The document outlines a systematic approach for appraising small and medium enterprises through analyzing nine key dimensions of business performance and their interrelationships. It emphasizes focusing on the vital few critical issues, assumptions, risks, metrics, and trends in each dimension. The approach is intended to help appraisers identify both strengths and weaknesses to assess the overall risk profile and robustness of a business proposition.

1. Francis P Coyne + Associates Limited
Management and Organisation Development Consultants
Systematic Business Appraisal
Nine due diligence positions of the SME
Directors Toolkit
Multiple perspectives: Appraisal depends on the objectives of an
Market Risk appraiser or stakeholder e.g. proprietor, shareholder, lender, buyer,
investor etc. Each appraiser selects a set of key issues and metrics
Strategic (KPI's) consistent with their mercenary interests and goals. A
Vendor Risk Business Risk
Position carefully chosen small set of key metrics has superior explanatory
Supplier Effectiveness Metrics Business power (see: Stakeholder Map, Concepts of Value and Metrics).
Position Position Fact-based analysis of drivers and trends: Determine which
Stability Metrics Demand Metrics
issues and metrics are critical in each one of the 'core dimensions of
business performance' and systemically (see: Workbook). Appraise
Ambition
performance and trends and the realism of projections against the
selected key metrics. Be alert to naïve projections and to changes in
and within trends. Summarise your findings and conclusions from
Financial Risk Talent Risk Credit Risk the analysis on the Risk Template and/or Radar Chart.
Objectives
Execution
P&L Leadership Cash Beware of invalid tacit assumptions: Assumptions, the thinking
behind the thinking, that which we (unwittingly) accept (believe or
Position Position Position suppose) to be true. Surfacing and challenging assumptions i.e.
Gearing Metrics Capability Metrics Liquidity Metrics things you consciously or unconsciously take for granted as being
true or reliable in each of the due diligence positions are at the core
of this systemic risk analysis. Plot your findings and conclusions
from the analysis on the Assumptions Map and Risk Template.
Strategy
Legal Risk Value Risk The power of good questioning: You only get answers to the
questions you ask and omissions in this regard can be painfully
Regulatory Customer apparent in retrospect. A question not asked is a door not opened.
Process Risk Good questioning identifies the key issues, strengths, risks and
Position Position
opportunities in each of the core dimensions of performance and as
Compliance Metrics Operating Retention Metrics a systemic whole. Good questioning differentiates symptom from
Position cause, builds relationships, stimulates creativity, motivates fresh
thinking, surfaces underlying assumptions and challenges the
Efficiency Metrics
© www.frank-coyne.com consult@eircom.net robustness of those assumptions. When you change your questions
you change your results. Great results begin with great questions
and good decisions begin with clear values and timely, evidence-
Systems thinking in action: Systemic appraisal of key issues, based, risk-weighted, information (see: Focus and Workbook).
assumptions, risks, metrics and trends in the nine correlated dimensions Darwin is a better guide to competition than economists - Henderson
Important: Distinguish between leading (predictive) and lagging (post-mortem) indicators (KPI's), and process, (activity) and output (accomplishment) metrics and
between customer-centric and corporate-centric metrics. When focusing on metrics, be mindful that, as noted by a sign hanging in Albert Einstein's office: "Not
everything that can be counted counts." See also: Strategic Planning Toolkit, Business Innovation Toolkit, Leading for Results Toolkit, Consultants Toolkit, Trusted Advisors Toolkit, and SOS Creativity Toolkit

2. Francis P Coyne + Associates Limited
Management and Organisation Development Consultants
Systematic Business Appraisal
Avoid information overload!
The crucial importance of focus: The fine art of 'leverage seeing'
This simple graphic illustrates the Pareto principle
The law of the 'vital few' and the 'trivial many' Vital Few
0%
Trends
Focus Vital Few
Executive Dashboard: (20%) Metrics/KPI's
CSF's in Core Dimensions of Performance
Impact or
Leverage
20%
80%
Business Acumen Results,
The ability to quickly Outputs,
discern the 'vital few' Rewards,
in each of the core Achievements
dimensions of Trivial Many
performance and
systemically is a
key analytical skill Dashboard Metrics
Imbalance or lack of direct
correspondence between
100% effort and reward © www.frank-coyne.com
Ireland allowed its three largest banks to build up total assets two times the size of the Irish economy. And then they failed - Johnson
Focus on the critical issues/CSF's ('vital few') and the related assumptions, risks, metrics and trends in each of the
core dimensions of business performance and systemically. The difference between mediocrity and genius is the ability to focus one's attention - Einstein
Small changes can produce big results, but the areas of highest leverage are often the least obvious: A key to success is to recognise that a small advantage or additional input
can translate into a highly disproportionate payoff. This phenomenon is sometimes referred to as the tipping point, the 20/80 rule or the law of nonlinearity (sandpile effect). It is a
perceptive recognition that little causes can have big effects and become a 'tipping-point' and that change happens, not gradually, but at one dramatic moment. Gladwell, in his bestseller,
defines this point as the 'tipping-point'.
Caveat: The leading indicators of business performance cannot be found in financial data alone (essentially the consequences of yesterdays decisions). Customer satisfaction, customers'
perception of the organisations stature and professionalism, employee satisfaction, product and service quality, innovation, market share - metrics like these often reflect a company's
economic condition and growth prospects better than its reported earnings do. Depending on an accounting department to reveal a company's future will leave it hopelessly mired in the
past - Ref: The Performance Measurement Manifesto, Eccles, HBR.
Just 12 firms account for 90% of Irish exports!

3. Francis P Coyne + Associates Limited
Management and Organisation Development Consultants
Systematic Business Appraisal EXAMPLE
Analyst's findings summary: DER (%) ____ ROCE (%) ____ CIR (%) ____ AV/S (%) ____ AV/C ____ MOS (%) ____
Following a systemic analysis of key issues, assumptions, risks, metrics and trends in KPI's
Analyst's perception of strengths in the core dimensions
Instructions: Please draw on your knowledge, experience and intuition and be as objective as you can in
due diligence positions. Subsequently link-up to form your SME risk perceptions profile. Even if you do
not have enough information to make a definitive judgement in each case, please answer to the best of
completing this appraisal profile. Shade the circle that best represents your current view for each of the
Systemic risk review:
Very Weak Moderately Weak Equivocal Moderately Strong Very Strong
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Appraisal must be adapted to circumstances and level of development of the business
Strategic Position
Equivocal: insufficient fact-based information to appraise, require further research, evidence and/or reassurances
Get the assumptions wrong, and everything that follows from them is wrong - Drucker
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Business Position
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Ten due diligence positions of the business
Cash Position
Core Dimensions of Performance
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Customer Position
See: Workbook (1)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Operating Position
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Regulatory Position
your knowledge and understanding at this time.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
P&L Position
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Supplier Position
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Capability Position
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Collateral Position
© Must not be copied or reproduced without written permission
High risk lending proposition Low risk lending proposition
Analysts Conclusion Robustness of the lending proposition
Certainly not Almost certainly not Probably not Unlikely Equivocal Slight evidence Probably Almost certain Certain
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
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Default very likely Default likely Default possible Default unlikely Default very unlikely
Note: Appraisal templates are designed to meet the specific requirements of clients Amateurs study the plan. Professionals study the assumptions - Old Military Saw