Dover Analytics | Business Analytics

Business Analytics

Business Analytics (BA): Improving Operating Margins and Building Firm Value

It’s common for businesses to encounter shrinking operating margins as they grow and mature, and it’s not uncommon that owners and managers are not sure what causes this condition. Left unaddressed, margin deterioration will decrease cash flow and diminish a business’s value.

Our Business Analytics group can explore and uncover the areas for improvement and recommend ameliorative actions. If properly implemented, these improvements can lead to higher business valuations.

How We're Different

We examine and analyze the issues effecting business performance, growth, and value. Through management and employee interviews and penetrating data analysis, we identify causes and work with owners and managers to formulate ameliorative strategies.

Business Issues Resolution

Our deep, insightful examination of business situations gives you the information and analysis to make fact-based decisions about the issues and problems in your business.

Operational Effectiveness

The most common issue that business owners bring to us is shrinking operating profits. The trend extends over many years of decreasing net cash flows and smaller pre-tax accounting income (not the net income on tax returns). Some of the causes are:

Unproductive or underutilized assets
Process inefficiencies
Insufficient controls
Overexpansion
Poor-fit acquisitions

As Certified Management Accountants, we possess the skills and techniques necessary to distill financial and operational data into meaningful and actionable information about your business issues.

Preparation for Business Sale or Investment (taking on partners or investors)

Why you should begin positioning your business NOW!

Dover Analytics helps its clients “scrub” and prepare their financial statements for the eventual marketing and sale of the business. In combination with improving Operational Effectiveness (above), we help ensure that you present your business in the best possible light.

A business that exhibits three to five years of “clean” financial statements generates greater interest and a higher valuation than businesses with questionable records. Diligent buyers look everywhere for opportunities to reduce offer prices.

Prospective buyers and investors are more likely to feel good about a transaction if they can trust a business’s historical performance records and the owner’s representations.

Examples of sources of discomfort include (just a few of an endless list):

Income statements

Do not show different revenue sources.
- sales not separated from services
- no geographical revenue breakdown
Inordinately high Cost-of-Goods-Sold, or ridiculously low Gross Margin
Dubious expenses
- Vacation travel recorded as business travel
- Non-working family on the payroll
- Expenses for spouse’s or children’s vehicles (such as auto loan and insurance payments), but no vehicles on the balance sheet
- Mortgage and upkeep expenses for a second home, but no property on the balance sheet
- Salary payments to a sole proprietor

Balance Sheets

Assets
- Off-the-books loans to employees or family
- Overstated Accounts Receivable (no bad debt allowance or no aging schedule available)
- Overstated inventory values
- Fixed Assets not depreciated
Liabilities
- Understated Accounts Payable
- Off-the-books loan obligations (usually from family or friends)
- Unrecorded leases
Equity
- Improper accounting for owners’ draw or distributions
- No separate equity accounts for partners

Still have questions? We offer Free Consultations