Establishing a winning strategy to build your company's value 140227 Milner Masterclass program at St John's Innovation Centre

© Copyright 2014 Milner Strategic Marketing Ltd

Establishing a winning strategy to build your company’s value

Nick MilnerMilner Strategic Marketing Ltd

27th February 2014


Company Overview

• Milner Strategic Marketing Ltd is a business consultancy

• Clients want help with market analysis, strategy and marketing programmes

• Clients are high tech, clean tech and bio tech and range in size from venture backed start-ups to large plc’s

• Based at SJIC & Adastral Park• 6 employees and 12 associates

(see www.milnerltd.com/team)• Founded 2006

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Web www.milnerltd.com

http://www.milnerltd.com/team


What is strategy?

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First used in Athens (508 BC) to describe the art of leadership used by the generals on the war council. From “strategos” (Greek), meaning general*

N=35,138 books on Corporate Strategy (24/02/14)

*source: McKeown, M. (2012) The Strategy Book, FT Publishing

© Copyright 2014 Milner Strategic Marketing Ltd4

Strategy without execution is a daydreamExecution without strategy is a nightmare

Japanese Proverb


Where does strategy sit in a business?

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Overview: Establishing a winning strategy to build your company’s value

• Company value

• Valuation contours• What drives company value?• Which value drivers come from strategy, which value

drivers come from execution?• Case studies

• Developing and establishing winning strategies

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Let’s start with company valuation

Quoted Company

• Share price x shares• Driven by evidence and

belief about the future earnings (profits) of the company

• Disclosure

• Analysts working to value listed companies

• “…that is already factored into the share price”

Private Company

• No share price• Calculated using

evidence and belief about the future earnings of the company

• Why calculate value?

• How to calculate value?

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Why calculate company value?

• flotation

• trade sale• acquisition• fund raising• evaluating strategic options

• setting objectives

• remuneration• new investors• new market opportunities• new management

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Methods to calculate company value

• Discounted Cash Flow (DCF)

• BDO company multiples• FTSE sector values• acquisition multiples• EBITDA multiples

• revenue multiples

• number/growth in customers

• Other sources of evidence

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The valuation range is between $45m and $65m using a variety of sources


Sources of evidence

Sources •Business Plan•Historic revenue growth profile•Order book or sales pipeline•Customers and contract length•Customer Satisfaction/loyalty•Quality/morale of staff•Products/Services/R&D•Market size and growth•Market share•Brand and Reputation•Competitor analysis/ Competitiveness•Track record of the leadership•Press coverage (amount/tone) •3rd Party (Journalists, Analysts, TA’s) •Market average/recent transactions 10


Revenue (£M) 1.5 1.6 1.7 1.8 1.9 2.0 2.1

18 27.0 28.8 30.6 32.4 34.2 36.0 37.819 28.5 30.4 32.3 34.2 36.1 38.0 39.920 30.0 32.0 34.0 36.0 38.0 40.0 42.021 31.5 33.6 35.7 37.8 39.9 42.0 44.122 33.0 35.2 37.4 39.6 41.8 44.0 46.223 34.5 36.8 39.1 41.4 43.7 46.0 48.324 36.0 38.4 40.8 43.2 45.6 48.0 50.4

© Copyr i ght 2007 M i l ner Company M ar ket i ng LLP

MultipleValuation Matrix

Valuation contours

Example: £36m company valuation contour for different revenues

Company value = £18m revenue x 1.5 (market average multiple) = £27m

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What drives revenue; what drives the multiple?

Lead stimulation• Customer targeting• Campaigns and offers• Collateral• Product demonstration• Customer programmes

• Reference programme• Cross-selling

Brand and Reputation• Market position/Strategic Fit• CXO/Leadership• Customer base/revenue quality• New services, well received• Thought leadership• Analyst awareness• Advertising/recognition

• PR• Web/digital media• Conferences, Exhibitions, Events

Revenue (£M) 1.5 1.6 1.7 1.8 1.9 2.0 2.1

18 27.0 28.8 30.6 32.4 34.2 36.0 37.819 28.5 30.4 32.3 34.2 36.1 38.0 39.920 30.0 32.0 34.0 36.0 38.0 40.0 42.021 31.5 33.6 35.7 37.8 39.9 42.0 44.122 33.0 35.2 37.4 39.6 41.8 44.0 46.223 34.5 36.8 39.1 41.4 43.7 46.0 48.324 36.0 38.4 40.8 43.2 45.6 48.0 50.4

© Copyr i ght 2007 M i l ner Company M ar ket i ng LLP

MultipleValuation Matrix

large

small

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What drives the multiple and revenue?

Multiple

Brand and reputationPerceived quality of management team

Good market positionin the right market

III.

Lea

d st

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Rev

enue

/EB

IT

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Business Valuation Performance Management

c. Market size, growth andvalue model

d. PriceAnalysis

e. Competitoranalysis

f. Market share

b. Market structure

I. Define market position

II. Formulate strategy and set objectives

Multiple

a. Identify target customers and

their needs

5. CXO builder programme

2. Analystprogramme

3. Thought leadership

programme6. Advertising

11. Partnerprogramme

1. PR programme

4. Web andSocial Media

8. Events9. Customerprogrammes

12. Productprogrammes

7. Collateral10. Trade

associations

Brand and reputationPerceived quality of management team

Good market positionin the right market

III.

Lea

d st

imul

atio

na

nd c

ampa

ign

s

Rev

enu

e/E

BIT

13.

Bra

nd,

logo

an

d st

yle

gui

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IV. Performance and Budget

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Establishing a winning strategy



10. Trade associations

Measure performance and budget

Analyse the market

Formulate the strategy

Implement marketing programmes

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Case study: Analyse the market

Requirement

Major smartphone manufacturer (HQ Taiwan)•How will markets develop around the world?

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Solution

• Bespoke market model for smartphones and tablets

• Excel

Benefits

• Fully understand methodology

• Exactly meets requirements

• Trusted forecasts

• No conflict of interest

• Alignment


Establishing a winning strategy - Analysis





Analyse the market



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• Understand how the forecasts are made

• Meets specific requirements

• Trusted forecasts• Alignment on number• Data is explicit• People can use it


Case study: Formulate the strategy

Requirement

10 years old, Pasteur Institute spin-out (HQ Paris)•Strategy review for international growth

•Review, re-group, refine then assign resources

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Solution

• Strategy workshop

• Strategy document– Numbers– Markets– Customers– Products– Partners– Competitors

Benefits

• Focus on the right deal size

• Refocussing on who we are

• Clarity of message

• Ceasing to fight the competition


Establishing a winning strategy - Strategise





Analyse the market



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• Who are we?• What are the resources?• What are the objectives?• What are the risks?• What are the options?• Evaluate the options• Now – decide• Clarity of message


Case study: Implement programmes

Requirement

Software company, with blue chip clients was growing, wanted to increase visibility but knew the visual identity reflected badly on the company and would impact on revenues

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Solution

• Reviewed company strategy and brand values

• Competitor identities

• Created a new logo, brand style guide and web site

Benefits

• Strengthened reputation

• Present and future cost savings

• Improved quality and consistency

• Differentiated position


Establishing a winning strategy - Implementation





Analyse the market



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• What needs to be done?• What needs to be done

first?• Who is best to do it?• Who is going to do it?• How do we measure it?


How do you develop a winning strategy?

• Involve all key people

• Use the best data• Be systematic• Confront inconsistencies• Ensure completeness

• Write up strategy

• Simplify to help communication

• Implement• Measure performance• Review and repeat

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Independently facilitated to ensure objectivity - even your GP has a GP!


Case study: the whole process

Requirement

3 parts of BT were combined into a single unit to be “spun-out”•Needed to be made into a real company

•Needed identity and leadership

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Solution

• Analysed and re-analysed the market for a valuable niche

• Top telco groups• Agreed strategy

and stuck to it• Built a global

brand and reputation

Benefits

Revenue

2003 $21m

2006 $34m

62% Growth

Valuation

2003 $20m (x0.95)

2006 $140m (x4.1)

600% Growth

© Copyright 2014 Milner Strategic Marketing Ltd24

For further information contact [email protected]@[email protected] [email protected]@milnerltd.com

visit www.milnerltd.com