Business FAQ

Below are some of the most common questions and issues that we help small and medium size businesses address. If any resonate for you, give us a call to discuss them in person. Contact IBC

Pricing
Is our pricing covering costs appropriately?
Product pricing needs to be high enough to cover manufacturing costs, factory overhead and marketing/selling expenses, corporate overhead and still leave some profit. We can help take most of the emotionalism and anxiety out of product pricing questions.

Is now the right time to take a price increase/decrease?
As economic activity picks up, we expect there will be new opportunities for price increases that were not feasible in the tough pricing environment of the past few years. We generally advise clients to consider three things above all others when considering a price change:
1) how price-sensitive are consumers,
2) what are current and future projected cost trends,
3) are key competitors likely to follow your pricing action.

Cost Management
Is our purchasing function obtaining services and materials at the lowest possible cost?
Attaining lowest imaginable purchasing costs requires doing a whole series of activities just right, including: centralizing purchasing requirements, eliminating maverick buying, adapting best contracting processes, using competitive bidding whenever possible, and identifying and qualifying new suppliers.

Are manufacturing cost standards accurate?
If actual manufacturing costs are consistently coming in above or below the cost standards that your company has set, that is probably an indication that the standards need to be revised. Standards need to be sufficiently detailed so that the reason for variances (e.g., manufacturing yields, efficiencies, labor, material pricing, product mix) can be understood by the person or departments accountable, and future adjustments made. We have expertise in this area and can help.

Growing the Business
How should we decide if now is the right time to expand?
You may already have a strong intuition that it is the right time to expand or acquire. We can help you finalize your decision with confidence, with an objective and thorough analysis of market opportunities, investment, risk, returns, and possible competitive response.

What financial measures should we use to evaluate new investments/acquisitions?
We prefer Discounted Cash Flow, to determine if project returns (i.e., Internal Rate of Return) are high enough, given your organization’s Cost of Capital.

Business Planning
We don’t have a business plan in place, is that a problem?
Not having an up-to-date business plan can be a problem, especially if your key managers are working at cross-purposes because they are pursuing different goals. Further, we find that the very process of working on a business plan with clients can give them new insights about the best course of action; we offer guidance and support for every step of this process.

Can we get small business financing from equity investors with our current business plan?
We have extensive experience helping entrepreneurs write or polish their business plan for equity investors. Some past clients have only needed an executive summary, while others have only needed help with their projected financial results; we are flexible in our approach.

Financing
What can we do about under-performing assets?
There are so many possibilities with under-performing assets, it’s hard to generalize. We’ve seen instances where eliminating slow moving items can improve returns for a product line. We prefer to see plants running at 80 to 90% capacity, since our experience shows that this maximizes return on assets.

How do we put a plan in place to finance future growth?
Always “hope for the best, but plan for the worst.” Our style is to be very conservative when working with clients on future growth plans, including profit and loss and working capital assumptions. Financing that is lined up in advance won’t fall short of what is actually needed, resulting in a cash squeeze.

Financial Reporting
How come we sometimes lack the data about our business performance needed to make key decisions?
We can meet with your key managers, find out what information they are currently lacking to make business decisions, and then develop performance reports that will get them that information in the future.

Is it worth the trouble to determine profit and loss at the product level?
From our experience, it usually is worth the bother to calculate gross margins down to the product level. It sheds a lot of light on pricing tactics and may also highlight what the best opportunities are in terms of cost reductions. Product gross margin data may also suggest which products you want to push harder from a sales perspective.