Industry Analysis

Are you Winning or Losing?

Athletes get feedback on their competition by looking at the scoreboard or comparing their won/loss record to others. If they have more points on the scoreboard or more wins, they know they are doing well. But it’s different for a business owner. Most business owners don’t have the tools or the time to do competitive analysis. The result is that many growing businesses have no idea how they are doing versus their competition. They don’t see their competitive advantages and they miss opportunities to leapfrog the competition. Or worse, they don’t see blind spots in their own business until it’s too late and the business is failing.
This is when an experienced CFO can add tremendous value. He can help you figure out exactly where you stand versus other businesses in your industry and show you the strengths and weaknesses in your current business model.
Wouldn’t it be valuable to know if your gross margins are several points below the industry average? Or if your operating expenses are higher than other businesses your size? Or how your working capital stacks up against competitors? Competitive analysis can show you these things and many more to help you know what the score is versus your competition, and ultimately it will help you to have a winning business.
Competitive analysis is critical to a winning business. But until recently, only very large businesses could afford this kind of expertise full time. This is another example of how a good Fractional CFO can make a huge difference for your business. You get competitive analysis expertise without the full time hire. Talk to a Fractional CFO today to find out what your score really is.
For example, let’s say I told you that your business was worth $1M. That would be interesting information. But if I went a step further and told you that your business was worth $1M today but your gross margins were 5-6 points below the industry average and if you could just get your gross margins up to the average for your industry your business might be worth $1.5M. Now that’s not just interesting, it’s valuable information. Now imagine I took it a third step and showed you several ways to improve your gross margins over the next 24 months to get them up to the industry average which results in a higher business value. That’s not just interesting information; it’s a solution to a more valuable business!
Business Valuation or a Solution to a More Valuable Business?
Because business owners don’t want just a business valuation, they want a more valuable business!
Business Valuation can provide valuable insight into building business value, especially if the business valuator is also an experienced CFO. The result is a blueprint for a more valuable business. Here’s how it works:

  1. Determine the current value of the business using business valuation techniques
  2. Isolate the “value drivers”; these are the things that make the value what it is currently. For example, your business is worth $1M today based on the income method, but analysis shows that your gross margins are 5-6 points below industry average and your revenue is highly concentrated in one large customer. If you could improve gross margins to something closer to industry average and reduce the reliance on one customer the value might be closer to $1.5M.
  3. Design specific steps to increase gross margin and diversify customer base over the next 24 months. This is where the CFO experience comes in.

The end result is a more valuable business! Want to learn more? Call Precision CFO today!