An independent business review IBR is an analysis of a company’s financial and operating position conducted by a professional who is independent of management. The purpose of an independent business review is to provide insights on the financial health of the business through a critical review of the main organisational performance drivers. An IBR is mostly used for determination of whether to establish a credit facility, or to inform the strategies for overcoming uncertainty and doubt about the company’s financial situation. IBRs may be conducted by various entities, including accounting firms, banks, private equity firms, and even rating agencies.
The IBR process usually involves reviewing historical financial statements, review of forecasted performance and current and expected business operating environment as well as conducting interviews with key personnel within the company.
Types of Independent Business Review
Financial review
A financial review is performed whenever a company is at risk of defaulting on its debt or there are concerns about the business’s ability to pay all its liabilities. The results of the review are used by both creditors and investors to determine the nature of future relationships with the business.
Market review
A market review focuses on describing the product as it pertains to the target audience. Market review IBRs give viewers a detailed sense of product benefits and how they apply to the consumer. It also includes review of remuneration, expertise and strengths, weaknesses, and status quo in relation to existing industry standards.
Operations review
Operations Review is a type of Independent Business Review initiated as part of a new deal’s due diligence or as a review in support of a potential sale of the business. During an OR, the operations processes and controls are assessed for strengths and weaknesses. The Operations Review addresses risk to the business and helps identify areas for cost reductions and improvements.
Operations reviews focus primarily on two areas, human factors and the threat posed by insiders. The administrator of the review, typically a third party independent of organization will analyze how the organization interacts with customers, vendors and partners in a way that minimizes the risk of misuse of information or identity as well as address any current policies that may lead to an abuse of privileges.
Product and service review
Product and service review is a type of IBR that helps the organization in identifying available opportunities to improve the quality of products or services, and to meet customer requirements. The focus of this type of IBR is on feedback received by customers. Product and service review uses feedback received from clients, customers, or any other external party involved with the products and/or services offered by an organization. A product or service review shows an overview of the reviewer’s thoughts, opinions, likes and dislikes regarding a product or service with comment explanations. Reviews are normally published on the seller’s website as well as on third-party review sites. Independent reviews provide an outside perspective on a company’s quality and reputation by showcasing customer experiences with that company.
People and culture review
People and culture review is a type of IBR that identifies whether the organization has the right people with the right capabilities, values, and culture in place to support its long-term business strategy. Practitioners conducting this type of IBR assess whether the talent profile within the organization today (e.g., bench strength in key roles) can support organizational priorities and deliver on expectations in three to five years. A people and culture review assesses talent development strategies and succession planning processes to determine if skills gaps will be filled or if someone outside the organization may need to take over a critical position.
Benefits of conducting an IBR
There are several benefits to conducting an IBR. Some of the key benefits include:
Objectivity: An IBR is a diagnostic process carried out by qualified and experienced professionals, who review the operations and finances of your business. It provides shareholders, directors and senior management with an independent assessment of the strengths, weaknesses and strategic options available to the business.
Comprehensive Analysis: An IBR is a confidential, constructive analysis of a company’s financial status, operating results, and plans for the future. The IBR can determine if its projections are too optimistic or realistic. In addition to this analysis, an IBR offers many other benefits: It helps create an accurate financial plan. It helps identify when financial problems are starting to occur before they become critical. It gives a company better ideas on how to improve its operation. The review process typically involves a detailed analysis of all aspects of the business, including its financial health, operations, and competitiveness.
Insight: An IBR is a valuable tool that provides insight into a company’s financial strength and current market performance. An IBR can help a business: – restructure its debts, devise an efficient business strategy that focuses on improving cash flow and increasing profitability and develop a long-term business plan which will be put in place for future sustainability.
Improved Performance: A company’s financial statements and processes indicate how well it is doing now and provide the basis for making important operational decisions. An IBR provides an objective evaluation of a company’s performance, covering all business aspects. Its purpose is to make recommendations that create positive results, such as improved management systems, cost efficiency, improved quality or boosted sales. The findings of an IBR can help to identify areas where the company can improve its performance.
Enhanced credibility: An IBR is an opportunity for your company to enhance its credibility. The IBR process can provide a more informed, objective assessment of how a company’s performance might evolve, and increase the probability that it will meet the business owner’s expectations.
Informed decisions: The benefits of IBR are numerous and can be extremely valuable for businesses of all sizes. By conducting an IBR, companies can obtain a clear and objective view of their current situation and identify any areas that need improvement. This information can help them to make sound decisions about their future and improve their chances of success.
IBR in Insolvency
Insolvency remains the main driver on demand for IBR services. The IBR process can be used as an alternative to liquidation or administration and can help avoid these outcomes if the company is found to be viable. If you are a creditor of a company in insolvency, you may request an IBR be conducted. The parties will then appoint an independent expert to carry out the review. The IBR report will assess the company’s financial position and provide recommendations on whether it should continue trading, enter into administration or be liquidated.
The IBR can provide valuable information to creditors about the state of a company’s business and help them make an informed decision about whether to support a proposal or not. If you are considering lending money to a company in insolvency, it is important to obtain a copy of the IBR report so you can understand the risks involved.
IBR in sales
As an independent business owner, one of the best things you can do for your sales is to get an independent business review. This will help you identify any areas where you may be falling short, and give you some ideas on how to improve. Once you found someone who is qualified, set up a meeting with them to discuss your goals and what you hope to achieve from the review. Be sure to ask plenty of questions so that you can get the most out of the review.
Conclusion
While getting an independent business review can be a bit costly, it is worth it if it means that you will be able to improve your business. So don’t hesitate to invest in one today! At FHC, we can help you with an independent business review.
