Management Consultancy – FAQ
- Why do companies conduct business valuations?
Some of the main reasons for seeking business valuation services are:
- Funding: To negotiate with banks, venture capitalists or investors
- Dispute: Resolution for fair settlement of ownership interest among shareholders
- Litigation Support: To negotiate settlement in pre-trial, trail, or arbitration scenarios
- M&A: For realization of growth strategy through Mergers or Acquisitions
- What are the different methods used in business valuation?
Your business value can be determined through several approaches depending upon the specific context. These approaches could be either Intrinsic i.e., based on the company’s inherent characteristics and performance or Extrinsic (or Relative) i.e., based on transactions involving comparable companies.
Most popular of these methods are the Asset approach, Income approach and Market approach. Often, multiple approaches are used simultaneously and the weighted value derived from these.
- Asset Approach: This is typically used with businesses that have substantial tangible assets like inventory and equipment.
- Income Approach: This type of approach uses prior earnings to estimate company value based on income potential.
- Market Approach: This is based on the prices of similar or comparable businesses that have recently sold.
- What are the recommended approaches in management consultancy – especially for family businesses and SMEs?
For most businesses, and more so for family offices and SMEs in the UAE, an interactive engagement with constant communication works the best. The focus in such cases is not on just making recommendations, but also on implementation monitoring and support.
In a nutshell, a good approach would be as follows.
- Engage with the leadership team to finalize and prioritize the key outcomes desired from the consultancy
- Co-create or align on the vision; define strategic objectives and plans
- Assess the current state through workshops with the senior management, other key personnel and through review of internal policies and processes
- Arrive at multiple options for the organization structures, select the best option and finalize department level roles and KPIs
- Once department level roles and KPIs are finalized, deep dive into each department and create/ amend processes and KPIs to align with the changes
- Conduct team workshops and awareness sessions
- Determine responsibilities and monitoring methodologies
- Provide ongoing monitoring and change management support
- Why are performance management systems important for SMEs and local/regional businesses?
Several organizations across the UAE, especially in the SME sector, have grown organically through the drive of their leadership and the contribution of some of their key employees. However, while growing and scaling up, it is important to ensure that the right people are hired, retained, and nurtured. In order to achieve this, organizations need to implement strong Performance Management Systems (PMS) to objectively measure and reward performance. Such a system is also important to align organizational strategy and objectives to individual objectives and deliverables across multiple levels.
- What is process mapping?
Process Mapping means flowcharting the critical business processes using a more hierarchical approach. Prior to mapping processes, it is important to define the process hierarchy clearly across all functions of the organization.
This means classification using a framework that comprises process categories, process groups, processes, activities, and tasks. While going to the task level may not be always needed, the remaining levels are a must and should be captured in process maps for the purposes of clarity and adequacy of mapping.
- What is the main purpose of business process mapping?
The main purpose of business process mapping is to promote transparency and allow organizations to improve upon their current practices by creating a clear, detailed visual representation of workflows.
Process maps are an important tool for software implementers to capture business requirements accurately ahead of ERP implementation. By creating the right process maps, organizations can ensure that user requirements are understood in full and clearly conveyed. Moreover, it also provides clarity to all parties on what processes can be automated using the ERP and what processes will need customizations or workarounds, as also if there are any processes which cannot be automated at all.
- What are feasibility studies used for?
A feasibility study report helps in estimating the possibility of successful project completion. An organization or an entrepreneur will be able to assess the possible positive and negative outcomes from a project with the help of a feasibility study.
A well-researched and documented feasibility study will also provide insights to potential lenders or investors regarding the financial viability of the project. It should also be able to highlight key risks, mitigants, milestones and provide a clear path to action for the execution of the project.
- How are feasibility studies conducted?
Most feasibility studies have three distinct elements to them.
- Technical Feasibility – comprising all matters relating to technical aspects of the project including all related requirements, specifications and costs
- Market / Commercial Feasibility – which covers the revenue aspects of the project including market size, demand trends, competitive environment, pricing, Go To Market strategies etc.
- Financial Feasibility – Inputs from these are captured in the project’s financial feasibility which focuses on projections of financials, investments, the project’s projected Return on Investment, Break-even period and the Project’s Net Present Value.
Sensitivities of various assumptions relating to the project are also factored into the financial feasibility, thereby showing multiple financial outcomes under different situations.
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