All business owners have the obligation to identify, measure, manage and mitigate the risks associated with their company. Delivering real value to our client’s entails far more than the annual preparation of a tax return coupled with a few phone calls per year.Understanding your business’s strengths, weaknesses, opportunities and threats are areas for improvement, which are an integral dimension that should be given attention.
The question we have asked ourselves is how can we better assist our clients and provide real value to them? Our firm wants to ensure you are provided with the tools, knowledge and analysis to properly identify where your Company is, how your Company can improve and what can add value to your business.
Listed below are areas where many business owners struggle. While most clients understand the importance of these areas, the issue becomes “How do I do it” or “I don’t have time to do it”. By understanding how these factors impact your Company, you can add value to your business. Moreover, you can increase your knowledge, recognize risks and trends, and most importantly, have a better-managed company. By realigning our
firm to provide these “value added” services, we will be in a better position to deliver realvalue to our clients.
The following areas present an opportunity for us to provide our clients with “value added” services (each discussed below).
- Capital Structure
- Industry Comparisons
- Financial Analysis & Performance
- Financial Forecasts and Budgets
- Working Capital Needs
- Reinvestment Needs
- Financial Statement Preparation & Review
- Business Valuation
- Preparing Your Company for Sale
- Capital Structure review (optimal capital structure)
- What is the capital structure of other companies in my same industry?
- Why fund with equity or debt?
- How should I use debt in financing operations and growth?
- When should I use short-term versus long-term financing?
- Industry Comparison
- How does my firm compare to our specific industry?
- The industrial climate can have significant effects on the value of a company. The factors influencing the industry can include technological change, fluctuations in supply and demand, price increases or decreases, and the competitive landscape.
- How is the industry I operate in forecast to grow?
- What are the key success factors of my specific industry to improve profitability?
- What is the cost structure of companies in my industry?
- Financial Analysis & Performance metrics
- Examine the financial condition and performance of the Company in order to gain insight into trends affecting future earnings capacity, as well as to analyze various financial risks.
- Financial statement analysis is one of the most important steps in gaining an understanding of the historical, current and potential future profitability of a company. Financial analysis is also critical in evaluating the following:
- The relative stability of revenues and earnings,
- The levels of operating and financial risk,
- The performance of management,
- Identifying strengths and weaknesses of the business,
- Identifying business trends over time,
- Providing basis for comparing the business to other similar businesses or industry
- Developing a Financial Forecast & Budget
- What forecast assumptions are reasonable?
- How do I develop a forecast model that can be adjusted to a changing environment?
- How does the Company forecast compare to actual operating results?
- If management does not provide a forecast then how do I know if I am on course and what corrections need to be made?
- What are the reasons I do not have a budget?
- The old standby that forecasts are mere guesswork and do not help is false. Forecasts can add significant value and provide direction to any company.
- Working Capital
- The working capital needs of a company must be determined to support projected operations. Working capital is required to expand facilities, upgrade equipment, invest in new technologies, expand distribution networks, and support anticipated growth.
- What is working capital and why should I care?
- How much working capital do I need to sustain operations?
- How do I determine my working capital needs
- Do I have excess or deficient working capital?
- What is our company’s policy on working capital?
- Reinvestment Needs: (Capital Expenditures)
- What are my capital expenditure requirements?
- What is the cost associated with capital expenditures?
- How will my capital expenditures be funded?
- What is management’s strategy for replacing existing assets as they become obsolete
- Quarterly or Annual financial statement review a.
- Do you understand how to read the balance sheet, income statement, statement of cash flows?
- Do you understand how all three of these statements tie together
- How often do you go over your financial statements?
- Do you need help interpreting what your financial statements are telling you?
- Business Valuation
- Knowing what impairs value and value creation entails far more than using an industry multiple or going along with a rule of thumb to keep the peace. Specifically, what adds value to your business? What should potential buyers and sellers look for? How is the value of a business determined? We can help guide you through this process by either valuing your business or providing consulting services to help ensure the optimal value is created.
- Preparing Your Business for Sale
- Focus is on improving the value of the Company rather than just measuring it.
- Determining normalization adjustments & financial structure impact on value.
- Identify your Company’s specific strengths and weaknesses.
- How to focus on improving identified weaknesses.
- Improving reliability of financial statements.
- How to strengthen the financial statements thereby reducing risk and increasing value.
- Comparison to other companies in the Industry.
Thank you for the opportunity to be of service to you. If you have any questions, please let us know how we can better assist you.
Very truly yours,
DeShazer, Toren & Braden CPAs, PLLC