What is Trend Analysis?
Most companies develop trends over time. These trends can dictate how well or poorly the company runs. Here are some of the trends that businesses may experience but may not be fully aware of as they go through day-day operations.
Trends are both internal and external – We analyze both so that we can recommend the best way in which to position a company going forward – both the internal and external workings of a company need to be healthy in order for a company to sustain long term growth and profitability.
Internal Issues/Trends:
Are the company’s admin and financial processes & procedures giving them the data and results needed to understand how well/poorly they are currently performing?
Is the owner aware of growth or declines in revenue on a monthly or weekly basis?
Is the owner aware of the company’s expense structure? Does the expense structure make sense given the level of revenue?
Is the staff sufficient for the current level of growth or for the growth plans the owner has in place for the next 1-3 years?
What is the status of Accounts Receivable (A/R) and Accounts Payable (A/P) – are these key items in line with the business plan? Are there any customers who are falling behind in payments? Accounts Receivable can dramatically affect cash flow – how healthy is your A/R?
Personnel Policies – are company employees both happy and as productive/efficient as they can be? What, if any, improvements can be made?
External Issues/Trends:
Interest Rates – Changes in interest rates can impact borrowing costs – both positively and negatively. As a business owner, keeping up on economic changes and its effects on businesses in general is key to building and maintaining a healthy company. Timing is everything – high interest rates can discourage investment and expansion while low interest rates may stimulate growth. As you structure your operations, keep these external trends in mind so that you are making changes at the most beneficial time economically.
Inflation – Rising inflation can increase your operational costs, squeeze your profit margins and reduce consumers’ spending power. Be aware of the trends here – as they change, so should you change the way in which you view the demand for your company’s products and/or services.
Trade Policies and Tariffs – Trade wars, tariffs and international sanctions can disrupt general trade flows – both nationally and internationally. Keeping abreast of such changes will help you minimize any negative effects these trends could have on the cost and availability of materials and markets.
Disruptive Innovations – New innovations can displace existing products and services, forcing companies to adapt to new environments or risk losing market share. For example, the new electric vehicle market is currently disrupting the traditional automobile industry. Changes will need to be made by the auto makers to keep up with this new innovation.