Is Your Business a Bit Sluggish or Suffering From a Runny Nose?
When you’re feeling unwell or lacking in performance, you would usually
visit your GP or health professional for a diagnosis and possibly a
remedy to get you back on your way to good health -right?
Well, your business is no different. Sullivan Dewing now uses a complex,
financial modeling software program to provide a critical financial
analysis – or Health Check – of your business.
Major Australian banks have recently adopted this software for the
specific purpose of processing and approving business finance
applications.
Apart from assisting in identifying the ability of a business to meet
the banks “hidden criteria” for finance applications, this service has
been invaluable in identifying the key drivers within a business that
can assist in turning a loss making or cashflow poor business into an
extremely successful and “healthy” one.
Here are some recent case study scenarios conducted on Sullivan Dewing clients:
Case Study 1 – Manufacturing business in building industry:
Analysis of the previous 4 years financial results demonstrated that the
company is performing very well and is in a strong position to sustain a
high rate of growth.
However, by analyzing the key strengths and weaknesses of the business,
it was found that due to the fact that the business was successful
enough to avoid the “cashflow crisis” that so many businesses
experience, the culture had become such that cashflow wasn’t important!
So, whilst it was confirmed that the business had good positive cashflow
($156k), undertaking the Business Health Check lead to the discovery
that the cashflow of the business had been trending down over recent
years and as a result the business currently had “cashflow wastage” of
$357k.
This is underutilised surplus cashflow. In this case, by working on
improving a few key drivers of the business, the owner has the potential
to personally benefit from the increased levels of surplus cash that
result from the changes through paying off personal, non tax deductible
debt (the home loan!).
Case Study 2 -Service business to commercial clients:
In contrast to case study 1, the analysis suggested that it is vital for
the ongoing future of the business that certain key factors be
addressed and improved as the business was not currently in a position
to sustain future growth.
If the business continues to grow as it has, all things being equal, it
would have a detrimental rather than positive impact, as cashflow would
dramatically decline. In fact, a 5% increase in revenue growth would
result in a reduction in cashflow of $100k!
It was shown that little attention has been paid to the key drivers of
the business as they are trending in a negative position. The overall
effect of this has been that the growth of the business in 2006 was at a
rate higher than the business could sustain and has thus put a heavy
strain on cashflow.
The good news is, that by knowing this information and by making some
relatively minor, informed changes to the key drivers of the business,
cashflow has the potential to turn around from a negative $111k to a
cash positive position in the next financial year.
Every business we have analysed has leaked cashflow. No business is
financially fully fit; there is always room for improvement. It is our
bet that your business has leaking cashflow too – why not let Sullivan
Dewing review your business so that you can turn your business around
and benefit from that cashflow wastage?
Contact Jeni Wilcock on 9526 1211 or by emailing jeni@sullivandewing.com.au if you would like to have a Business Health Check conducted on your business, or to find our more information.
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