© RBP Ltd 2015 www.rbponline.co.uk 1

A £1bn+ Market For Legal, Regulatory, Tax and Commercial Compliance Support

Developing and Delivering Services In:

o Health & Safety and Property Risks

o Employment Law, Employee Relations & HR

o Tax, Company Law, Property,

Contract and Commercial Risks

From Businesses Specialising In:

o Consulting, Outsourcing, Insurance Advice & Assistance

o Content, Publishing and Online Documents

o Computing, Software and Services

A Recession Resistant, High Growth, ‘Legal Services’ Market

with good profit potential.

A fusion of consulting, content, computing,

insurance, training and certification components.

Embedded, typically fixed-price, long-term,

high renewal client contracts.

Usually enterprise software compatible solutions

where SaaS/Cloud are already commonplace.

Core B2B sales and client relations

disciplines are the norm.

Clients come from all industries and

all sizes of firm.

SME and on-line client bases are already

heavily penetrated.

All to simply reverse the burden of proof

for clients whose focus lies elsewhere.

Not the Myths

The Facts

Real Examples of:

Excellence

Potential

Persistence

Obstinacy

Executive Summary 2

Part 1: The Market Overall 5

Market Maps 6

Market Segmentation 11

Financial Fundamentals 1995-2015 14

Investment Capacity 18

Market Entry 20

Market Consolidation 21

Net New Sales 22

Profitability 23

Operating Profit 25

Sales Per Employee 26

Payroll as % Sales 28

Average Employee Cost 30

What Great Looks Like 32

Part 2: Sector Performances 33

HSE Management Systems 34

Growth/Profitability 35

Investment Capacity 36

New Business 37

Sector Comparison 38

New Entrants 40

Market Structure 41

Leading Players 42

What Good Looks Like 43

Regulatory Consultancies 44

Mid-Market Employee Relations 54

Safety Technology 60

Food Safety 66

Over 300 Companies Analysed

5 Sectors Quantified

Real Operational Benchmarks

Market Economics Explained

Market Maps 6

Employment 7

Safety 9

Market Segmentation 11

Financial Fundamentals 1995-2015 14

Investment Capacity 18

Market Entry 20

Market Consolidation 21

Net New Sales 22

Profitability 23

by Sector 24

Operating Profit 25

Sales Per Employee 26

by Sector 27

Payroll as % Sales 28

by Sector 29

Average Employee Cost 30

by Sector 31

What Great Looks Like 32

For each Sector coverage includes:

Growth/Profitability

Investment Capacity

New Business

Sector Comparison/Attractiveness

Market Structures

What Good Looks Like

This is not a definitive list of the many segmentations currently active, but does illustrate the major issues of business model types, specialisms and competencies.

HSE Management Systems 34

Growth/Profitability 35

Investment Capacity 36

New Business 37

Sector Comparison 38

New Entrants 40

Market Structure 41

Leading Players 42

What Good Looks Like 43

Regulatory Consultancies 44

Mid-Market Employee Relations 56

Safety Technology 62

Food Safety 68

The core Safety and Employment markets overlap but retain distinct competencies: ‘the same, but different’.

Employment market sectors are slightly less fragmented and suppliers more ‘legal’ in character.

Safety is very fragmented, full of specialisms, focused on larger companies and more technology, property services and certification focused.

Declining growth rate percentages reflect scale; growing by £1m is harder to achieve in a £10m market than in a £100m one.

‘Early maturity’ means that most, if not all, of the addressable market has by now had an opportunity to understand, assess, and deploy (or not) the services on offer.

Business models developed in the ’70 and ’80s have now learned how to stretch to scale. Services have developed to cover both depth and breadth in various permutations.

Client acquisition was the name of the game in the ’90s and early noughties. During Dotcom it was thought that technology was the answer, but the problem was retention and technology is only part of the solution.

There are some horizontal market sectors still opening up, notably the 100-250 employees, and 250-500 employee company sectors. The driving force here, however, is sectoral empathy, with services in, for example, education also beginning to open up.

Growing by 0.5% in ’09 when the nation’s GDP fell by 6.3% shows the recession resistant character of this market.

A couple of major management mistakes (in the safety sector predominantly) account for at least half of the drop in growth.

7

JSB

ECA

Croner IRPC

Markel/Abbey Protection

Peninsula

AdviserPlus/Riverview

EllisWhittam

Beprofessional

© RBP Ltd

2015

Employment Specialists Combined Solutions Safety & other

Specialisms

Mic

ro

S

mall

Fir

ms

SM

Es

CL

IEN

T F

IRM

SIZ

E

M

ajo

r

Co

mp

an

y

ELAS

CCH Tax Fee

Protection

PFP

Copperfield

Abbey Tax

EEFCIPD

IQ Business

WorkplaceLaw

Law-speed

QDosLawPack

AP Partnership

CompactLaw

Business Safety

Systems

Boys & Maughan

CreamHR

Deminos

ClearDocs

Heather RML

HR Dept

HR Advantage KLC

TCM Group

Iren-icon

The Health & Safety People

Regulatory

Consulting

2015

Disclaw

AccessLegal

ESP/DecisiveHR

AgilityUK/

Hascom

HR Insight

Epoq Law Assure

Judicium

Just EL

SageGreen

Thomas Mansfield

HR&EL Consulting

Safety Specialists

Regulatory Consultancies

Tax Fee Protection

Publishing

Insurance/advice & assistance

Wirehouse

Specialists Training

ADP OneclickHR

EML/Simplaw

Alcumus/Drury PSM/

Sypol

RBS Mentor

Cornel UK

Abbey HR

Citation/MHL

Xact

Law at Work

BHP/Donut

MBHS

Tetra

S2

Corporate Risk Systems

Sentinel

Sage

Law Express

Outset UKCEFM

SAS

Northgate ES/Moorepay/

First Business

Lloyd ELC

Strictly Education

Temple Legal

Alifa

Education Personnel

Management EPM

SimplyBiz

Park City

Clearsky

Cordium

Arc legal

Vista

Peninsula: Taxwise

HCA Associates Northgate:Human & Legal

Avensure

Abbiss Cadres

FG

Sigerson

Empire Assurity

Acaster

Elcons

Cornhill HR

Linden

Fusion HR

Browne Jacobson

HRPlus

Any Non-exec worth their salt

will know what

competitive intensity

feels

like:

This is what it

looks

like.

© RBP Ltd 2015 T&Cs Apply www.rbponline.co.uk 9

Long term is more than

last year, or

two years ago…

Try three business cycles back;

then back it up with facts

and look forward.

© RBP Ltd 2013 T&Cs Apply www.rbponline.co.uk 10

Overall there are very few listed firms which can claim to be representative of the companies active here. Most of the best performers are VC or privately held and usually not divisions of major groups.

Company and commercial law niches abound, but the hype around on-line documents, etc is misleading here. Certification and procurement niches are critical here: Watch Achilles, Atlantic Data, and the Made Simple Group.

IRPC used to lead in tax; it is still largely a 3 cornered fight with Abbey and Peninsula’s Taxwise though.

HR and employee relations specialists are often collegiate teams and find achieving and sustaining scale difficult accordingly. Strong brands like KLC remain though niche players like EPM and Bond are the ones to watch.

Regulatory Consulting divides into those who can ignore Peninsula and those who cannot but this sector overall is reaching early maturity. Higher service teams such as Adviserplus and Ellis Whittam are the ones to watch now.

Safety training is high profile and underpinned by the qualification program obsessions in safety compliance. Iosh, Nebosh etc still lead the dance but consultancies with training arms dominate the delivery overall.

Safety software has finally proved to be more than a generic enterprise risk management module and teams like WarwickIC, Rivo, Shire and BSS are hitting a strong patch of form currently.

Safety specialisms are crucial to the mid-market development and while the borders between white-collar and blue-collar or men-in-vans versus men-in-Audis safety remain, niche leaders abound. See NSF/Cmi to understand the central role of certification services in food, but also similar teams in construction. Entrepreneurial innovators like Metro, Riskstop are fun too.

Santia, Croner and some big divisions within neighbouring market leaders such as RPS still lead the brand charts, but the mid-market is strong with focused teams like 4See, THSP and Cardinus building strong positions.

Segmentation

Segmentation

Segmentation

If you don’t know what

‘different’

looks like -

you’ll forever be

playing catch-up

© RBP Ltd 2013 T&Cs Apply www.rbponline.co.uk 11

No guesses

No samples

No hunches

307 real suppliers

Tracked

Quantified

Projected

12

13

Economics

Made Simple

Profit Potential

Stakeholder Returns

• Entry costs are low but rising; sales costs are the major investment required.• Large numbers of small training and consulting teams keep averages quite low.• Time costs: it can take 5-6 years for some ‘harder’ sectors to deliver any profitability.

Firms can and do invest millions to establish market positions. There is nothing inherent in the market structure that requires this – it is rather a sign of ambition (or impatience).

Barriers to entry are not high, but barriers to achieving significant scale are. The real problems come in this market when breaking out of the £2m, £5m and £14m sales levels. Challenge 1 is professionalising sales teams (nationally); challenge 2 is succession/effective operational middle management and IT-led standardisation; challenge 3 is service line extension, managing horizontal and vertical services. ‘Lifestyle’ training or consulting teams remain plentiful but achieving scale from these is not easy.

14

How Hard Can It Really Be - in Hard Numbers?

Over How Long?

Which Sectors Are Really Hard?

No Guarantees – Just Guts

Here’s How Much.

• Superior profitability is more common than the official statistics suggest.

• 11.9% - 12.3% overall average profitability can be misleading.

• Often the largest losses in % terms relate to the smallest companies.

35-55% profitability is not unusual. It is hard to sustain in a high growth market, but the potential is there for all.

Profitability overall is rising, but given the high proportion of firms which are under the full P&L disclosure limit, estimated profits will understate the true position.

Loss making firms are often small and often new entrants, so a 320k loss on a 50K business in its first year looks bad, but is both typical of the market and also financially insignificant overall.

Competition among the top firms is intensifying and the number of new entrants is not abating – rising if anything – so the pressures on market profitability overall are increasing.

15

Top10 Top 25% Profitability Bottom 25

32.5% 24.5% Long Term Average -21.1%

33.6% 25.3% Last 10 years Average -15.4%

37.7% 27.7% Last 5 years -39.1%

35.3% 27.1% Latest -103.9%

31.4% 25.6% Projected -8.3%

Rigorous Analysis

Factually Based

Deciles, Quartiles and

Red Zones Explained

Clear Headlines

Expert Commentary

Sector Benchmarks Charted

• Most firms achieve around £60-90k pa.

• This is low for professional service firms; top quartile levels should be achievable.

• The large number of small firms distorts the averages downwards.

Most firms achieve between £60-90k on an annualised sales per employee basis. This is typically on a headcount, not average employee or FTE basis, but it also does not take account of any sub-contractor deployments.

It is not necessarily a ‘good thing’ to have top decile benchmarks here as it can simply reflect a business structure which relies on either overseas or headcount deployment elsewhere. SPE levels of £200k+ are not uncommon in international enterprise software, for example, but that would not be a useful ambition for most firms in this market currently.

Average levels are, however, on the low side for professional services and consultancy markets and reflect either a higher than usual level of discounting to acquire clienteles, and/or a preponderance in the market of small consulting teams.

Median top quartile levels should be a realistic aspiration for professional consultancies of scale

16

Historic Sales Per E'ee: Long Term

156 Top Decile Average

155 Median Top Decile

123 Median Top Quartile

70 Median Overall

75 Average OverallOperational Benchmarks:

Sales per Employee

Payroll as % Sales

Average Employee Costs

Real Numbers

Real Trends

Real Comparators

• Early indications for 2012 suggest costs are not rising much if at all.

• Only mid-market employment and Safety IT differ significantly from market norms.

• Long term growth rates of 2.9%pa typically do not deliver equivalent sales per employee increases; staff costs rise more so automation has to deliver efficiencies.

© RBP Ltd 2013 T&Cs Apply www.rbponline.co.uk 17

Market Sector

Details Charted and Compared

Long Term Trends

Sector Nuances Quantified

Big is not always beautiful here; many large firms have struggled to maintain growth and profitability.

Others have also struggled to find adequate investment targets for profits made.

For small firms achieving £2m in new sales may only be aspirational, but the point is to target the proportion of the market’s £44m that’s ‘yours’.

It is important to focus on both halves of these equations: eg a propensity to discount (or give ‘value’ disproportionately to clients) will inflate payroll as % sales and reduce sales per employee benchmarks. ‘Right’ is a complex series of actions.

Market leaders can expect 30-35%+; top 3 in a sector can expect to return 25-35% consistently; and new entrants should expect to achieve profitability within 3-5 years and payback within 3-4 years thereafter.

Winning in strategic terms is defined as achieving sustain superior stakeholder returns. This does not equate directly to profitability, but that is the nearest measure that is generally available.

In this market it is usual to expect a 1:1 ratio or better as the ratio between reported profit (ebitda) and sustainable free cash flow – the real measure of commercial success. Companies with lower than a 1:1 ratio will typically have revenue recognition policies that are adapted to the business cycle, size of firm or their particular investment preferences. They are what they are and accountants will balance angels on endless pin heads to argue their point, but in any due diligence process during an attempt to realise the value of such a cash flow, it will be scrutinised much more closely if it falls below 1:1. Ultimately cash drives value, not games around descriptions of ‘profit’. The old cliché that Sales = Vanity, Profit = Sanity but Cash = Reality holds true today more than ever.

18

What Good looks Like

CAGR 4.33%

Profitability 11.94%

Net New Sales pa 2218.2

Sales per Employee 70.1

Payroll % Sales 45.37%

Average Employee Cost 31.5

What Great Looks Like

CAGR 10.50%

Profitability 35.27%

Net New Sales pa 3411.0

Sales per Employee 122.9

Payroll % Sales 45.75%

Average Employee Cost 45.1What Does

Great Feel Like?

What Does

Good Look Like?

Real

Numbers

19

Sectors Examined in DetailGrowth/Profitability

Investment Capacity

New Business

Sector Comparison/Attractiveness

Market Structures

Top: the Probables and the Possibles

What Good Looks Like

Compared to the Market Overall

Profitability and Market Entry Costs

What Winning Looks Like

20

The market structure shown opposite is typical of an embryonic market where early entrepreneurs can demonstrate the core attractiveness of the niches, but profitability is still determined more by business model than competitive intensity.

The cluster of smaller teams also suggest many more will follow the leaders into this sector, while some of the older brands will find sustaining a life-style position equally possible.

This cluster of niches is not yet a cohesive whole and no-one has yet established leadership as the firm able to lead in more than one or two niches. This sectoral focus will be the name of the game for the coming decade, however.

It is intriguing that the winners here so far are (a) not technology players primarily – but technology lies at the heart of what they do; (b) not content, precedent or documentation specialists – although free, detailed and high quality document and document management systems are at the heart of what they do; and (c) typically not coming from the deep pockets of large global firms, but from experienced or even collaborative efforts from people who know a gap when they see one.

The brand leadership of firms like JSB and ECA has taken a long time to build and suggests the room for alternatives in these niches is limited. Qualification training services and research collaboration systems take decades to build.

The advent of innovators like Adviserplus, Judicium, LawatWork and Outset suggest that while many law firms and many HR consultancies could gain traction here, only a few will and it takes focus and compliance specialism to do so.

ECA

Adviserplus

EPM

Ellis Whittam

JSB

Croner

Judicium

CEFM

Park City

Law at Work

Outset

LawSpeed

CIPD

HRi

KLC

Unique Market Maps.

Find the ‘quiet winners’.

See examples of

what’s really working (or not)…

The noisy players are

often the worst examples.

Cut out the gossip.

21

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