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

Establishing a winning strategy
to build your company’s value

Nick Milner
Milner Strategic Marketing Ltd

27th February 2014
© Copyright 2014 Milner Strategic Marketing Ltd

Company Overview
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•

•

•
•
•

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 startups to large plc’s
Based at SJIC & Adastral Park
6 employees and 12 associates
(see www.milnerltd.com/team)
Founded 2006


Web www.milnerltd.com
2

What is strategy?
N=35,138 books on Corporate Strategy (24/02/14)
*source: McKeown, M. (2012) The Strategy Book, FT Publishing

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*


3

Strategy without execution is a daydream
Execution without strategy is a nightmare
Japanese Proverb


4

Where does strategy sit in a business?


5

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


6

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?

7

Why calculate company value?
• flotation
• trade sale
• acquisition
• fund raising
• evaluating strategic options
• setting objectives
• remuneration
• new investors
• new market opportunities
• new management

9

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

The valuation range is between $45m
and $65m using a variety of sources
9

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

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

Valuation Matrix
Multiple
Revenue (£M)
18
19
20
21
22
23
24

1.5
27.0
28.5
30.0
31.5
33.0
34.5
36.0

1.6
28.8
30.4
32.0
33.6
35.2
36.8
38.4

1.7
30.6
32.3
34.0
35.7
37.4
39.1
40.8

1.8
32.4
34.2
36.0
37.8
39.6
41.4
43.2

1.9
34.2
36.1
38.0
39.9
41.8
43.7
45.6

2.0
36.0
38.0
40.0
42.0
44.0
46.0
48.0

2.1
37.8
39.9
42.0
44.1
46.2
48.3
50.4

© Copy r i ght 2007 M i l ner Company M ar k et i ng LLP

Example: £36m company valuation contour for different revenues

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What drives revenue; what drives the multiple?

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

large

small

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
Valuation Matrix
Multiple
Revenue (£M)
18
19
20
21
22
23
24

1.5
27.0
28.5
30.0
31.5
33.0
34.5
36.0

© Copy r i ght 2007 M i l ner Company M ar k et i ng LLP

13

1.6
28.8
30.4
32.0
33.6
35.2
36.8
38.4

1.7
30.6
32.3
34.0
35.7
37.4
39.1
40.8

1.8
32.4
34.2
36.0
37.8
39.6
41.4
43.2

1.9
34.2
36.1
38.0
39.9
41.8
43.7
45.6

2.0
36.0
38.0
40.0
42.0
44.0
46.0
48.0

2.1
37.8
39.9
42.0
44.1
46.2
48.3
50.4

Good market position
in the right market

Perceived quality of
management team

Brand and reputation

Multiple


14

Revenue/EBIT

III. Lead stimulation
and campaigns

What drives the multiple and revenue?

Business Valuation Performance Management

d. Price
Analysis

e. Competitor
analysis

f. Market
share

I. Define market position

II. Formulate strategy and set
objectives

1. PR
programme

2. Analyst
programme

3. Thought
leadership
programme

4. Web and
Social Media

5. CXO builder
programme

6. Advertising

7. Collateral

8. Events

9. Customer
programmes

10. Trade
associations

11. Partner
programme

12. Product
programmes

Good market position
in the right market

Perceived quality of
management team

Brand and reputation

Multiple


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IV. Performance and
Budget

Revenue/EBIT

c. Market size,
growth and
value model

III. Lead stimulation
and campaigns

b. Market
structure

13. Brand, logo and style guide

a. Identify target
customers and
their needs

Establishing a winning strategy

Analyse the market

Formulate the strategy

ImplementTrade
marketing Partner
programmes
10.
12. Product
11.
associations

programme

programmes

Measure
performance
and budget


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Case study: Analyse the market
Requirement
Major smartphone
manufacturer (HQ
Taiwan)
•How will markets
develop around
the world?


Solution
Benefits
• Bespoke market • Fully understand
model for
methodology
smartphones
• Exactly meets
and tablets
requirements
• Excel
• Trusted
forecasts
• No conflict of
interest
• Alignment
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Establishing a winning strategy - Analysis

• Understand how the
forecasts are made
• Meets specific
requirements
• Trusted forecasts
• Alignment on number
• Data is explicit
• People can use it

Analyse the market


ImplementTrade
marketing Partner
programmes
10.
12. Product
11.
associations

programme

programmes

Measure
performance
and budget


17

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


Solution
• Strategy
workshop
• Strategy
document
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–
–
–
–
–

Numbers
Markets
Customers
Products
Partners
Competitors
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•
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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


ImplementTrade
marketing Partner
programmes
10.
12. Product
11.
associations

programme

•
•
•
•
•
•
•
•

programmes

Measure
performance
and budget


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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

Solution
• Reviewed
company
strategy and
brand values
• Competitor
identities
• Created a new
logo, brand
style guide and
web site
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•
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•

•

Benefits
Strengthened
reputation
Present and
future cost
savings
Improved
quality and
consistency
Differentiated
position

Establishing a winning strategy - Implementation

Analyse the market


ImplementTrade
marketing Partner
programmes
10.
12. Product
11.
associations

programme

programmes

• 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?
Measure
performance
and budget


21

How do you develop a winning strategy?
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Involve all key people
Use the best data
Be systematic
Confront inconsistencies
Ensure completeness
Write up strategy
Simplify to help
communication
Independently facilitated to ensure
• Implement
objectivity - even your GP has a
• Measure performance
GP!
• Review and repeat

22

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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•
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•

Solution
Analysed and reanalysed the
market for a
valuable niche
Top telco groups
Agreed strategy
and stuck to it
Built a global
brand and
reputation
23

Benefits
Revenue
2003 $21m
2006 $34m
62% Growth
Valuation
2003 $20m (x0.95)
2006 $140m (x4.1)
600% Growth

For further information contact
jonathan.davenport@milnerltd.com
david.jenkins@milnerltd.com
nick.milner@milnerltd.com
chloe.purcell@milnerltd.com
kay.sharpington@milnerltd.com

visit www.milnerltd.com


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