3 business analysis questions
Planning is the foundation of any business. Individual planned indicators or industry averages can be used as base ones. To understand whether the intermediate, final performance indicators for the reporting period correspond to these indicators, business analysis allows. Its results are taken into account when making managerial decisions.
Business analysis allows you to identify white spots in the conduct and or accounting of financial and economic activities. He also solves the problem of finding reserves to eliminate errors and implement new projects. In addition, timely analytics contributes to effective financial result planning. As a rule, several indicators are analyzed at once. The standard list includes investments, marketing, margins, finances, resources and personnel.
How does business analysis work?
Analytics in action is easiest to see with examples. Let’s take a company that was forced to suspend its activities for 3 months and, of course, suffered losses. In order to return to work without incurring new ones, the organization will have to decide how many staff can and should be reduced.
Business analysis includes a metric such as HCVA. The value added of human capital determines the real impact of employees on the company’s profits. The following indicators are required to calculate HCVA:
The organization’s income for the period (12 million rubles).
The expenses of the organization for the same period (9.6 million rubles).
Labor costs (3.9 million rubles).
Number of employees (76 people).
HCVA formula: (Income – (Expenses – Labor costs)) / Number of employees. When calculating according to the data from the example, the added value is 8289 rubles.
Two indicators are calculated: pre-crisis and actual. Let’s take into account the decrease in income by 35%, the reduction in labor costs to 2.6 million rubles, and the total expenses to 6.72 million rubles. While maintaining the same number of staff, the added value falls by 1.7 times and amounts to 4842 rubles. To restore the pre-crisis HCVA indicator, the company will have to keep 44 people in the state.
What will happen without business analysis and if you want to keep the number of staff? The company will suffer losses.
How is business analysis done?
The top analytics method is SWOT. It identifies strengths, weaknesses, opportunities and risks (threats).
Also popular is the “Boston Matrix”, which provides for the division of goods into groups, taking into account the pace of sales and the growth rate of market share. This method is loved by marketers. The Boston Matrix identifies groups of products that require large investments in order to generate future profits, and groups of products that need to be phased out.
The ABC method is suitable for the analysis of production costs. It is focused on the assessment of resources, from the use of which the enterprise receives the maximum (80%), average (15%) and minimum (5% and below) income.
What is the result?
An indication for business analysis is not necessarily a real drop in sales, profits. Working ahead of the curve is a rational move. Comprehensive analysis reveals factors for increasing profits and growth in sales, the reasons for the decrease in performance indicators. It also allows you to predict profit when the above indicators change.
According to the analysis, the company’s management evaluates its financial stability, solvency, resource efficiency, the validity of marketing and advertising expenses, and the feasibility of implementing investment projects.