230 Business Turnaround Analysis Questions

Before you can decide  if the business can be rescued and turnaround, you have to look at the ‘whole picture’. You need to understand the business, what makes it tick, its strengths and weaknesses and where the opportunities are. This business turnaround analysis provides you with about 230 questions to help you analyze the business. Sufficient analysis must be done to ensure that the correct options are selected for the improvement.  The evaluation of the business at this stage may take a few days for a small business, or up to several weeks for a larger company. The outcome of the turnaround analysis will determine your course of action. By having a clear picture of the particular problems you will be better prepared to cope with and solve the problems. Time is of the essence and certain basic steps need to be taken. 

Strategy is about choices that a business makes those impacts its outcome.  It is a set of decisions and actions resulting in the formulation of plans designed to achieve company goals and objectives.  Strategic management enables a business to identify, build and organize its resources to achieve its objectives.

1. Does the business have a mission statement stating in broad terms its purpose, philosophy and goals?
2. Has a business profile been developed to reflect its internal resources and capabilities?
3. Has the business’s external environment been assessed?
4. Does the business have a clear understanding of its competitive environment?
5. Can you match the business’s present resources with the external environment?
6. Can you effectively exploit your internal strengths (human resources, finance, technology, personal abilities, ‘exploiting’ commitment and loyalty of staff), while protecting areas of weakness?
7. Has the business developed a long-term strategy to achieve the objectives?
8. Has the business developed short-term objectives to achieve its long-term goals?
9. Does the business have any contingency plans in regard to marketing, pricing, financing and operations?

Planning and providing for succession is something that most small business owners don’t think of until it’s too late to do anything about the problem.  Providing for succession could be a ‘simple matter’ of handing over the business to a family member, i.e. son or daughter or spouse.

However, it can become more complex if there are partners and investors involved, or the business is going to be run by your whole family.  In planning the business’s future, you should ensure, with the help of a consultant, that you are using the best financial structure, the correct business entity and the best tax strategy, all of which will have an effect on the business entity and the best tax strategy, all of which will have an effect on the business’s profit and capital structure.  Since tax laws and government regulations concerning businesses are changing constantly, it is important that as an owner of a business you stay up-to-date and in touch with these matters.

1. Is someone there to operate and run the business while you are away?
2. Does the person have the necessary training to run the business?
3. Does the person work in the business?  If not, why?
4. How will your death or incapacity affect or influence the business?
5. What type of business entity will best serve your needs?
6. What are the advantages and disadvantages of each of these entities?
7. Is your will well-thought-out, planned and up-to-date?
8. Whom do you want to take over once you retire?
9. Are they competent to run the business?
10. If the successor is a family member, will key personnel stay on and work with that family member?
11. If the successor is a partner, will family members stay on and work with the new owner?
12. Are all responsibilities for all key personnel and family members specified?
13. Have you spoken to all concerned parties about your plans for succession?
14. How do they feel about it and what are their concerns?
15. Have you provided adequate and sufficient information to your successor concerning the general operation and management of the business?
16. What other matters relating to tax, financial and estate planning need to be considered for the future prosperity of the business?

Assets Evaluation

Many businesses have sizeable sums of money tied up in fixed assets, such as land and buildings, plant and machinery, fixtures and fittings.  Other businesses may have an inadequate level of fixed assets.  In both cases, are these assets being utilized to the business’s best advantage?

1. Does the business lack any assets that may improve its capability to render a better service resulting in higher profitability?
2. Are the business’s fixtures and fittings, plant and machinery providing the required level of profitability?
3. Could some assets be sold to generate cash?
4. Do you need to replace any old assets?
5. Can you postpone purchases of all but essential fixed assets?
6. Can the business finance its own assets, or would it need outside financing?
7. Should outside financing be considered?
8. Can the business increase sales and profit with its current assets?
9. How can this be achieved and what plan of action is in place?
10. Can certain assets be used as security in case of unforeseen circumstances?
11. Are any other weaknesses evident or noticeable in the business?

The production facility

1. Is the facility coping with demand? 
2. How many sales did we lose because an item was out of stock, or we could not deliver on time, or the installation team was booked up for weeks in advance?
3. Can I access the resources needed to cope with growing demand in line with sales projections? If not, how will I address this issue?
4. Are stockpiles of raw materials, work in progress and finished goods in line with current demand?
5. How do the productivity levels I achieve in my facility compare with industry benchmark figures?
6. How would an unbiased observer with sound industry sector knowledge rate the facility in terms of the following: Workplace safety, with specific reference to practices prescribed by the Department of Labor? Total quality management? Overall performance excellence?
7. When last did I evaluate the benefits of outsourcing some manufacturing functions? Which activities could be outsourced? What would the advantages be? What would possible disadvantages be?

Business’s location

The type of business you are going to operate manufacturing, retail or service will play an important part in determining your business’s site.  Each business will have its own set of unique factors to consider when developing its location strategy.  Priorities the ones that will most benefit your business.

For Retailers

1. Is the business located in a high rent or low rent area?  Should it be?
2. Is the rent paid by the business competitive?
3. Is the location the most suitable for the business?  If not, what are the business’s options?
4. If in a low rent area, how does the business attract customers?
5. Is there a better site available in the area and what would the cost be in moving?
6. Do neighboring businesses draw potential customers into the area?
7. Is there a parking problem in the area?  How can this be alleviated?
8. How visible is the business in relation to other businesses in the area?
9. How do the other businesses in the area feel about the location?
10. Is the traffic/pedestrian flow sufficient to sustain and continue the business’s growth?
11. Are any other disadvantages evident or noticeable in the business’s location?

For wholesales

1. Is the location easily accessible and convenient for customers?
2. Is the business close to its markets?
3. Are costs in receiving inventory the lowest possible?
4. Would using an alternative means of transport improve efficiency and reduce costs?
5. Do customers collect orders, if so, how convenient is it to expedite the orders?
6. Would an alternative location reduce costs and increase profits?
7. Are your competitors better situated than you are?
8. Are any other disadvantages noticeable in the business’s location?

For factories

1. Should this type of business be close to its markets or its raw materials?
2. Should this type of business be close to its labor?
3. Is adequate labor available?
4. Would an alternative location reduce costs and increase profits?
5. Does the location make use of the best production layout?
6. Are costs consistent with those available at other potential locations?
7. Are adequate transport facilities available at competitive prices?
8. Would using alternative transport improve efficiency and reduce costs?
9. Would an alternative location reduce costs and increase profits?  Why?
10. Are any other disadvantages evident or noticeable in the business’s location?

For service business

1. Are customer visits an important part of the business?  If so, are your facilities for your customers comfortable and adequate?
2. What type of rent location does the business need high or low?
3. Is paying rent necessary, is it possible to work from home, if most of the business comes via telephone and email.
4. Is passing trade important to the business?  If so, can business be increased by advertising?
5. Is the location suited to the working needs of your employees?
6. Is there sufficient parking for your customers?
7. How far are your customers prepared to travel to your place of business?
8. How far do you need to advertise from your place of business?
9. Are any other disadvantages evident or noticeable in the business’s location?

Business’s layout

For Retailers

1. Does the business’s layout encourage customers to browse?
2. Is merchandising attractively displayed?
3. What are the current trends concerning aisle movement?
4. Is there adequate spacing between aisles?
5. Is the store brightly illuminated and well ventilated?
6. Are there adequate employee service utilities?
7. Do partitions obstruct customer and stock flow?
8. Is merchandise displayed for easy comparison and examination?
9. Is maximum view of store required by staff and managers?
10. Are the fixtures and fittings, colors and displays well suited for the type of customer sought by the business?
11. Is the removal of rubbish, garbage and other waste material planned for minimum amount of customer disruption?
12. Is point of sale material adequately displayed so as not to hamper customer flow?
13. Does the store need storage facilities, or is all the stock placed on the floor?
14. Are any other disadvantages evident or noticeable in the business’s layout?

For wholesales

1. Are popular lines of merchandise located in proximity?
2. Do customers visit the business on a regular basis?  If so, what is the mage projected?
3. Is there a minimum amount of stock handling between receiving and merchandising?
4. Is the receiving bay convenient for receiving stock?
5. Are aisles wide enough for efficient operation?
6. Are stacking racks of convenient height?
7. Does the store have adequate storing space?  Does it need the space?
8. Is maximum usage of space utilized in the store?
9. Does the store utilize straight aisles?
10. Are any other disadvantages evident or noticeable in the business’s layout?

For factories

1. Are first operations near receiving and last operations near dispatch?
2. Is maximum use made of the present layout?
3. Can unproductive movement of raw materials, goods in progress or finished goods be reduced?
4. Does the factory have a planned scrap removal system in place?
5. Does the factory have a strategy to handle noise, dirt, dust heat pollution etc?
6. Is quality control monitored continuously along the production line?
7. What is the procedure should an employee find a quality control problem?
8. Are sufficient quality controls carried out along the production line?
9. Is there a minimum amount of back tracking of work in progress?
10. Are distances at a minimum between operations?
11. Are service facilities for employees of a high standard?
12. Are materials delivered to employees and removed from their work area?
13. Does the factory have a strategy for expansion?
14. What other functions would be needed to increase operational efficiency?

Business’s Stock controls

The level of stock should be set at an acceptable level to keep the momentum of the business flowing evenly.  Without an adequate stock supply, a business cannot produce products to meet customer demands.  If stock levels are too high it results in money tied up that could have been used more productively elsewhere.  It is important to develop an approach that is appropriate to the management of the business’s stock.

1. What approach to stock control is to be used, i.e. fixed order quantity, fixed interval approach, two-bin approach or J.I.T?
2. What ‘margins’ should be added to cater for uncertainties?
3. What is the lead-time required for delivery of stock?
4. How much stock should the business carry?
5. How often does the business order stock?
6. When is the best time to order?
7. How are minimum orders established?
8. What is the total cost of storage?  (Capital tied up in stock, cost of borrowing, cost of warehousing, depreciation, stock shrinkage, insurance, rent, heating, light, and administrative costs, etc).
9. Does the stock have a shelf life?
10. Can a more effective stock control system decrease costs and increase profits?  How?
11. How often is stock movement monitored?

Purchasing methods

A business should formulate some sort of purchasing policy and procedure to determine a set of guidelines according to which suppliers are identified and selected.  Purchasing means ordering the right quantity and quality of goods, at the right time, from the right suppliers, at the right price to the correct place.

1. Are the correct suppliers being used?
2. Does the business use only local suppliers or can foreign suppliers be sourced?
3. Is the quality of the supplier’s goods monitored?
4. Have you ever inspected the supplier’s premises?
5. What is the record for service, quality, price and co-operation from the present supplier?
6. Is the business allowed to accept gifts from suppliers?
7. Does the business buy direct or through an intermediary?
8. Is a specific person responsible for the purchasing of stock?
9. Has the business taken advantage of the supplier’s discount offers?  Is it worth it?
10. Must all orders over a specific amount be authorized by a second person?
11. Are quotations requested before orders are placed?
12. Can a more effective purchasing operation contribute to the profit of the business?

Before taking extreme or radical action in your business you need to understand the market your business is servicing, be on familiar terms with who your customers are, what their needs are, and whether your business’s product or service can satisfy and meet these needs.

1. Is the business’s major problem a lack of sales?
2. If so, what has caused the decline in sales?
3. What has the sales trend been in the last year, compared with the previous year?
4. What factors are responsible for the current sales trend?
5. What were the forecasted sales volumes?
6. Have you defined your business’s target market?
7. Do you know who is buying the business’s product or service?
8. Should any of the business’s products/service be phased out?
9. Can you offer a service or product that your competitor cannot?
10. Was a proper market research conducted when the business was bought?
11. If not, should the research be conducted now?
12. Was any basic market research data studied?
13. What is the future outlook for your business?
14. Are any other weaknesses evident or noticeable in the business?
15. Can you exploit the business’s strengths?

The macro environment

1. What changes are taking place in society as a whole that could impact on the development of the market?  (Example:  as a new leisure activity gains in popularity, it creates growing demand for the necessary equipment).
2. What changes are taking place on the legislative/regulatory front that could have an impact on the future development of the market?  (An example would be the expected effect of anti-smoking legislation on the fortunes of cigarette manufacturers).
3. Are environmental issues being raised that could affect the future development of my business? If so, could these evolve into a threat to the continued viability of my business? What feasible counter measures could I institute to counteract this and what would this entail?

Trend analysis

1. What future trends are beginning to emerge, especially among established and prospective customers, suppliers and competitors?
2. How would developments in the field of technology impact the way in which the product is designed, made and/or distributed?

Concept analysis

1. Does the product itself and the way we bring it to the market continue to optimally satisfy market expectations?
2. Should the answer be “no”, what feasible steps could I institute to address the situation?

Customer analysis

1. What are customers’ product preferences (our most popular items)?
2. Why are they buying these products?
3. What are they really buying?
4. Does price play a major role in the buying decision?
5. What are my customers’ buying habits, for example in terms of location, store opening times, volume bought per purchase?
6. Would changes to any of these variables enhance my competitiveness and drive sales upwards?
7. What would this entail?
8. If given a good reason to do so, what other products out of my current range might be existing customers purchase?
9. What would it take to achieve this?
10. Who else might buy the same product?
11. How else can we get them into the store and/or get the product to them?

Competitor analysis

Analyzing and evaluating competitors is an important function that your business needs to undertake on a regular basis.  You need to identify and asses your major competitors’ strengths and weaknesses and compare your product/service with theirs.  You may not be able to compete directly with them but by observing, analyzing and examining their activities may provide you with information concerning future trends and movement in the marketplace.

1. What are your strong points and how can your exploit them?
2. How can you disguise your weak points?
3. Do you know who your competitors are?
4. Are you in an industry with many competitors?
5. Can you identify your main competitors?
6. Are you aware of any new competitors entering your market?
7. Could you respond to any competitor’s threats?  How?
8. Do you know your competitors’ strengths and weaknesses?
9. Is it possible to increase your market share?  How?
10. How difficult is it for competitors to copy your product/service?
11. Are there any differences between your advertising strategies and your competitors?
12. Can your business maintain its profitability in the face of stiff competition or declining sales?
13. Who are my top 5 competitors at present?
14. Are there any newcomers among them?
15. What is the estimate market share, expressed in %, each one of the competitors holds?
16. How does this compare with my company’s market share?
17. What new products have my competitors introduced over the past sic months?
18. How do we measure up in this department – how many products have we developed?
19. What differentiates each competitor’s range from my own?
20. Should their range be superior to mine, how will I rectify this?
21. If my range is better than theirs, how can I best exploit it?
22. Is horizontal expansion by one or more competitors, for example by opening up additional branches, likely to occur in the near future?
23. Should this happen, what level of threat would this pose to the continued growth of my business?
24. How would I respond to such a move and what resources would this require?
25. Is vertical integration (a competitor being bought out by a supplier) on the cards?
26. Should this happen, what level of threat would this pose to the continued growth of my business?
27. How would I respond to such a move and what resources would this require?
28. Is a merger between two or more competitors, thereby creating a single but more powerful competitor, on the cards?
29. Should this happen, what level of threat would this pose to the continued growth of my business?
30. How would I respond to such a move and what resources would it require?

Supplier analysis

Am I aware of “who is who” in the market and do I have an optimal relationship with the best suppliers in the sector?

Are the suppliers I deal with keen to keep my business – how do they express this?

Am I totally satisfied with the service I receive?

Am I aware of new suppliers arriving on the scene?

Am I aware of suppliers that seem to have been around for some time and have developed a good reputation, yet I have not dealt with them before?

Should any of the above call for action, what am I going to do about it and by when?

Does the industry sector suffer from over-capacity at supplier level?  (This could mean that the market is about to change from a sellers’ market to a buyers’ market – meaning that the stockpiling of inputs would be inadvisable.

Does the industry sector suffer from under-capacity at supplier level?  (This could mean stock shortage could arise shortly – the stockpiling of inputs becomes a strategic necessity).

Is a merger of two or more suppliers on the cards?  (This could lead to the emergency of one large supplier that holds a monopoly and threatens the equilibrium of the market).

Apart from customers, suppliers and competitors, who else influences the future development of the market?  (Examples would be lobby groups like industry sector groupings, consumer associations and the media).

Am I dealing with such groups to best possible effect?  (Remember Raymond Ackerman of Pick ‘n Pay fame who set himself up as the housewife’s friend and built his empire on it).

Should the answer be “no”, how can I rectify that?

Should the answer be “yes”, what else could I do to broaden my influence in this regard?

Promotion

1. Is marketing afforded the attention it deserves?
2. If not, what am I going to do about it?
3. Is my target customer profile as complete and up to date as it should be?
4. Do I have a marketing budget in place and is it adequate?
5. Does my advertising reach its target population?
6. Do I have mechanisms in place to track the effectiveness of my advertising?
7. Are the results of my advertising activities satisfactory?
8. Is it perhaps time to call in the experts?  (An agency, if well-chosen, can do wonders for your business).

Product life cycle

1. Where is my product in terms of the product life cycle concept?
2. Does this call for an intervention? If so, what resources will this requires and by when will it be implemented?
3. What discernible trends are emerging that could impact on future developments of the market for the product?
4. Looking 6-12 months ahead, is the market for the product expected to expand, contract or remain static?
5. Does this call for an intervention? If so, what resources will this requires and by when will it be implemented?

The sales and distribution channel

Increasing sales means planning, forecasting and budgeting.  In order for a business to realize its projected sales, managers must know what they want to achieve and how to achieve it.  Continuous evaluation of the business is needed in good and bad times.

1. Has an overall sales forecast been set for the business?
2. Have sales targets been set for individual/groups of products or services?
3. Has an overall growth objective been set for the business?
4. Do sales need to be stimulated?  How can this be achieved cutting prices, reducing costs, increased advertising or finding new markets for your product/service?
5. Has the business a defined and clear sales policy?  For example pricing and discount structure guarantees and back up service policies.
6. Are actual sales measured and monitored against targeted sales?
7. Are sales performance measured and assessed?
8. Have you analyzed your immediate competition?
9. How will competition react if you cut/raise prices?
10. How will your customers react if you raise prices?
11. Is the advertising program being assessed for its effectiveness?  How is this accomplished?
12. Can a secondary market for the product/service be found?
13. How much do our customers spend on the product/service?
14. Can the business offer a credit facility to encourage sales growth?
15. What additional promotional activities should the business be undertaking?
16. Are my merchandising efforts at least on par if not better than those of my competitors? If not, what will I be doing about it within the next four weeks?
17. Does my delivery mechanism continue to meet customer expectations?
18. Are improvements possible?
19. What would these improvements, if implemented, do to customer satisfaction levels?
20. What would this do to sales?

Quotations and tendering

1. Do I have a formal system in place that tracks requests for quotations and tenders and the outcomes this activity generates?
2. What is the conversion rate for quotations given to number of orders received?
3. Is this at least on par with industry sector benchmarks? If not, how will I improve this ratio?
4. By driving sales performance, especially at the level of tenders, am I risking falling into the trap of “over-trading”?

The human face of business

1. Are we interacting on a regular basis with customers?
2. Am I personally talking to customers?
3. Are my people talking to customers?
4. Above all, are we really listening to what customers tell us?

Pricing policies

Your business should analyze its pricing policies on a regular basis to determine whether an adequate profit has been provided for and to establish whether an opportunity exists to fine-tune prices upwards or downwards.  The importance of a sound pricing strategy cannot be sufficiently stressed in any business.

1. Regular and minor price modifications to your product/service can influence the profitability of the business.
2. Do you know which product/services are price sensitive?
3. Have you compared your prices with those of your competitors?
4. Are price adjustments small and incremental?
5. Have loss-leaders ever been used?  Does the price strategy reflect this policy?
6. How are mark-ups established?
7. What type of price policy is being adapted?
8. Are products/services priced for maximizing profits?
9. Is the price set in accordance with customer’s expectations?
10. Does the customer perceive the product/service to be of value?
11. Does the product/service require after-sales service, maintenance or technical advice and back up?  Does the business provide these services and is it priced accordingly?
12. Does the business have a pricing strategy to offset current products when they become obsolete?
13. Can it maintain profitability in the face of stiff competition or declining sales?
14. Can sales be increased to existing customers by using an ‘add on’ strategy e.g. burger plus chips?
15. Does the business have a pricing strategy plan?

Merchandising

Merchandising is part of the business’s communication mix and forms part of the business’s sales promotion activities.  It is the promotional effort made by a business to move goods at point-of-sale.  Merchandising includes window displays, store banners, labeling and packaging of the product, product demonstrations, samples and any special consumer buying incentives related to the product.  It includes free gifts, increased quantities at a reduced rate, cross product branding (putting a free sample into another brand a bar of soap with toothpaste), and any other incentive that will maneuver the customer’s attention to your product to make a sale.

1. Is the business a convenience store or a specialty store?
2. Are there a number of competitive offers being made on the same product?  If so, limit the offers to one.
3. Are customers aware of the offers on your product?
4. Is point-of-sale material well planned and organized?
5. Is the merchandising done in-house or is it contracted out?
6. Are free samples readily available?
7. Can a loss-leader be positioned around a merchandised product to attract attention?
8. Does the merchandiser understand retail management and associated operational problems?
9. Is the merchandising creative?
10. Do employees understand the importance of merchandising?
11. What additional merchandising activities should the business be undertaking?

Personal policies

The success of your business is dependent on having the ‘right type’ and number of employees.  Retaining the right staff is extremely important, therefore the employees you select must benefit from their work, be reliable and trustworthy towards the business and help the venture to grow and prosper.  You cannot do everything yourself!

1. Has a job analysis been conducted detailing the job description and specification?
2. What has the staff turnover been high or low?
3. If high, has the cause been established?
4. Does the business comply with employment equity?
5. Does the business provide initial training, on-going training and refresher courses for all employees?
6. Do all employees know company policies?
7. Do employees understand the company’s disciplinary procedures?
8. Are the salaries being paid in-line with current market trends?
9. Do opportunities exist in the business for further advancement?
10. What incentives are currently being offered?
11. Do the present policies need to be reviewed and restructured?
12. Would an outside professional be needed?

Personal policies

In order to complete a skills audit matrix some questions need to be answered:

1. Who is responsible for what task?
2. Is the standard of performance known for completing the task?
3. How consistent is the performance?
4. Are the employees capable of multitasking?
5. During annual leave/absenteeism, how are the skills covered by whom and how efficiently?
6. As a result of a shortage of human resources, how many crises have occurred over the past 6-to-24 months?
7. What were the consequences of the crises?

Documentation and guidelines

1. Have formal job descriptions for all positions been compiled and are they up to date? Do my people understand that job descriptions should be seen only as guidelines?  (Actual job responsibilities may vary according to business realities at any given time).
2. Is the employee handbook kept up to date? Did every one of my people receive a copy and have they signed for it? Is it being referred to frequently and does everyone fully understand its importance?
3. Is the workforce development plan up to date and does it reflect appropriate BEE policies? Do we rigorously adhere to our manpower plan when filling existing or new positions?
4. Has a formal document that sets out the recruitment process been drawn up? Is it kept up to date? Do we rigorously adhere to the guidelines it sets?
5. Has a formal document that sets out the dispute resolution process been drawn up? Is it kept up to date and rigorously adhered to? Has it been made accessible to every one of my people, for example by incorporating it into the employee handbook?

Performance enhancement issues

1. Do I lead by example?
2. Is the example I set likely to instill the desire in my people to emulate me?
3. Do I lead people into action?
4. Should my leadership skills require honing, how will I address this and by when?
5. Am I satisfied that every member of the team knows precisely where they fit in and what is expected of him or her?
6. Has a career path been mapped out for every member of the team and is it used?
7. Are training initiatives in place to address skills shortages?
8. Have I considered the introduction of learner ships?  (It’s not only the right thing to do; it makes commercial sense as well)
9. Do I conduct regular performance review sessions with every member of my team?
10. If not, how will I rectify this?
11. If yes, did the individual and I jointly set performance targets for an agreed period?
12. To prepare promising individuals for a future leadership role, did I delegate responsibility for clearly defined projects together with the necessary authority to them?
13. If so, did I provide adequate ongoing mentoring and support?
14. Did I monitor progress without unduly interfering?
15. On completion of the specific project, did I evaluate the outcome fairly and provide comprehensive feedback?
16. Do I hold regular meetings with my team?
17. Do these meetings indicate that staff morale in general exceeds, or at the very least matches, established industry sector benchmarks?
18. Are staff meetings generally a positive affair, or do attempts to use them, as a “forum for complaints” tend to dominate proceedings?
19. Are project meetings and task-related workshops as productive as they should be?
20. Is a formal follow-through and progress reporting procedure in place?
21. Is a staff incentive scheme in place?
22. Is it still relevant and sufficiently attractive to actually motivate people?
23. Is it designed in such a way that it rewards performance rather than mere attendance or participation?
24. Does every team member have a fair chance of qualifying for incentive payments?
25. Is any intervention needed and if so, what needs to be done?

Management information system

Most times business people have insufficient and poor information regarding the performance of their business and generally the information collected will not warn the owner of any impending failure.  Research suggests that many businesses owe their failure to inadequate and ineffectual management decisions.  Owners base their decisions on information exacted from annual reports, which is very often better suited for the Receiver of Revenue than for the business.  Having the correct information is basic to the success of any business operation.

1. Do you know what your turnover figures are?  What your gross profit and expenses are every month?
2. Do you know what your monthly net profit is and more importantly your cost of sales?
3. Do you compare these figures to your budgeted figures?
4. Are monthly cash flow figures prepared and compared to budgeted figures?
5. Are monthly sales figures and gross profits for each individual product or category of product prepared each month?
6. Do you know what the monthly sales and gross profit are for each customer?
7. Do you know what the monthly sales and gross profit are for each sales representative?
8. Are actual figures achieved compared to your planned figures to ensure that the business stays on track?
9. Do you receive accurate and intelligent feedback from your sales representative?
10. Are stock reports received showing stagnant items?
11. Do you have a debtor’s age analysis?

Leadership appraisal

A long list of different entrepreneurial characteristics exists in literature.  The following are some qualities that a successful owner would need to turn his/her business around:

1. Able to work exceptionally long hours.
2. Autocratic, with an understanding for the softer issues.
3. Flexible ability to adapt, listen and revise views.
4. Analytical – make decisions with minimum amount of data.
5. Prioritize workload.
6. Confidence in own ability.
7. Take unpopular decisions.
8. Ability to work the short-term vision.
9. Entrepreneurial a go-getter.
10. Good negotiating and communication skills.
11. Dedicated to push through change in demanding and challenging times.
12. An enforcer of change and discipline.

A team player but independent, tough and single-minded to achieve recovery. The following questions relate to leadership appraisal and the business.  Below are lists of prompts that may assist when doing a leadership audit:

1. Is what you are doing now moving you closer to achieving your turnaround objective?

2. How is your time spent?  Move away from unproductive tasks and concentrate on the responsibilities that will improve profitability and cash flow.

3. How well do you manage your time and organize your workload?

4. How willing are you to take on the responsibilities of managing the turnaround of your business?  If you believe that there is no hope for the business’s survival, how will you convince the stakeholders?

5. Do you have the stamina and endurance required to turn the business around?

6. Are you motivated to see yourself through the hard times, the long hours and the frustration of turning your business around?

7. Can you visualize the success of your business?

8. Are the managers experienced in their related fields?

9. Are managers properly trained to undertake and understand the urgency of the situation?

10. If another company bought out your business, would this company use your existing managers?

11. Can you (as manager/owner) step outside your circle and visualize where the company is going?

12. How willing are the top members of the business to see the turnaround process through to completion?
13. Are you capable of selling the vision to the stakeholders?

Accounting system

‘Back-of-the cigarette box’ accounting systems are out.  Do not let the state of your books become your worst enemy.  Keeping an inadequate set of accounting records will not help you in running your business successfully.  Having a continuous cash flow is an important part for efficient management of your business:

1. Do you prepare monthly statements each month?
2. Does the business have a complete accounting system?
3. Would a newer up-to-date accounting system be more convenient and reduce workload?
4. Do you know the correct amounts owed by your creditors?
5. Do you know the correct amounts due to creditors?
6. Do you invoice debtors immediately?
7. Do you handle amount queries promptly and immediately without delay?
8. How do you handle slow payers?
9. Are discounts given for prompt payments and conversely do you charge penalties for late payments?
10. Do you prepare a regular aging of accounts?
11. Are any other accounting weaknesses evident or noticeable in the business?

Planning, organizing and controlling your business’s financial activities is an important function that needs to be managed correctly so that your business can generate an income, provides a profit, grow and reach its long term objectives and goals.

1. Does the business have a financial policy?
2. Do you operate and apply an effective cash management system?
3. Have you implemented an effective budgeting system in your business?
4. What is the level of the business’s working capital and is it sufficient?
5. What is the business’s liquidity position?
6. Does it have trouble paying its current bills, if so, why?
7. Is the creditworthiness of each customer evaluated?
8. What is the solvency position of the business?
9. What percentage of Gross Profit goes to paying the various expenses?
10. What is the current ratio and acid ratio of the business?
11. What is the return on capital employed?  (R.O.C.E)
12. What is the return on Assets?  (R.O.A)
13. Are any other financial weaknesses evident o noticeable in the business?

Credit Policies

If your business sells on credit, you must evaluate the creditworthiness of your customers and whether it is worthwhile to offer credit.  Credit sales must have a positive effect on your business.  The business needs to establish credit policies and take into account that credit sales mean additional administration for the business.

1. Is the business financially stable enough to have a credit policy?
2. On what terms will credit be granted?
3. Will credit sales have a positive effect on your business?
4. How will the creditworthiness of each customer be evaluated?
5. How and who will manage the debtors’ book?
6. What is the cost of administrating the debtors’ book?
7. Does the business have bad debts?  What is its percentage to sales?
8. Have the bad debts been written off?  Are they too high?  Are they realistic?
9. Are discounts offered for early settlement?
10. Does the business use credit cards?  Are the costs taken into account?
11. Has an age analysis been done lately?  What does it show?
12. Has the business taken full advantage of credit that it has been offered?

Financial Projections

Are our budgets meaningful and carefully maintain up to date?

1. Do we achieve budget figures every time or at least most of the time?
2. Should deviations occur, have I examined the reasons for over- and under-performance and put measures in place to improve accuracy?
3. Has every key person in my organization provided input for financial projections?  (This is best done by asking for departmental sub-budgets for which each contributor is expected to accept responsibility).

Debtor's Control

1. How much money am I losing in the form of bad debt? Is this in line with benchmark figures for the sector?
2. Do I have a formal debtor's approval process in place? Is it still adequate? Is it rigorously adhered to?
3. Is debtors payment performance monitored daily?
4. Does a formal follow-up procedure for overdue accounts exist and is it adequately documented? Is it rigorously implemented? Are exception reports listing customers whose accounts are in arrears generated weekly or at least monthly?

Cash Flow Issues

1. Does actual cash flow conform to cash flow projections?
2. Is cash flow adequate to meet the ongoing obligation of the business in full, on time, every time? If not, how will I rectify this? By when will this be accomplished?
3. Are creditors balances carefully tracked and exception reports generated to monitor the following: Accounts that are about to fall into arrears; Opportunities to claim early settlement discounts from suppliers; Opportunities to pay leases and other recurring payments annually in advance rather than on a monthly basis, provided that this reduces the payment sufficiently.
4. Do I make the best possible use of terms granted by suppliers that do not offer early settlement discounts?
5. In appropriate circumstances, do I use surplus cash to stockpile raw materials and other items that are used in large quantities: If the supplier offers an extra discount for volume deals; Or to avoid the impact of a pending price increase?
6. Do I monitor cash balances and invest surplus cash at the best possible rate?

Am I making money?

1. Does the business’s cash flow allow me to receive reasonable personal drawings at appropriate intervals?
2. Do I earn a market-related or better return on shareholders’ investment?
3. Am I able to build financial reserves for reinvestment into the business?

Legal structure

1. Under what form is the business now operating?
2. Is this form best suited to the business’s needs?
3. What are the advantages and disadvantages associated with this form of business?
4. What form of protection does the business need?
5. Is unlimited liability a potentially serious problem for the business?
6. Is the business insured and is it adequate?
7. Does the center where the business is situated have insurance?  If so, what does it cover?
8. Against what risks is the business protected?
9. Has a specialist been consulted concerning the setting up of the business legal forms, i.e. insurance, tax and type of proprietorship?
10. What are the major risks associated with this type of business?
11. What other legal functions would be needed to ensure a “risk fee environment”?

Risk Policies

Insuring your self against fire and theft, flooding and fraud, liability and death will help reduce your losses.  Insurance provides one of the most dependable and effective means of safeguarding yourself and your business against losses that may be incurred.

1. Does the business have adequate insurance to cover theft and shrinkage, fire and floods, public liability or settlement of a lawsuit?
2. What protection has been provided for each of these risks?
3. If the business is a partnership, how will the business be effected if one of the partner's dies?
4. What protection has been provided for each of the partners?
5. Are key employees insured?
6. Do you pay worker's compensation?
7. What other eventualities need to be considered?
8. Did I prepare a risk analysis chart and if so, is it still relevant?
9. Is my insurance cover kept up to date?
10. Are the internal response mechanisms intended to deal with a crisis still in place? Are they still adequate? When were they last tested?
11. Do I have an external crisis support network in place on which I can draw, should the need arise? Is it still adequate? When was it last put to the test?
12. A very real, yet rarely considered risk:  will I be able to whiz through the occasional (and almost inevitable) slump in sales without undue strain on cash flow and damage to the business’s reputation?

1. Is communication with customers, be it in the form of telephone exchanges, mail, email or any other method, conducted promptly and efficiently?
2. Are invoices and other financial documentation checked for errors before they go out? Are they addressed to the correct department/individual? Do they go out on time, every time? Are requests for duplicates of such documents handled courteously and efficiently?
3. Are statutory reports completed and submitted to the correct department on time?
4. Are performance reports (external and/or internal) completed on time?
5. Are my accounting records kept up to date?