Unlocking Higher EBITDA Through Optimized Site Speed

Private equity firms don’t often get into the digital marketing weeds — but they’ll want to be aware of how small changes (like improved site speed) can make a big impact on the bottom line.

Navigating the digital landscape might not be second nature for many in the private equity sector, but the correlation between digital optimization and enhanced EBITDA is undeniable. We’ve even written about how small adjustments to digital content (webpages, landing pages, ads, blog posts, etc.) can make a significant impact on the EBITDA of your portfolio companies.

Today, we want to look at site speed, which is a factor that most companies overlook. 

Site speed is exactly what you think: How fast (or slow) does your website load for visitors? 

Here’s what you may not know: Site speed directly impacts the bottom line of your portfolio companies, including EBITDA. Research indicates that 1 in 4 visitors will leave a site if it takes 4-plus seconds to load. Satisfaction drops 16% for every 1 second a user waits. And 70% of consumers admit that site speed influences whether or not they will purchase from an online retailer.

Private equity firms rarely get into the digital marketing weeds like site speed. But your portfolio companies must use every lever available to increase financial health and maximize their attractiveness as acquisition targets.

At Aux Insights, we live and breathe digital marketing strategies and tactics that make a real difference in the value of portfolio companies owned by private equity firms. If you’d like help optimizing the digital presence of your portfolio companies and ensuring their EBITDA reaches its full potential, we’re here to help. 

Contact us to schedule a brief consultation, and forward the following site-speed-accelerating tactics to the marketing teams of your portfolio companies.

How Site Speed Affects EBITDA

Let’s look at a concrete example of how site speed can affect the EBITDA of your portfolio companies. Imagine your firm has invested in a company with traditional performance that looks like this:

• $100,000 media spend

• 200,000 site visitors

• 4% purchase conversion rate (8,000 purchases)

• $100 average order value ($800,000 site revenue)

• 70% gross profit margin ($560,000)

• $100,000 fixed costs

• $460,000 EBITDA

Focus on the 4% purchase conversion rate, which site speed influences. If the speed of your site slows, the purchase conversion rate falls. If the speed of your site accelerates, the purchase conversion rate climbs.

For example, a site-speed-related increase to a purchase conversion rate of 4.1% also increases EBITDA by $14,000 to $474,000. A jump to 5% increases EBITDA by $140,000 to $600,000. A site-speed-related decrease to just 3.9% lowers EBITDA by $14,000 to $446,000. A decrease to 3% lowers EBITDA by $140,000 to $320,000.

What Slows Down Site Speed?

There are numerous reasons for slow site speed. The theme used to build your site may not be adequately optimized. Your site may include too many images or images that are too large. You may be using too many plug-ins to add functions and capabilities to your site. Traffic may be high, slowing load speeds. Or the location and performance of your servers may be lagging.

Knowing how to identify the root cause of slow site speed is most important. Tools like Google PageSpeed Insights and Pingdom can help marketing teams at your portfolio companies zero in on problem areas — so that they can quickly develop solutions.

5 Actions for Accelerating Site Speed

The tools mentioned above can help you identify and solve the specific issues slowing down your portfolio companies’ sites. In the universe of potential issues you may discover, here’s a look at five of the most common solutions:

• Image Compression: Large files are notorious for slowing down site speed. Use compression tools to reduce file sizes and dramatically boost speed.

• Software Audit: Review and eliminate non-essential apps and software running on your sites to enhance performance.

• Optimized Theming: Most websites are built on customizable themes. Moving from a suboptimal to a streamlined theme can yield significant benefits.

• Streamlining Redirects: Excessive redirects or broken links can be a bottleneck. Regular audits can address this issue.

• Opting for Hero Images: Slider images often weigh down sites, while static hero images provide a rapid, cohesive user experience.

To solve significant site speed issues, work with a developer who can refine coding elements and ensure your websites are as agile as possible. As outlined above, site speed directly impacts the EBITDA of your portfolio companies, which means that an experienced developer can deliver a significant return on investment.

The Bottom Line

In today’s digital age, every minor adjustment on a digital platform can lead to significant shifts in revenue and, by extension, EBITDA. As custodians of investments and stakeholders’ interests, it’s paramount to appreciate and leverage these nuances. It might be as simple as optimizing a website today, but the ripple effect on the balance sheet can be profound tomorrow.

You don’t have to identify the right digital marketing adjustments on your own. At Aux Insights, we work with private equity firms that recognize the opportunity to increase EBITDA across their portfolio companies — but that also need outside experience and knowledge to execute.

Schedule time to meet with us about using digital marketing levers to maximize EBITDA across your portfolio.