PKF O'Connor Davies Accountants and Advisors
PKF O'Connor Davies Accountants and Advisors
Insights

Unlock the Potential in Your Business: A Business Enterprise Diagnostic Explained

By Brian Allen, Partner, PKF Clear Thinking and Michael Wesley, Partner, PKF Clear Thinking

Private business owner are always looking for opportunities to maximize the value of their business. This can be accomplished not only by making improvements and effectively addressing issues, such as declining sales or inefficient and costly operations, but also by avoiding decisions that could negatively impact value. Sometimes those decisions are not always clear to someone immersed in the day-to-day business. Whether you are looking to improve profitability or prepare your business for a sale, a Business Enterprise Diagnostic is a simple, inexpensive tool that can be used to gain an independent opinion and roadmap to optimize the value of your business.

What is a Business Enterprise Diagnostic?

A Business Enterprise Diagnostic is a comprehensive, objective, high-level review of your business used to validate assumptions, identify areas for improvement and assess risk mitigation. It is often performed in conjunction with an annual plan or forecast and is a tool that can be used by businesses to quickly identify areas of improvement to increase profitability, cash-flow and liquidity.

 It includes a detailed review of key business metrics, processes, procedures and managerial direction/synergies in key functional areas of the business, as compared to plan and industry standards. Generally, it also includes a SKU (Stock Keeping Unit) rationalization and productivity analysis and a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis. This provides important foundational information based on objective facts about where the business currently stands and provides an invaluable tool for developing a sound business strategy going forward.

The diagnostic can be tailored to the specific needs of the business and include a customized set of analyses to address areas of particular concern.

Do I Need a Business Enterprise Diagnostic?

Often, a company’s management team will know that there are challenges or opportunities to improve the business, but they may not be well defined. More importantly, the magnitude of the issues may not be known. As a result, management could be hesitant to hire consultants out of fear of having a long and expensive project that may not yield a positive return on investment. A Business Enterprise Diagnostic offers a lower commitment threshold and is an excellent tool for immediate feedback. By pinpointing critical areas that can be quickly improved, management receives a longer-term roadmap to develop a more robust strategic plan with actionable items that will be most impactful to the business. It’s the perfect first step.

How Does It Work?

The diagnostic process should be designed to be quick and efficient, ensuring minimal interruption to your business operations. Work can be done both remotely and onsite to analyze and fully understand your business, while minimizing disruptions. Upon completion, you should receive a report to review with your consultant which outlines key findings and recommendations. This report will serve as a valuable tool for you to develop a roadmap for strategic planning, with a focus on areas that will have the most impact on your business.

Data Driven Analytical Approach

The key to a quality diagnostic begins with a data-driven analysis. Data will be gathered from your business, including financial statements, sales and cost reports, operational processes, market information and other available sources. Key financial metrics will be prepared along with a review of critical processes and procedures. Other more detailed analyses will be performed to determine the best opportunities and biggest risks to your unique business.

Financial Performance
Included in all Business Enterprise Diagnostics should be a thorough review of the company’s financial performance and key performance metrics. This will include an assessment of the key components of working capital, such as cash and treasury functions, accounts receivable, inventory and other significant assets. Additionally, the company’s liabilities and debt structure should be analyzed and include a review of the accounts payable and a vendor analysis related to trade suppliers and other major vendors.

Debt Structure
Also included in a Business Enterprise Diagnostic is a review of the company’s debt structure to see if it is meeting the needs of the company’s working capital and capital expenditure requirements. Your consultant should have significant contacts within the lender community and can often identify opportunities for improvement that would result in increased liquidity and lower financing costs using the appropriate debt restructuring strategies.

Management Team and Key Business Processes

In addition to financial analysis, a Business Enterprise Diagnostic is used to identify areas for performance improvement. Examples include:

  • Review of key managers and the leadership team
  • Review of the functional areas and critical processes of the business
  • Review or assist in creating key performance indicators (KPIs)
  • Benchmarking key metrics with industry best practices
  • Identification and implementation strategies for quick-win initiatives as well as longer term improvements
Management Team Assessment

As part of the process, the diagnostic should include collaboration with business owners and key management personnel to gain a thorough understanding of their roles and core functions. Open conversations should be encouraged to understand leadership’s insights and opinions when it comes to what is working well and areas that require improvement. By collecting individual perspectives, specific operational issues can be identified, such as bottlenecks, resource constraints, or gaps in policies and procedures. Additionally, a comprehensive assessment of the management team’s strengths and weaknesses will be made and include recommendations to help identify areas of weakness and how the team can be more effective.

Business Processes

Depending on the type of business, we will review critical business processes for overall effectiveness and efficiency that include the following:
      • Manufacturing and production
      • Service delivery
      • Supply chain management
      • Sales and marketing
      • Employee recruitment, onboarding and training
      • Budgeting and forecasting
      • Accounting and financial reporting
      • Invoicing and collections
      • Customer service
      • Information technology
      • Procurement
      • Strategic planning
      • Marketing, including Customer Relationship Management (CRM)

Review of these processes are performed in context with the other financial and performance data collected in the diagnostic. It is tied together in the findings and recommendations portion of the report and can quickly be turned into actionable items.

Get Started Now

A Business Enterprise Diagnostic is an excellent tool to pinpoint critical areas to fix or improve a business and provide a solid plan to address those items specifically. It’s the most important first step to developing a meaningful and sound business strategy either by the company’s management team, or with the help of consultants. It is also a good tool for regularly validating assumptions and monitoring progress on previously identified initiatives.

It’s easy to get started and can begin with a simple phone conversation to discuss how a diagnostic can benefit your business.

Contact Us

If you have any questions or would like to schedule a Business Enterprise Diagnostic, please contact a PKF Clear Thinking Partner:

Brian Allen, Partner
PKF Clear Thinking
ballen@pkfct.com | 971.404.7733

Michael Wesley, Partner
PKF Clear Thinking
mwesley@pkfct.com | 404.229.8933

About PKF Clear Thinking, LLC

PKF Clear Thinking, LLC, a subsidiary of PKF O’Connor Davies, offers advisory services that help companies succeed, at any stage of their life cycle, with clear direction and practical, actionable solutions. The Firm engages with healthy companies to create value and works with troubled companies to preserve value. Our track record and years of experience working on hundreds of successful engagements has propelled us to become a trusted and respected advisor. For more information, visit https://www.pkfct.com/.

Media Contact
Posted In:
Posted On: