Evaluation Criteria
Consumer Growth Partners seeks to establish relationships with companies poised for success. We typically begin an engagement by developing an Investment Rationale designed to optimize company value over a target time period based on the needs of the investors and owners, taking into account the dynamics of the business and the external environment. As part of the Investment Rationale, we perform a gap analysis to identify and prioritize the requisite addition of financial and management resources that the business will need to achieve company objectives. This approach provides a road map for how we can assist the company and enables us to engage our resource network of industry contacts, capital partners and strategic relationships. We consider the following criteria in evaluating a potential engagement:
Compelling Proposition
In the retail/consumer product and restaurant sectors there are relatively few barriers to entry, and most companies face many formidable competitors. We prefer to partner with companies that are able to position themselves well in defensible niches, target favorable demographics, focus on attractive geographies and/or operate in channels that produce or can produce superior returns.
Proven Management
When a company has a compelling proposition, the best management team properly capitalized will be successful. Accordingly, we seek to partner with experienced executives who have a demonstrated track record of success and achievement. Often we are engaged in situations where companies are led by passionate entrepreneurs who may benefit from exposure to these kind of executives. Depending on the situation, we can use our network to identify seasoned executives to serve as officers, directors or consultants to the business.
Proven Economics
We ascertain whether the company has demonstrated economics which can be replicated to generate predictable growth. For specialty retailers and restaurants, the focus is on four-wall cash contribution from existing units as well as the payback period of the initial four-wall investment. For direct marketing and consumer companies, the focus is on product sell-through and re-order rates. As part of our evaluation, we identify core activities that should be expanded, peripheral activities that should be cut back or terminated and new channels that should be developed. As part of the Investment Rationale, we prioritize activities and resources that optimize each of these opportunities.
EBITDA Growth Potential
The combination of proven management and proven economics generally allows a company to grow. However, some categories are not large enough to support infinite growth. As part of the Investment Rationale, we seek to demonstrate the capability to grow EBITDA through the investment period and for some period beyond. When a company can demonstrate sustainable EBITDA growth potential, the investors, owners and management teams will be in a position to optimize their exit opportunity.