Common Questions to ask_all

Question 1

Company Questions_general

Answer 1

Profits and revenues for the last three years
Customer segmentations - Characteristics, Changing needs, Profitability by segment
Product mix - Costs/margins, Product differentiation, Market share
Production capabilities/capacity
Brand - strength and what is it
Distribution channels
WCS (what constitutes success?) - Which metric is used

Question 2

Market Questions_general

Answer 2

Market size, growth rate, and trends
Where is it in its lifecycle (emerging? Mature? declining?)
Industry drivers
Customer segmentations
Margins – what are the typical margins in the industry
Industry changes - MA? New players?, Changes in technology?, Regulations?
Distributions channels
Major players and market share
Product differentiation
Barriers to entry/exit

Question 3

Developing a New Product_product

Answer 3

Will it cannibalize an existing product
Is the customer segmentation(s) the same
Can we use the same distribution channels
Can we use the same sales force – dont want a new sales force for just one product
How and where will this new product be produced
Will we have to hire new workers or retrain current workers
What’s special or proprietary about it? Is it patented? For how long
Are there similar products out there? Are there substitutions
What are the advantages and disadvantages of this new product
How does the new product fit in with the rest of our product line

Question 4

Market_market entry

Answer 4

What role does technology play in the industry and how quickly will it change
How will the competition respond

Question 5

Market Entry_general

Answer 5

Who are the competitors and what size market share do they have
How do their products differ from ours
How will we price our products or services
Are substitutions available
Are there any barriers to entry
Are there barriers to an exit? How would we exit if this market sours
What are the risks? Examples include changing market regulations or technology

Question 6

Market Entry_barriers to entry

Answer 6

Lack of brand or street cred
Capital requirements
Access to raw materials
Access to distribution channels
Lack of human capital
Government policy
Industries dominated by a small number of big players can be a barrier

Question 7

Market Entry_ways to enter

Answer 7

Start from scratch and grow organically
Acquire an existing player from within the industry (grow inorganically)

Form a joint venture/strategic alliance with another player with a similar interest. What can wash side bring to the venture

Outsourcing. have someone else manufacture the product, with the client still handling marketing and distribution

Question 8

M&A_possible synergies

Answer 8

Cost Side
Reduction of employees
Reduction of administrative and factory overheads
Elimination of excess facilities and integration of
complementary technologies
Increase in purchasing power
Revenue Side
Cross-selling
Marketing, selling and distribution of similar or
complementary products
Gaining access to new markets
Sharing of distribution channels
Reduction or elimination of competition

Question 9

M&A_reasons to purchase

Answer 9

Increase market access, boost the brand, and increase market share
Diversify the company’s holdings
Preempt the competition from acquiring the company
Target company is a threat
Inherit management talent
Obtain patents or licenses or products
Gain from synergies, cost savings, cultural integration, expansion of distribution channels, and customer base. Cross-sell products
Gain tax advantages
Increase shareholder value

Question 10

Due Diligence (company and industry)_general

Answer 10

What kind of shape is the target company in?
Management?
Products?
Profitability?
Brand?
What is the standalone value?
What has been its growth rate?
Why is it on the market?
Consider all the items in the core box about analyzing
a company
How secure are the markets, customers, and suppliers
What are the margins like? Are they high volume, low margin, or low-volume-high-margin
How is the industry doing overall? And how is the company doing compared with the industry? Is it a leader in the field
How will competitors respond
Are there any legal reasons we can’t or should not acquire the target company
Are there technology risks
How much will it cost? Will the client overpay
Does the buyer have enough cash or access to capital markets

Question 11

Pricing_strategies

Answer 11

Competitive analysis: are there similar products out there? How does our product compare with the competition? Do we know their costs? How are their products priced? Are there substitutions? Is there a supply-demand issue? What will the competitive response be

Cost -based: sum all costs and add profit. This way you know the break even point. Usually not a very good way to price anything, though, because if you misjudge the market you’ll have to cut prices and squeeze margins

Price-based: what are people willing to pay? If not more than costs, than product might not be worth making. They also might be willing to pay much more than you could get by just adding a profit margin. Diff margins for different industries. What is the product worth to the buyer? Compare it with other products or services in their lives. What did they pay in those cases

Question 12

Growth_increasing revenue

Answer 12

Expand the number of distribution channels
Increase the product line through diversification of products or services (esp with products that won’t cannibalize sales of existing products)
Analyze the segments of the business with the highest future potential and margins
Invest in a marketing campaign
Acquire a competitor (esp if the question is an increasing market share)
Adjust prices (take price sensitivity of the customer into account. Lower price to inc volume and raise them to dec demand or inc profits per unit)
Create a seasonal balance (diff product each quarter)

Question 13

Industry Analysis_drivers

Answer 13

Brand/street cred
Price
Quality
Endorsements
Fads
Marketing
Products
Size
Economics
Technologies

Question 14

Suppliers_general

Answer 14

How many are there
What is their product availability
What’s going on in their market
How is the supply chain? Are the companies that supply you getting what they need from their suppliers?

Question 15

The Future_general

Answer 15

Are players entering or leaving the market
Are any mergers or acquisitions going on
Are there any barrier to entry or exit
Substitutions, what alternatives are there

Question 16

Developing a New Product_marketing

Answer 16

How does this strategy affect our existing product line
Are we cannibalizing our own sales from existing product
Are we replacing an existing product
How will this strategy expand our customer base and increase our sales
What will the competitive response be
If we are entering new market, what are barriers to entry
Who are the major players and what are their market shares

Question 17

Developing a New Product_consumer

Answer 17

Who are our customers and what is impt to them
How are they segmented
How can we best reach them
How can we ensure we retain them

Question 18

Developing a New Product_funding

Answer 18

How is the product being funded? Does out company have the cash or are we taking on debt? Can we support the debt under various economic conditions
What is the best allocation of funds

Question 19

Starting a New Business_general

Answer 19

Start with market entry questions
Who are competitors
What market share do they have
How do their products or services differ from ours
Barriers to entry/exit

Question 20

Would You Invest_management

Answer 20

How experienced is the mgmt team
What are its core competencies
Have they worked together before
Is there an advisory board

Question 21

Would You Invest_markey and strategic plans

Answer 21

What are the barriers to entering the market
Who are major players and what are their market shares
What will their response be

Question 22

Would You Invest_distribution channels

Answer 22

Which, and how many, dist channels can we rely on

Question 23

Would You Invest_products and services

Answer 23

What is the product, service, or tech
What’s the competitive edge
What are the disadvantages
Is the tech proprietary

Question 24

Would You Invest_customers

Answer 24

Who are they
How can you reach them
How can you ensure you retain them

Question 25

Would You Invest_finances

Answer 25

How is the project funded What is the best allocation of funds Can we support the debt under various economic conditions

Question 26

Competitive Response_come for your market share

Answer 26

What is their new product and how does it differ from what we have What has the competitor done differently? What changed? Have any other competitors picked up market share? Have the consumers needs changes Did they increase or expand into new channels

Question 27

Competitive Response_responses

Answer 27

Analyze our current product and redesign, repackage, or move upmarket Introduce a new product Increase our profile with a marketing and pr campaign Build customer loyalty Cut prices Lock up raw materials and talent Acquire them or another player in the same market Merge with a comp to create a strategic advantage and become more powerful Copy the comp

Question 28

Company_turn arounds

Answer 28

Why is it failing? Bad products or services? Bad management? Bad economy Are competitors facing the same problem Do we have access to capital Is the company publicly traded or privately held

Question 29

Turn Arounds_responses

Answer 29

Learn as much ab the company and its operations Analyze services, products, and finances Secure sufficient financing so your plan has a chance Review the talent and temperment of all employees and get rid of “dead wood” Determine short and long-term goals Devise a business plan Visit client, suppliers, and distributors -- and reassure them Prioritize goals and get some small successes ASAP to build confidence

Question 30

Ways to Cute Costs_Labor

Answer 30

Crosstrain workers Cut overtime Reduce employer ,401(k) or 403(b) match Raise employees contribution to healthcare premiums Institute 4 10 hour days rather than 5 8 hour ones Convert workers to owners (they will work longer and harder and think of ways to cut costs) Contemplate layoffs Across-the-board pay decreases

Question 31

Ways to Cute Costs_Production

Answer 31

``` Invest in technology Consolidate productions space to gain scale and create accountability Create flexible productions lines Reduce inventoried (JIT) Outsource Negotiate with suppliers Consolidate suppliers Import parts ```

Question 32

Ways to Cute Costs_Finance

Answer 32

``` Have customers pay sooner Refinance your debt Sell non essential assets Hedge currency rates Redesign health insurance ```

Question 33

Industry Analysis_general

Answer 33

Where is it in its lifecycle (emerging, mature, declining) How has the industry been performing (growing or declining) over the last one, two, five, and ten years How have we been doing compared with the industry Who are the major players and what market share does each have? Who has the rest Has the industry seen any major changes lately? These might include new players, new tech, increased regulation What drives the industry? brand/street cred, price, quality, endorsements, fads, marketing, products, size, economics, or tech Profitability. What are the margins