FM Analysis Business Contact: Consultancy

David McClelland Director

Tel: +44 (0) 208 947 5108 Email: info@carlton-advisors.co.uk Website: www.carlton-advisors.co.uk

David McClelland is Director and owner of Carlton Strategy Advisors Ltd, a business and market strategy consulting firm, serving small and medium sized enterprises, including private equity portfolio companies.

Carlton Strategy Advisors (CSA) works with company managers to assess the health and character of their business, with an eye on future prospects and in consideration of the business’s exposure to commercial risk. We help management to prepare for accelerated growth or more generally when business is at a strategic cross-road, facing choices about customer acquisition, product introduction and geographical extension - by either organic means or trade acquisition.

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Coping with flat UK economic output – a common challenge for CSA client companies CSA believes the economy of the UK will remain flat for some time to come, by a number of accounts. The business investment cycle tends to respond to macro economic growth, not lead it, and will remain constrained as the greater driver of growth, leverage, will remain in short supply as the banks take time to redress balance sheets before recommencing lending once again. Meanwhile, public sector expenditure will remain on a tight leash; deep-rooted problems in the Euro-zone will inhibit UK export demand and, lastly, the general public, as consumers, are unlikely to return to their free spending ways in the wake of job uncertainty and with pay outpaced by the effects of inflation.

Constrained of economic pull, we see the successful business being the one that can occupy an identifiable trading segment, or selected market niche, best able to build its commercial proposition around a differentiated, core business competence which is protected by defendable barriers to entry in a scenario that has the effect of generating recurring revenues through repeat customer loyalties at the same time as serving to keep out the competition.

These goals are common to all businesses, of course, but it is the manner and process by which they can be attained that are addressed by CSA in our work with company clients, private equity investors and bank lenders.

How can Carlton Strategy Advisors assist businesses?

Scoping effective business strategy review CSA’s introduction to a company client may follow a request from the business unit’s executive management, equity holders or bank lenders, to help in the identification of where both value and value creation opportunity rest within the business.

The scope of such investigative analysis sets out to first understand the current rational and logic of the management team, having already taken the business down one or other paths to market. CSA will submit its request for information and, following its early review, meet for one-on-one interviews with members of the senior team before seeking to substantiate such levels of internal detail against independent, external market information.

Internal business review may examine the order of the company’s development to date in a discussion with management that will also cover both business and personal objectives. This will be followed by an early financial review and an assessment of the experience of the management team when setting and meeting objectives, together with key performance metrics. Particular granularity will be given to the analysis of compound growth for revenues and margins across key product, customer and geographical segments in a comparison of the historical situation against the proposed plan and forecast, read in the light of assumptions made by management about key business drivers.

External market information will usually be gathered from a combination of secondary and primary market research methods, ie desk research of public domain market information and by taking up customer/lost customer references, interviewing suppliers and by examining the strategy and performance or market peer groups, including most immediate competitors.

In short, CSA will work with management to assess the wisdom, benefit and risk involved when trading activity is aligned to certain customer groupings and in competition with market rivals. Of course one

person’s risk is another’s opportunity. The trick for the strategy consultant as a reporting advisor is to view the strategic options open to the business through the eyes of the company’s management and/or equity owners and debt lenders, remaining aware of what will make each one comfortable or nervous. It is an ability to read the options, identify the issues, establish the evidence and communicate final opinion that makes strategic review effective.

Part of the ‘art’ is also knowing when to stop ‘rowing the boat ashore’; substantiating and setting down the strategic options open to the company in a usually restricted timeframe. Most typically, three to four weeks is required to carry out a thorough strategic review, depending on business size and complexity.

Common themes emerging from strategic review Typical of the situations that can be uncovered and reported back to the client following review are:

• Confirmation of whether the company is recognised as a leader in its field, strengths and weaknesses

• Synergy and fit between existing business units or in connection with business bolt-ons

• The performance of alternative market suppliers, including rivals/take-over targets, against customer selection criteria, opportunities arising from unmet needs and the corresponding barriers to market entry that need to be overcome

• Customer/supplier concentration that may limit negotiating power and create over business dependency

• Misaligned objectives within the management team and resource gaps that constrain performance

• Confused product-to-market channels and restricted market visibility, limiting forecasting accuracy in planning