How to Analyse a Company: Complete Guide to Business Analysis

Analyzing a company is essential in various crucial moments: when you are considering a new position, when private equity firms evaluate acquisitions, or when executive search consultants try to make the right match between talent and organization. A thorough business analysis can mean the difference between a successful career step and a costly mistake, between a profitable acquisition and a financial disappointment.

For professionals who are considering a new job, business analysis offers insight into the stability, growth potential and culture of a potential employer. For private equity firms it is the foundation for due diligence and valuation of target companies.

For executive search it helps in identifying organizations that best fit the ambitions and expertise of top talent.

This complete guide leads you step by step through the analysis process, with practical insights for each of these perspectives.

Why Business Analysis is Crucial for Different Stakeholders

For Professionals: Making the Right Career Choice When you are considering a new position, especially at senior level, analyzing your potential employer is essential. A company can look great on paper, but may hide financial problems, culture problems or strategic challenges. By conducting a thorough analysis, you can:

• Assess job security: Is the company financially stable enough to support growth?

• Evaluate growth opportunities: Is the company in a growing sector with future potential?

• Benchmark compensation: Are the offered conditions market-conform and sustainable?

• Assess culture and leadership: Does the management team fit with your work style and ambitions?

For Private Equity: Due Diligence and Valuation Private equity firms have elevated business analysis to an art. For every acquisition, an in-depth analysis is crucial to:

• Determine valuation: What is the company really worth based on fundamentals?

• Identify growth strategies: Where do the opportunities for value creation lie?

• Map risks: What operational, financial or market risks exist?

• Plan exit strategies: How and when can the investment be realized?

For Executive Search: Creating the Perfect Match

In executive search, business analysis is essential to match the right candidates to the right organizations. It helps with:

• Candidate profiling: What type of leader does the company need for the next growth phase?

• Organization diagnosis: What are the real challenges that the new executive will face?

• Determine culture fit: Does the candidate fit with the organizational culture and values?

• Identify success factors: What are the KPIs on which the new hire will be assessed?

The starting point: Do you know About the Company?

Before diving deep into numbers and ratios, begin with a fundamental question: do you know about the company? This simple question determines your analysis trajectory and ensures you spend your time efficiently.

If You Know the Company

When you're already familiar with a company, you can proceed directly to quantitative analysis. This means evaluating financial performance and calculating key ratios that provide insights into the company's health and performance.

Analyzing Financial Statements

Income Statement The income statement provides insight into a company's profitability over a specific period. Key indicators include:

• Revenue Growth: Measures year-over-year income growth

• Net Profit Margin: Shows how much of each euro of revenue remains as profit

Balance Sheet The balance sheet offers a snapshot of the company's financial position:

• Assets and Liabilities: Analyze the relationship between possessions and debts

• Current vs. Non-Current Assets: Provides insight into liquidity and long-term investment

Cashflow Statement The cashflow statement shows how cash flows through the company:

• Free Cash Flow (FCF): Calculated as operating cash flow minus capital expenditures

• Operating Cash Flow: Shows how much cash the company generates from core activities

Evaluating Key Financial Ratios

Profitability Ratios

• ROE (Return on Equity): Net income divided by shareholders' equity - ideally above 15%

• Net Profit Margin: Net profit divided by revenue - shows operational efficiency

Valuation Ratios

• P/E Ratio (Price-to-Earnings): Market price per share divided by earnings per share

• PEG Ratio: P/E ratio divided by earnings growth percentage - lower is better

Liquidity Ratios

• Current Ratio: Current assets divided by current liabilities - ideal between 1.5-2

• Quick Ratio: More conservative measure of liquidity

Solvency Ratios

• D/E Ratio (Debt-to-Equity): Total debt divided by shareholders' equity - below 0.35 is favorable

• Interest Coverage: EBIT divided by interest expenses - above 2.5 is healthy

If You Don't Know the Company

When you don't know a company, begin with qualitative analysis to understand the fundamentals before looking at numbers.

Understanding Business Model and Industry

What Does The Company Do?

• Products and Services: Identify core activities and revenue streams

• Target Market: Understand who the customers are and market size

• Business Model: Analyze how the company makes money

Competitive Advantage

• Brand Strength: Strong brand positioning and customer loyalty

• Patents and Intellectual Property: Protection against competition

• Market Share: Dominant position in the sector

Industry Trends

• Sector Growth or Decline: Is the industry rising or declining?

• Technological Developments: How do new technologies affect the sector?

• Regulation: What legislation affects the industry?

Assessing Management Quality

Leadership Team

• CEO and Board: Track record and experience of the management team

• Strategic Vision: Clarity and feasibility of long-term goals

• Governance: Transparency and accountability in decision-making

Integration: From Qualitative to Quantitative

A complete company analysis combines both approaches. Qualitative insights provide context to financial figures, while quantitative data supports qualitative assessments.

Best Practices for Company Analysis

Use Multiple Sources

• Annual reports and quarterly figures

• Industry reports and market research

• News articles and analyst reports

• Regulatory filings

Analyze Historical Trends Review at least 3-5 years of data to identify trends and cyclicality. One-time events can distort figures.

Benchmark Against Competitors Compare performance with direct competitors and industry averages to determine relative strength.

Scenario Planning Consider various future scenarios and how the company would perform under different market conditions.

The Role of Executive Search in Business Analysis

For organizations that want to strengthen their leadership team with analytically strong professionals, executive search is indispensable. Finding executives who possess both the technical skills for in-depth business analysis and the strategic vision to translate insights into action, requires specialized recruitment expertise.

At e-search we work closely with private equity firms, scale-ups and established enterprises to find leaders who can make the difference. Whether it concerns a CFO who can lead due diligence processes, a CEO who can execute growth strategies, or a COO who can realize operational excellence - we understand that the right analytical mindset and experience are essential.

For private equity firms we help in finding portfolio company leadership that can create value. For professionals who want to take the next step in their career, we offer access to organizations where their analytical skills come optimally into their own. For companies we identify executives who not only understand the numbers, but also know how to translate them into sustainable growth and success.