Commercial audits - why, when and how?
The simple uttering of the word “audit” can make the blood in a manager’s veins ice over. It for sure did it to me back in my managerial days in larger organisations. Immediately we look to where we misplaced reports and documents, we ask ourselves if all the decisions taken were cleared and approved by the right instances, and the list goes on.
In many ways it can feel like going to the dentist after three years of not going - we know something will be found and the only real question is how painful will it be?
In many ways, maintaining our commercial strategy, governance and processes are an asset to our organisation and it is good to go for a check-up. Perhaps a better comparison than going to the dentist would be to see a counsellor or a mentor.
How can an external view help me?
An outside perspective brings the following benefits:
Functional focus: A commercial due diligence expert is a specialist in the domain of commercial strategies, performance and operational excellence. As a manager in commerce you have to focus on many elements of running the department that go well beyond the functional elements. A commercial due diligence expert’s only role is to focus on the performance of the department from a functional perspective
An objective view: Ways of working and processes turn into habits, and habits lead to cutting corners, which can lead to blind spots, which can lead to an increase in risk or missed opportunities. An objective view can make sure that your organisation is running itself in the right way. To bring in a sports analogy, aerobic sports such as swimming or running have a very strong technique focus which zeroes in on optimal energy usage. As the overused adage goes “running a business is a marathon, not a sprint”, having the right energy saving technique ensures all your organisations efforts have the maximum possible impact over the long term
Benefitting from best practices learnings: Learning from the outside world is something that we all try, but our insight into the actual workings of another company or industry practices can be limited due to very simple things such as simply that we don’t have the time. Just consider the completion rate of internal trainings which aren’t mandatory. Bringing in external knowledge, from other industries, and for them to be presented or implemented is invaluable
When is the best time to run a commercial due diligence effort in your organisation?
Reassessing your ways of working: You sense that a strategic, operational or process revamp is needed as your organisation is running below its potential. As in gardening, before planting new plants, it’s good to redo the flowerbed, regenerate the earth and put in a healthy dose of compost. For new seeds and strategies to grow, reviewing the fundamentals is important in order to make sure that the new commercial endeavours will land on a fertile and ready soil
Preparing to sell a part of the operation or the full operation: As a business owner, in order to increase the potential market price of the department or organisation that you are looking to sell, it is good to review the ways or working and then either change them before the actual due diligence process starts. Think of it as taking your car or bike to the maintenance shop before you sell it
Before buying an organisation or a business unit: To keep the car analogy, if you know nothing about cars, but really want to buy that car of your childhood dreams, you might bring along a friend who is a car aficionado and will know where to look and what you look for to tell if the deal is worth and if so, if the asking price is realistic
How to go about it?
There are many commercial due diligence services out there, reaching out to them is an easy task. The important element is for you to feel that you are in capable and good hands.
Before reaching out to an expert it is good practice to phrase your concerns in as detailed a way as possible. The right consultant will take you through a thorough questionnaire, which will help you uncover dimensions which you might not have thought of.
If you are curious to find out more, our commercial due diligence process is explained here, we’d be delighted to talk to you.