Other than the basic analyses of income, expense and operations, Winflow considers more attributes of a business, so that to find the best fit for our clients.
After setting the scope for the right industry and realizing the physical conditions, it is eventually the people who work for you that determine your success.
A bright future of a company is only possible with a good management team, which consists of:
- Board of directors
- Key employees / principals
- Advisory committee
- Consultants and other specialists
- Key management personnel to be hired
This team should include all key personnel who are responsible for decision making, operation guidance and supervising. And the following key characteristics are assessed for each company: experience, education, loyalty, strengths and areas lacking strength.
Even a great management team with clear policies needs great staff to ensure success. The importance of high quality staff is more pronounced in a human capital intensive industry, such as consulting and personal services. In these industries, much productivity of the company comes from employees’ skills, and qualified employees are not only scarce but also require extensive training.
Research and Development
Technology leads to growth in productivity and hence profit in a company. We assess each company and the technology they use by comparing them to industry and general business environment, not only on production but also in terms of management, accounting and marketing. And technology plans are usually good indicators of potential development.
R&D intensive companies usually hold their own research results as patents or trade secrets. We evaluate patents by comparing them to bids on similar patents, subtracting any costs for renewal, and adjusting the value according to the maximum protection period remaining. We will also evaluate trade secrets accurately by forecasting the additional cash flow it should bring to the company.
A great product is profitable, of high quality and brings customers high utility for the price. But it will not make the company who makes it successful unless the targeted customers are aware of such product. That’s the importance of marketing.
Promotion of brand names and trademarks adds potential value to the company. Advertising methods include flyers and brochures, promotional events, traditional paper media, broadcast media, and online advertising. Companies with different targeting customers find different promotional campaigns more cost effective than others. Apart from that, for many companies who are in the consumer product/services industries, an effective sales team and incentive program helps obtain more market share.
Reputation is another key factor of analyzing marketing of a company. This is, in many business textbooks, called the “power of the indirect message”. The charity events the company sponsors, the high cost but more environmental friendly paper used on promotional materials, and the taste of design and décor used on company premises, all send messages that cannot be found in financial reports.
Looking back at the fundamentals, the following analysis, although straight forward, is always the key for evaluating a company for acquisition.
- The value of real estate and potential appreciation/depreciation
- The book value and market value of equipment and its book/actual depreciation
- The cost, efforts and time expenses on each license and certificate the company has acquired
- Inventory and turnover period
- Amount of payables and receivables
An accurate evaluation will help you save and provide a strong basis for negotiation when it comes to business acquisition. Contact us today to find out how our consultants evaluate your business or the business you are about to buy.
1800 956 6897
At Winflow Financial Group, our consultants help entrepreneurs with our experience. Tell us about your business or investment today and find out how we can help your business save money and grow.