You’ve completed initial screening of your target company and confirmed your belief in the investment hypothesis. Your target appears to be underperforming its potential in the marketplace. You sense strategic misalignment along with sales and marketing inefficiencies to be material causes. You know this presents an opportunity to profit from turning these weaknesses into assets.
How do you advance from a strong hunch to a conviction? Even more importantly, how do you quantify the opportunity and entice your investors to participate? This is the domain of a cost structure analysis.
First, let’s be clear about what a cost structure analysis is, and is not. It is a rigorous and accelerated evaluation of sales and marketing effectiveness. It delivers fact-based recommendations for improving profitable growth. And while cost takeout opportunities will be identified, tested, and quantified, this is not all about cutting costs. It is about improving subpar sales and marketing performance to drive investor value.
Identifying Value Creation Opportunities
So how do you identify, test, and quantify the opportunities? It all begins with benchmarks. By comparing your target’s performance to comprehensive performance benchmarks and emerging best practices, you identify functional areas with the greatest value creation opportunity. These become your investment hypothesis.
Next, you should thoroughly test your hypotheses and uncover new opportunities. This entails evaluating the company’s strategic alignment, performance conditions, and talent from the perspective of four discovery lenses:
Utilize a structured, yet agile, approach to quickly yield qualitative and quantitative insights, findings, and recommendations your competition is likely to miss. The status of your hypotheses—in process, proven, disproven, or inconclusive—should be continually summarized for frequent reviews. High-touch communications will keep all team members aligned. This is critical to success when engaged in the due diligence phase.
Creating Your Investment Proposal Deck
You should culminate with the creation and communication of the investment proposal deck. By now, you can apply your findings for a trustworthy proposal and pave the way, either for the close or a recommendation not to proceed. In addition to summarizing and substantiating your value creation opportunities, your investment proposal deck should create a time-bound road map for the steps necessary to realize this value
10 Best Companies to Sell For in 2016
The key to sales greatness is a well-aligned strategy that simplifies the buying and selling process. It’s why “A-Players” love their employers and almost never leave. Turn to page 37 to learn more.