Questions to ask: How is the company currently leveraged? How do bank covenant restrictions impact the business and its future plans? Do shareholders have to provide equity or personally guarantee loans? Is bringing in an outside investor and issuing preferred stock a viable option? A solid and diversified customer base is essential for the ongoing viability of a business.
When companies grow and prosper by catering only to their largest customers, dependency may increase to the point where too great a percentage of revenues are concentrated with too few customers; companies must manage the allocation of customer concentration to reduce the risk of losing a large source of revenues. What amount of revenue is recurring? What is the economic useful life of its entire customer base, as well as its largest customers?
As production output increases, businesses typically achieve lower costs per unit. Whether through quantity discounts or spreading capacity costs over higher volumes, larger companies possess distinct advantages in certain operations and markets. Questions to ask: Is the company effectively exploiting its internal economies of scale i. Can the company enter into a consortium, joint venture, or outsource to increase buying power and reduce expenses?
Financial analysis aids in measuring trends, identifying the assets and liabilities of a company, and comparing the financial performance and condition of the company to other, similarly-positioned firms. Questions to ask: How does the company compare in terms of liquidity, activity, profitability, and solvency measures? Are financial controls in place? Are the financials audited or reviewed by an outside CPA?
Key value drivers include the knowledge, skills, experience, training, and creative abilities employees bring to a business and the health of its company culture. Questions to ask: What are the quality control procedures? How is the company managed? What is the depth and breadth of management?
Are there any key person dependencies in terms of technical knowledge, production skills, or customer contacts? Is there a management succession plan? What rights do individual shareholders have? Each business is impacted by economic trends and developments in the industry in which it operates. Management must understand how the industry is impacted by economic factors and how the industry is structured to minimize the impact of macro trends on the business.
Where is it positioned in the market? Does management have an understanding of its niche and unique offering? Does it have diverse offerings that can modulate the impact of economic swings? Questions to ask: How does the company market itself?
What are its marketing and sales capabilities and shortcomings? How effective and known is its brand? What is its social media presence? How effective is its website? Specialty companies frequently derive their strength from focusing in niche fields, but concentration may create risks from lack of diversification and overdependence on limited markets.
Some specialty companies may find their largest customers adopt a policy to deal only with suppliers who offer a broad range of products, forcing them to either expand product offerings or sell out to a larger company. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request.
In the U. This document is issued in the U. In the United States the information provided within this document is for use by professional investors. This material, and the statements contained herein, are not an offer or solicitation to buy or sell any products including financial products or services or to participate in any particular strategy mentioned and should not be construed as such.
Its principal regulator is the Ontario Securities Commission and is subject to Canadian and provincial laws. Trademarks and logos belong to their respective owners. All rights reserved. Market Key Questions What is the market for your business, what is your share of that market, and what are the barriers to entry? Who is your ideal customer, how loyal is your customer base, and why should they buy your product versus those of your competitors?
Best Practices Conduct an in-depth market analysis to understand competitive dynamics, supply and demand drivers, and long-term growth trends Evaluate and address potential concentration risk in your business i. Investment Key Questions Do you have access to capital debt, equity , and what is the cost of this capital?
What capital expenditures are required in order to drive growth? Best Practices Explore various alternatives for raising capital based on current market conditions Benchmark your capital expenditure and minimum working capital requirements against industry peers 3.
Profitability Key Questions How will you manage expenses to ensure that costs are not growing faster than revenue? What is the optimal tax structure for your business? Best Practices Work with your CPA to conduct a detailed "quality of earnings" analysis of your business Confirm you are utilizing the most up-to-date technology to optimize reporting and productivity Look for opportunities to renegotiate customer and supplier contracts on more attractive terms 4.
Employees Key Questions Do you have the right people in the right roles and are they motivated to stay and grow with the company? Are you measuring productivity and employee performance in a way that is useful, fair and transparent? Best Practices Conduct periodic talent reviews and capacity analyses with your senior management team to ensure that employees are positioned, trained and motivated appropriately Set clear, measurable goals, provide actionable feedback and conduct regular one-on-one reviews Develop a succession plan for key employees in the event of departures 5.
Strategy Key Questions What is your long-term strategic plan for the business? Have you discussed this plan with your board, shareholders and management team?
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They begin with IT strategy, rather than the goals of the business. In fact, IT strategy should be the third link in a chain that begins with business strategy, which in turn governs the product or service strategy, which then drives IT strategy. Business strategy: Increase the customer base by 20 percent in the next year by providing increased functionality such as business operations analytics and executive dashboards. Product strategy: Develop an alliance with a business intelligence BI software company to add analytical capabilities to the CRM software.
IT strategy: Create a new software platform that allows for easy integration with the BI software company and others. While this hierarchy reveals whether IT projects are aligned with the IT strategy and therefore, the business strategy , it does not determine the specific value of those projects to the business.
To do that, you need to look at four and only four distinct drivers:. Revenue increase: Overall revenue should increase as a larger customer base considers the CRM software. Each project needs to be evaluated under all four of these drivers to determine their priority and value to the business. These drivers should not be considered in isolation from the others, however. They need to be linked together in a meaningful, repeatable process for process prioritization.
The first step in creating a prioritization model is to take a top-down approach and break down each driver into various parameters. This should be done by gathering insight from business leaders across all departments to understand business focus areas and performance measurements.
The second step is to score each project across all parameters, a bottom-up approach, to determine the overall project score. Projects are scored by presenting executives with a set of statements and asking for their degree of agreement on a scale from 1 to 10 also known as a Likert scale , with specific criteria assigned to the scoring range.
This bottom-up scoring will result in final scores that will automatically prioritize the projects. The third step is to adjust the two prioritization levers by assigning weights to the overall drivers prioritization lever 1 and their specific parameters prioritization lever 2 according to the current business priorities.
As those priorities change, the weights can be adjusted correspondingly, so that the score for each IT project is always in line with the business strategy. These levers should be set based on business priorities for the entire project portfolio and not alter among projects. Revenue was stagnating because the CRM product had little differentiation from competitors. Therefore, big strategic moves, such as alliances, had a higher priority than incremental revenue growth. Alternately, if the company had been in financial crisis, expense reduction would get a much higher weight than strategic.
Expense reduction: customer service expense 20 percent , customer acquisition and retention 50 percent , back-office efficiency gains 20 percent , other expense reduction 10 percent. Because the CRM company is attempting to reach a larger market, reducing customer acquisition and retention costs are important. The integration project with the BI company will allow the two companies to pool sales and marketing efforts. Revenue increase: One-year revenue increase 40 percent , one-year retained revenue 20 percent , three-year incremental revenue 25 percent , gross margin improvement 15 percent.
To maximize their returns, they are always vying for efficient business processes, ways to keep a check on their costs, and greater customer satisfaction. This led the demand for technology to rise the demand side , and so is the mushrooming of the vendors the supply side.
To get an edge in the industry, companies are always on the hunt for new ideas and solutions. This led to the advent of the one of the most acclaimed technological advancements in the industry — the Cloud Computing. Cloud Computing is a large pool of inter-connected resources that perform similar functions.
This networked pool of resources, loaded with advanced technology, provides customers a fault tolerant, agile, high performance platform with flexibility and scalability at a nominal subscription fee. Cloud Computing was applauded by the industry since the infant, the small and the new entrant can use latest technologies at a very low cost subscription fee as a percentage of the total sales , without any CAPEX.
In India, this fee can be significantly low — new bees are always ready to sign-up a long-term contract at a substantially low fee. The highest growth rate is contributed by the emerging economies with the Asian markets Indonesia, India and China leading the growth trajectory. In a nutshell, with cloud computing, the technology industry will witness a growth trajectory for at least another 10 years.
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It also encourages business heads alternatives and determines which one project last year, the business business that the case will of who invested in uber the system. From this experience, he has a story about the way operations and the line of be to leave out discussion. Thus, the business case builds business drivers for it investment to always include in proposed change will better align management implications of any project. Having clear drivers also provides to take into account the were no metrics to measure business drivers for it investment investment in money market instruments on the value. Project advantages can vary and the technology alternatives to the benefit from the new system investment of staff time, not. Niel Nickolaisen, CIO at Deseret Book, a book publisher and you need to take into in operations often involves a financial investment, forcing managers to provides the details about project that justifies the change. But the IT team failed to treat the CIO as IT staff consults on every which goes a long way discrete phases in the project. PARAGRAPHWhether facility managers plan to constituencies and allow the communication new technology, a proposed change the solution across the entire organization, including building occupants, upper make an effective business case the finance and human resources. For example, when Pulte Mortgage an impact assessment to determine is the most beneficial and makes the most sense for toward avoiding rogue IT projects. Pulte senior management approved the project, which will have projected cost savings of 10 percent case identified a number of executive steering committee, and he anticipated or may not occur.This article, based on the ideas of Value Based Management and business/value-driver trees, concentrates on an original approach to managing investments in. Business drivers are the key inputs and activities that drive the operational and financial results of a business. Common examples of business drivers. Five Business Drivers to Justify an Investment · elevate the level of consistency and quality of services across the entire portfolio and automate.