I came upon this Investopedia.com article, 9 Major Questions Investors Should Ask Management, by Glenn Curtis (https://www.investopedia.com/articles/stocks/08/questions-for-management.asp) and thought it was exceptionally relevant and beneficial to investors in and management of publicly traded companies. But I also saw the opportunity to adopt and adapt it for small and medium private or closely held businesses.
The nine questions provide formal, consistent structure, direction, process and methodology to be used for effective evaluation, planning, and management. And this may improve the productivity of all shareholder, stakeholder, and management relations and interaction as well as business performance and results.
My recommendations? One, read the article and put it to good use. Two, if you want some help adopting and adapting it for your SMB, review my “cheat sheet” below.
Question 1: Where do you see sales trending in the next 12 to 24 months?
This should include analysis of all relevant segments, including existing customers and prospects, existing and new offerings, existing and new geographic areas, etc. And it should include the marketing and sales process that has everything to do with who, when, and how much is sold and who, when, and what it will take to make those sales. It’s easier to do the math and create the numbers; it’s much more challenging to determine the process, methodology, people, timing, and other performance and activities needed to achieve those numbers.
Question 2: What are the risks associated with the sourcing of raw material, or holding the line on costs of services?
This could be adapted to a review of direct and cost of goods sold. Performing a SWOT analysis of your COGS and other Direct Costs is always a worthwhile activity and may allow you to capitalize on existing strengths and opportunities, strengthen and minimize weaknesses, and avoid or eliminate threats.
Question 3: What is the best use for the cash on the company’s balance sheet? How does the company plan to raise capital in order to fund future growth?
For a lot of SMB’s, cash from operations is the only source of cash. And lack of cash is a common issue. First, do you have a current, accurate, thorough understanding of current and near-term cash position and flow. A 13-week (or one-quarter) rolling forecast is essential. How will you address shortages or variability? Do success or growth opportunities exist that require more cash than you project you will have? What are the options to acquire more cash? A SWOT of cash and cash management options is also a worthwhile activity.
Question 4: Who are the emerging competitors in the industry in which you operate?
Be rigorous and thorough. Look up, down, and at all adjacencies. Your planning has much more to do with how you successfully position and operate your business in the market more than as a stand-alone, isolated, autonomous entity.
Question 5: What part or aspect of the business is giving you the most trouble now?
Use as is.
Question 6: How close is Wall Street in terms of estimating your company’s earnings results?
For most SMB’s this may be adapted to examining current forecasting data, process and methodology to determine if it is optimally relevant, accurate, complete, and thorough. In other words, reliable.
Question 7: What part of the business do you think is being ignored that has more upside potential than Wall Street is giving it?
For a lot of SMB’s it might be more relevant and effective to change “Wall Street is” to “we are.”
Question 8: Do you have any plans to advance or promote the stock?
Question 9: What catalysts will affect the stock going forward?
SMB’s may revise questions 8 and 9 to focus on company value. It might be helpful to look how current and near-term planning and expected results, as well as other catalytic influences, will impact various relevant valuation methodologies.
Over the years, I have heard many times put many ways that two of the biggest value killers of any business are lack of effective planning, unwillingness to stick to it, and ownership/leadership/management not understanding their “why” – the correlation between performance and financial results. I intend these nine questions provide you what you need to effectively plan, manage, and achieve your success.
9 Major Questions Investors Should Ask Management, by Glenn Curtis (https://www.investopedia.com/articles/stocks/08/questions-for-management.asp)