Top 29 Operational Risks Found in 3,000+ Business Valuation Engagements

Top 29 Operational Risks Found in 3,000+ Business Valuation Engagements (Frequency 80% or more often):

1. Meeting minutes are boilerplate (90%).

2. No budget or forecasts (80%).

3. No performance metrics /nominal knowledge of market or competitors (80%).

4. No annual review of insurance (90%).

5. No independent and regular independent and qualified valuation (95%).

6. No business, marketing, or succession plans (90%).

7. No strategy (90%).

8. Nominal effort to cull clients (80%).

9. No gain-sharing for innovation (90%).

10. Culture is control oriented, siloed, and tactical (80%).

11. Banking relationship is solely transactional (80%).

12. Board comprised of family, inside directors, and friends (95%).

13. Limited or no involvement in own or client industry associations (80%).

14. Poor knowledge of balance sheet, P&L, and growth norms for industry (90%).

15. No shareholder/key person/buy–sell agreements or not followed (80%).

16. No risk assessments/SWOT analysis (80%).

17. No review of education, experience, age, and health of key personnel (80%).

18. Concentration of clients and vendors (80%).

19. Little to no leverage of trusted advisors (90%).

20. No independent advisory board (95%).

21. Little leverage of human capital (knowledge and relationships) (90%).

22. No effort to identify, protect, and/or leverage intangible assets (80%).

23. Founder, management, and/or advisors have reached growth capacity (80%).

24. No review to optimize capital structure (90%).

25. No supply chain analysis (90%).

26. Nominal cross-training of personnel (80%).

27. Nominal redundancy of key functions (80%).

28. Little or no training budget (80%).

29. Underfunded or unfunded buy–sell agreement (80%).

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Carl Sheeler, PhD, ASA brings wisdom gained from his 25 years of strategic planning, governance, business
operations, finance and advanced analytics experiences to bring clarity to complex risk identification, measurement, management, and mitigation issues faced by family offices and businesses.  He is the author of the John Wiley & Sons book titled Equity Valuation Enhancement, a treatise which addresses scaling 8- to 10-figure companies and has presented or published 200+ times for entities such as the American Institute of Certified Public Accountants, the American Bar Association, the Federal Bar Association and other organizations on value, strategy and governance.  He can be reached at carl@carlsheeler.com or 424-253-0110