Company analysis: how to find growth points
A successful entrepreneur performs many tasks: producing a product or providing services, building a personal brand, developing marketing strategies. Not the last place in his work is the analysis of the company: what can be improved, in what direction to move on.
The onset of the pandemic and changes in the economy have led to the fact that a huge part of small and medium-sized businesses have closed. Therefore, those who remained, thought about further actions. Many entrepreneurs seem to know where to go, but are afraid to step into the unknown. It’s like being in your room, but in the dark. If you take the wrong step, you will hit your foot on a stool or break a crystal vase. It is the same in business: many are afraid of increased risks and potential problems.
However, most of the business will have to think about what to change for the better. For many small companies, this will be easy: often entrepreneurs do not work on the quality of service and assortment. In addition, they do not think about additional sales and feedback systems. In the light of recent events, such a business, if it makes a profit, is small, so it will have to reach a new level.
If the characteristics that need to be improved are no longer obvious, start looking for growth points. Growth points are specific ways to increase your profits.
Financial analysis for company success
Financial analysis is the study of key financial indicators and project results in order to adjust and create management, marketing, and investment strategies. It allows you to find mistakes in time and strengthen positive trends.
First of all, start with the macroeconomic situation in the world and in the country. Is the economy growing? What are the indicators of GDP, incomes of the population, unemployment and inflation. Pay attention to the exchange rate and forecasts of the Central Bank. Meanwhile, assess the position of the industry.
On the website of the Moscow Exchange, you can find indicators of sectoral indices, watch presentations of companies for investors. Imagine how the legislation might change, what consequences this will lead to for the industry.
Now we can move on to the financial results of the company. Several reports show them:
1 The balance sheet displays data on loans and borrowings, working capital, that is, current assets and liabilities. It also contains information on the book value of assets and equity. It also reflects the sources of asset financing.
2 The income statement displays gross profit, final profit, revenue, all income and expenses for a certain period. Shows the total profit or loss.
3 The cash flow statement provides information about the income from operating, investing and financing activities of the company.
The most important thing is to consider the key indicators identified in the reports in dynamics. Together with financial indicators, they analyze the company’s operating results, which often act as the main growth factor.
Next, the coefficients are calculated. First, the liquidity ratio, which shows the company’s ability to meet its debt obligations. Secondly, indicators of the capital structure, reflecting the stability of the business in the long term.
Compliance with planned indicators that are set within the company is analyzed. In addition, profitability is taken into account. In other words, it is the integrated efficiency of the company’s various resources.
Marketing analysis of the company
It is important not only to analyze the business of competitors, but also your own. As a result, there are several methods. Some of them are more superficial, others are deeper.
SWOT analysis is a business analysis method that helps to identify its strengths, weaknesses, opportunities and risks. It is primarily used for strategic project planning. The abbreviation was first announced at a business policy forum in 1963.
The essence of the method is to fix the largest number of factors affecting the business. On their basis, it is possible to draw conclusions about the components:
- S (Strengths) – strengths that distinguish the business from competitors;
- W (Weaknesses) – shortcomings that make the company less competitive;
- O (Opportunities) – opportunities that can be used;
- T (Threats) – threats that are dangerous for business.
- Strengths. For example, great experience, good reputation, price advantages.
- Weak sides. For example, low-quality equipment, lack of staff, narrow assortment;
- Opportunities. For example, the absence of strong competitors, the favorable location of the store, the reduction in the cost of raw materials.
- Threats. For example, laws restricting business, the emergence of strong competitors, a rise in the price of raw materials.
The QFD method, that is, in Russian, the quality deployment function, was invented by planner Yoji Akao in Japan in 1966. Its essence is to bring together different characteristics: consumer, technical and production. Then the product will be in demand in the market.
The work algorithm itself is something like this: we collect the most detailed consumer data, highlight the consumer and technical characteristics of the product. We compile a table where we write characteristics in the vertical column, and technical implementation solutions in the horizontal column. This is how we get the top needs: it becomes clear how to allocate the budget.
This is a more energy-intensive method, but it will give concrete results.
PEST analysis is a way to analyze the growth points and risks associated with the market situation. This is a long-term version of the analysis for years to come.
Several types of factors are evaluated at once. Political, that is, the global situation, domestic tax policy, the availability of subsidies, etc. Economic factors are especially important: for example, the level of inflation, the dynamics of unemployment, etc.
Socio-cultural factors, which include the standard of living of the population, education, etc. also affect demand and future financial performance. Pay attention to technological factors: innovative technologies, the pace of development of scientific activity.