Key takeaways
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Operations performance & improvement activity is up 57% YoY, according to the BluWave Activity Index, comparing January to mid-September 2026 to the same time in 2025.
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The first thing a lower-middle-market sponsor buys is a diagnostic, not a program. Judge every provider on what that diagnostic will produce.
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Qualified providers look identical on paper. Direct experience in the portfolio company’s sub-sector is what separates them.
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Before you sign, ask how savings get tracked to the P&L. Run-rate is not realized.
Lower-middle-market PE firms get the right operational improvement resource by buying a diagnostic first and choosing the provider on what that diagnostic will produce, not on the methodology they sell. At this scale, the partner who owns the deal usually owns this decision too, because there is often no operating partner to hand it to.
More sponsors are making that call. Operations performance & improvement activity is up 57% YoY, according to the BluWave Activity Index, comparing January to mid-September 2026 to the same time in 2025. The backdrop explains the lift in demand. Debt costs more than it did when most current holds were underwritten, so the plant floor is carrying more of the return. McKinsey’s analysis of more than 100 PE funds with vintages after 2020 found that general partners focused on value creation through asset operations earned internal rates of return up to two to three percentage points higher, on average, than their peers.
From where I sit in Research and Operations, the sponsors who get this right treat sourcing and scoping as one problem.
What should an operational diagnostic produce?
A good diagnostic produces a sequenced set of EBITDA levers, each sized and weighted for risk, tied to the value creation plan. The output names the three to five levers to pull first, what each is worth, how confident the provider is in that number, and what each will ask of the management team.
The diagnostic is a real, priced phase. We've seen in our projects across operations performance and improvement the typical lengths of engagements: 4–6 weeks for a focused diagnostic, 3–6 months for a targeted lever such as labor productivity or layout, and 6–12 months for a full lean program across multiple sites. A diagnostic that comes back as a list of 40 initiatives with no order has skipped the part you paid for. The sequence is the deliverable.
Why is the diagnostic harder in the lower middle market?
The diagnostic assumes infrastructure a lower-middle-market portfolio company often lacks: clean operating data and a middle-management bench. Many have no continuous improvement function at all. Founder-era habits fill the gaps, and the routings tend to live in a supervisor’s head rather than the ERP.
Benchmarks built on large plant networks mislead here. So do providers who have only worked alongside an internal CI team; they will spend your first month building the data their method expects. The lane is also wider than the plant floor, running from dispatch standardization in distribution to revenue-cycle process mapping in healthcare services. Ask any provider how they work when the data is thin and the operation is not a factory.
Where do operational improvement resources come from?
Four sources cover almost every lower-middle-market situation, and each fits a different gap.
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The portfolio company’s own team. Right when the lever is known and someone has the capacity to run it. At this scale, capacity is usually the constraint.
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The sponsor’s network. Former operators and advisors the PE firm already trusts. Fast and credible, and thin the moment the portfolio company’s sub-sector is new to the sponsor.
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Generalist consulting firms. Strong frameworks and program management. The risk is a team learning your sub-sector on your hold clock.
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Specialist operators through a vetted network. Former plant managers and operations executives who have run the kind of business you own. BluWave connects PE firms and portfolio companies with this bench across its operations and performance improvement practice.
Most sponsors use more than one. The mistake is using the one that happens to be closest.
How do you tell a real operator from a polished deck?
Ask what their last diagnostic produced, whether they have run your specific sub-sector, and how they tracked savings to the P&L. The answers separate practitioners from presenters faster than any certification.
From websites and profiles, qualified providers look the same. On a recent BluWave calibration call for a food manufacturing target, the candidate firms read as interchangeable until one detail surfaced: a practitioner who had spent 30 years inside the target’s specific processing niche. The credential, not a methodology slide, moved that firm to the front of the conversation.
Put these questions to every provider on your list:
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Walk me through a recent diagnostic, blinded. What were the levers, and in what order?
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Who walks the floor, and have they run this kind of operation?
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How do you separate run-rate from realized savings, and which general ledger accounts will you map them to?
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What does month seven look like after you roll off?
Answers that should worry you: a methodology name offered in response to the first question, a partner who sells and an analyst who shows up, or “savings identified” as the headline number. If you run the portfolio company, ask the same questions. The diagnostic consumes your team’s time, and you live with its sequence.
“Sponsors rarely open a call asking for lean or a diagnostic. They tell us what closed and what the business does. The best move a partner can make is to describe the problem in that language and let the match follow the problem, not the method.”
—Scott Bellinger, VP, Revenue, BluWave
Do you need an improvement consultant, an interim COO, or operations diligence?
The point in the deal lifecycle decides it. Operations diligence is pre-close work on the deal team’s clock. An improvement consultant is post-close, for the diagnostic and the method. An interim COO is for the case where the operating seat itself is open.
Blurring them is the most expensive error in this lane. A diligence expert who validates throughput before IC is rarely the right person to run a 100-day plan. A consultant cannot fill an empty seat, and an interim executive is not a methodology. The line is getting harder to hold, because operating partners are increasingly pulled onto deal teams before signing and the 100-day plan starts before close. Decide who owns the diagnostic before the ink is dry.
Are you in the first 100 days post-close and need a guide to help you make the decisions that will return the most value? Check out our 100-Day Value Creation Playbook.
How do you know the savings reached the P&L?
Require the provider to baseline every initiative, map it to specific general ledger accounts, and report the expected change and the absolute P&L line together every month. Run-rate savings are annualized if sustained. Realized savings are in the P&L.
Tracking the expected change and the absolute P&L value together keeps savings promised in a meeting from vanishing before the bottom line. An operating partner stops reading at an improvement percentage with no baseline. Your proposal review should stop there too.
Who owns the improvement after the consultant rolls off?
Someone inside the portfolio company, named before the engagement starts, with a management operating system to run it. Without that owner, most improvement programs drift back toward where they started once the outside team leaves.
Write sustainment into scope: daily management, tiered huddles, KPIs that cascade from the floor to the board deck, and methodology transfer as a dated deliverable. Once introductions are made, buyers often find the candidates are all strong and the decision comes down to scope and price. Scope is where month seven gets decided.
Put the diagnostic in motion
If a portfolio company’s margin in the model is not showing up on the floor, share the need with BluWave. The team will scope the diagnostic with you and make introductions to vetted operations specialists within 24 hours, at no up-front cost. I am happy to compare notes on what the first four weeks should produce.
Frequently asked questions
What should an operational diagnostic produce, and how long does it take?
A focused operational diagnostic typically runs 4–6 weeks and should produce a sequenced set of EBITDA levers, each sized and risk-weighted, tied to the value creation plan. The output names the three to five levers to pull first, the value of each, the provider’s confidence in that value, and the demand each places on management. A long list of initiatives with no order is not a finished diagnostic.
How do you sequence improvement initiatives when a diagnostic returns dozens of them?
Rank each initiative on two tests: EBITDA impact and executability with the team you actually have. Start with the three to five that score well on both, and push the rest into later waves. At a lower-middle-market portfolio company, management bandwidth is usually the binding constraint, so an initiative the team cannot run this quarter moves down the list regardless of its size.
What questions should you ask an operations improvement provider before engaging?
Ask to see a recent diagnostic, blinded, including the levers and their order. Ask who will walk the floor and whether they have run your sub-sector. Ask how they separate run-rate from realized savings and which general ledger accounts they will map them to. Ask what month seven looks like. Vague answers on any of these are a reason to keep looking.
How do you know operational savings actually reached the P&L?
Baseline every initiative before work starts, map each one to specific general ledger accounts, and track the expected change alongside the absolute P&L line each month. Run-rate savings are annualized if sustained; realized savings are already in the P&L. Any proposal reporting “savings identified” without that tracking plan is reporting activity, not results.
Who owns operational improvement after the consultant rolls off?
A named leader inside the portfolio company, chosen before the engagement starts. The owner needs a management operating system to run: daily management, tiered huddles, and KPIs that cascade to the board. Methodology transfer should be a dated deliverable in the scope of work. Without an owner and a system, improvement programs tend to revert once the outside team leaves.
Our sponsor wants outside operations help. What should we ask for?
Ask for a scoped diagnostic before any implementation commitment, with a named deliverable: a sequenced set of EBITDA levers your team can execute. Ask for a provider who has run your kind of operation. Then ask for savings tracking mapped to your general ledger and sustainment in scope with a date. Asking this way protects your team’s time and gives the sponsor a plan it can defend.
