Frameworks Flashcards
Bottom-Up Market Sizing
- What customer/product segments exists?
- How many purchases are there “an hour” by segment?
- How much is each purchase?
- How many hours/year do they operate? (50 weeks/year or 350 days)
Top-Down Market Sizing
- How many people/households will purchase?
- How much will they purchase?
- How often will they purchase?
- How much will they spend?
Key Drivers on Revenue - Price
Overall Market Demand, Competitors, Customers
Key Drivers on Revenue - Quantity
Overall Market Demand, Competitors, Customers, Channels
Key Drivers of Cost - Fixed Cost
Fixed Labor, Marketing, Overheads, Interest/Depreciation, Taxes, Other Fixed Costs
Key Drivers of Cost - Variable Costs
COGS, Variable Labor, Distribution Costs, Other Variable Costs
Price - Overall Market Demand
Is product/service becoming a commodity with multiple providers offering identical options?
Is fundamental demand decreasing for the product? (Typewriters)
Price - Competitors
Are they driving price down, offering cheaper products?
Price - Customers
How much buying power do they have?
Are they negotiating for lower prices through bulk discounts?
Quantity - Overall Market Demand
Is it decreasing/increasing?
If decreasing, then quantities decrease across the whole market (client and competition).
Quantity - Competitors
Are they stealing customers (market share)?
Is their product more attractive?
Quantity - Customers
Are we meeting their needs?
Have their needs changed, or have they found a substitute that better meets their needs?
Are we missing out on targeting an attractive customer segment?
Quantity - Channels
Are we marketing/selling through channels relevant to our key segments?
If our consumer buys on the Internet and we sell retail, we’re inefficient.
Fixed Costs - Fixed Labor
Have salaries of management or required staff increased?
Fixed Costs - Marketing
Has the client increased spending without seeing related increase in sales?
Is there opportunity to use marketing budget more efficiently?
Are there more appropriate channels? Appropriate level of spending?
Fixed Costs - Overhead
Are rent and utilities increasing?
Can we decrease without impacting operations?
Fixed Costs - Interest/Depreciation
On mortgages, loans, etc… are rates increasing?
Has client made a major capital investment?
Fixed Costs - Taxes
Has the client moved to a different tax bracket?
Have they opened a facility in a new location?
Are there opportunities to shift to lower tax options?
Fixed Costs - Others
Insurance, etc. are costs increasing?
Variable Costs - COGS
Are costs increasing due to market factors like increasing energy prices?
Can we negotiate with suppliers or switch to lower cost options?
Variable Costs - Variable Labor
Dependent on how much is produced or serviced?
Have wages increased without a corresponding price increase?
Variable Costs - Distribution Costs
Are costs increasing, say, because of changes in transportation?
Variable Costs - Other
Storage, packaging, variable utilities
Market Study - Overall Market
Is market demand increasing or decreasing?
If so, are some segments growing/shrinking disproportionately?
Have substitutions emerged?
Market Study - Competitors
Who are they?
Have there been new entrants (locally or from outside area/different verticals)?
What’s our market share (by segment)? Is it changing?
Is the market fragmented?
Market Study - Customers
What are their needs and are we addressing them?
Are their needs, demographics, or regions shifting (or is one accounting for most of the shift?
Market Study - Company
Has the capacity of the company changed?
How is the sales force incentivized (or are they?)
What is the manufacturing process?
Does company have a high performance culture?
Market Study - Product/Service
General: What are the prices of our products?
Have there been any price changes?
Have there been decreases in average spend for a particular segment?
Does our product/service have differentiating factors that are attractive to our customers? Has there been in a shift in quality/merits?
Channels:
Which distribution channels do we use?
How do they compare in pricing/penetration?
Are there opportunities to shift share or introduce new channels?
Is our marketing message, channel, spend effective?
M+A - Market Assesment
Size of overall market, growth of the market, and competitive landscape
M+A - Company Assesment
Top Performer, Revenue growth (historical and projected), profits, profit growth (historical and projected), market share (increasing/decreasing)
M+A - Post Acquisition Strategy - Revenue
Growth, Synergies
Post Acquisition Strategy - Revenue - Growth
Can you increase prices/spend? Can you increase quantities - frequency, purchase volume, # of customers
Post Acquisition Strategy - Revenue - Synergies
If you can combine operations with another company, can you piggyback on what one company does well to improve sales of another company?
M+A - Post Acquisition Strategy - Costs
Reduction, synergies, exit strategy
Post Acquisition Strategy - Costs - Reduction
Can company decrease costs without adversely affecting operations?
Can it maintain current costs but still grow top line?
Post Acquisition Strategy - Costs - Synergies
If the client plans to integrate the target into a parent or another holding company, can you decrease operation costs?
Leverage economies of scale?
Post Acquisition Strategy - Costs - Exit Strategy
After client has increased profits, what do we plan to do?
Sell? IPO? Continue to operate? Spin-off? Expand?
M+A - Risks/Benefits
Management team, cultural fit, complications, defensive strategy
M+A - Risks/Benefits - Management Team
May be willing to pay more for a strong team, or better one
M+A - Risks/Benefits - Cultural Fit
Concern of integrating departments with different structures - 2 sales departments with different compensation structures
M+A - Risks/Benefits - Complications
Government regulations can hinder the buying process
Competitor growth or aggression would affect buyer’s decision or price point
M+A - Risks/Benefits - Defensive Strategy
May be willing to pay more to purchase intellectual property to keep it from competitors
