Red Flags
Drivers essentially affecting the entire business
Red Flags
Red Flags are important issues or ‘watch-outs’ that can negate some, or all, the value of your business, and compromise performance. While Red Flags are “Driver Specific”, these issues penetrate into other Drivers essentially affecting the entire business.
If an owner is trying to raise capital, hit growth targets, attract stellar employees or a buyer, these are the types of issues that will bubble up during due diligence and can compromise achieving one’s business objectives.
Red Flags PDF
Click here for a PDF version that includes all of the red flags that may come up on the report if you run a Discover Assessment.
All Red Flags in Depth
Below you will find more information on all of the 18 Drivers.
Company Overview
Make it easier for any stakeholder (present or future) to gain a holistic understanding of the company.
When Company Overview comes up as a Red Flag, it is an indication that it is not easy for a stakeholder to gain a holistic understanding of the company.
Company Overview is an involved Driver, however, there is one specific indicator that often come up as a problem area during the Deep Dive:
Company Culture: A valuable company has a strong, positive culture where employees are proud of their individual jobs and proud of the company they work for. Unhappy employees is usually a sign of a bigger underlying problem in the organization.
If Company Overview is a Red Flag, it is important that you begin to address this issue as soon as possible as it not only is impacting your Value Gap but is also affecting your business as a whole.
Company Overview
To minimize risk, the company must diversify its customer base
When Customer Diversification comes up as a Red Flag, it is an indication that the company does not have a diverse customer base.
Customer Diversification is an involved Driver, however, there is one specific indicator that often come up as a problem area during the Deep Dive:
Customer Diversification: If your business is dependent on only 1-3 customers, you have all of your eggs in one (or a few) baskets which equals significant risk. Some capital providers or buyers will not want to assume this level of risk.
If Customer Diversification is a Red Flag, it is important that you begin to address this issue as soon as possible as it not only is impacting your Value Gap but is also affecting your business as a whole.
Growth
The company needs to show a growth history greater than competitors and projections above the norm.
When Growth comes up as a Red Flag, it is an indication that the company cannot show a growth history greater than competitors and projections above the norm.
Growth is an involved Driver, however, there is one specific indicator that often come up as a problem area during the Deep Dive:
Company Growth: Flat or declining revenue will make others pretty wary that your business has a bright future.
If Growth is a Red Flag, it is important that you begin to address this issue as soon as possible as it not only is impacting your Value Gap but is also affecting your business as a whole.
Human Resources
The company must be able to efficiently and effectively
attract, find, train, and retain quality employees.
When Human Resources comes up as a Red Flag, it is an indication that the company is not able to efficiently and effectively attract find, train, or retain quality employees.
Human Resources is an involved Driver, however, there are two specific indicators that often come up as problem areas during the Deep Dive:
Organizational Roles & Responsibilities: Ambiguous employee roles and responsibilities is a sign of deeper organizational issues.
Employee Records: Inadequate employee records can make your business difficult or impossible to sell.
If Human Resources is a Red Flag, it is important that you begin to address this issue as soon as possible as it not only is impacting your Value Gap but is also affecting your business as a whole.
Legal
It’s essential the company gets its legal house in order and follow all best practices.
When Legal comes up as a Red Flag, it is an indication that its legal house is not in order and best practices are not being followed.
Legal is an involved Driver, however, there is one specific indicator that often come up as a problem area during the Deep Dive:
Litigation: Nothing can kill the value of a company faster than legal issues.
If Legal is a Red Flag, it is important that you begin to address this issue as soon as possible as it not only is impacting your Value Gap but is also affecting your business as a whole.