Foundations

Answer three questions in order: is the market attractive, can we win there, and what is the best way in? Then check the economics of the chosen mode against the client's hurdle.

• Attractiveness: size, growth, margins, competition, barriers.
• Ability to win: customer fit, cost position, capabilities, brand.
• Mode: build alone, partner, joint venture, license or acquire.
• Economics: market size × achievable share × margin, minus fixed costs; payback against the hurdle.

Elements:S-ATTRS-ABILITYS-MODE

Separate momentum (what the market gives anyway) from levers the client controls, then size each lever against the gap to the target.

• Existing customers: more frequent purchases, bigger baskets, higher prices.
• New customers: new segments, new regions, new channels.
• New offers: products or services that use what the client already has.
• Inorganic: partnerships and acquisitions.
• Prioritise by size of gap closed, time to impact, feasibility and risk.

Pitfall: Counting inflation-driven growth as real growth.

Elements:S-LEVERSS-PRIOR

Value the target on its own, add synergies you can realistically capture, subtract integration costs and risks — and compare the result with what the buyer pays, including debt.

• Why is the buyer interested, and why is the seller selling?
• Standalone value: growth, margins, a peer multiple.
• Synergies: revenue (harder to capture) versus cost (more certain), minus dis-synergies.
• Risks: people, integration, market, legal; the buyer's ability to fund the deal.
• Price and terms: maximum price, earn-outs, conditions.

Pitfall: Comparing an equity price with an enterprise-value multiple.

Elements:S-STANDS-SYNS-DRISK

Lay out the steps in order, put each step's capacity in the same unit, and compare with demand. The slowest step limits the whole process; fixing any other step changes nothing.

• Convert every step to the same unit (e.g. orders per hour) before comparing.
• Use effective capacity (nominal × utilisation), not nominal.
• After fixing one bottleneck, check which step becomes the next.
• Compare fixes on cost, speed and side-effects; changing the process often beats adding staff.

Elements:S-PROCS-CAPS-TRADE

Many cases are variations of the six types. These prompts help you adapt.

• New product: what makes it different, who will buy it, will it eat into existing sales, how will rivals react, how is it funded?
• Start-up: treat it like an investor would — team, market, edge, customers, funding.
• Competitive response: what exactly did the rival change, which customers moved, and which responses protect value rather than start a price war?
• Turnaround: why is the company failing, is it alone, how much cash and time are left, which quick wins rebuild confidence?

Elements:S-EXTS-HYP

A price sits between a floor (what it must cover) and a ceiling (what customers would pay), positioned against what alternatives cost. Always check the net effect on profit, because price and volume move together.

• Cost-based: cost plus a margin — tells you the floor, rarely the best price.
• Competitor-based: anchor on alternatives and adjust for differences.
• Value-based: what the product is worth to the customer.
• Objective first: volume, margin, or a strategic goal such as ridership.

Pitfall: Assuming a price cut pays for itself through volume without checking contribution per unit.

Elements:S-3CS-PGOAL

Split profit into revenue and costs, then decide which side moved before drilling down. If revenue moved, separate price from volume; if costs moved, separate fixed from variable.

Example: A shop's profit halves while sales are flat: revenue did not move, so look at costs — and at what competitors did with their prices.

Pitfall: Listing every cost line before checking which side of the tree actually changed.

Elements:S-REVS-COSTS-EXTS-HYP

Clarify exactly what to count, choose a path, state every assumption with a reason, and cross-check the result from another angle.

• Top-down: start from a population and narrow it with shares and frequencies.
• Bottom-up: start from one representative unit (a shop, a customer) and scale up.
• Demand side versus supply side: either can be the main path; the other makes a good cross-check.
• Round early — the approach is graded, not the decimals.

Pitfall: An answer ten times off a known benchmark usually means one assumption is wrong — revisit it rather than defend it.

Elements:C-SCOPES-SEGS-ASSUMEM-SANITYY-DRIVER