More than anything business owners want a healthy business. There are two parts to being healthy — financial and organizational.To determine the health of a business, owners should ask themselves if their business is profitable and sustainable and a good place to work? Here are some steps to follow and questions to answer when assessing the health of your business:
Set and effectively share goals and objectives. Without getting into semantics, do you have a business plan that is shared with your team? Do you set longer-term goals and shorter-term objectives that are quantifiable and measurable? Do you communicate your goals throughout your organization so everyone knows what the expectations are for operational performance?
Do you have high employee morale? Do your employees operate as a team to achieve organizational goals and objectives? Do your teammates value their positions and demonstrate that with low turnover and enthusiasm for the organization?
Do you demonstrate strong leadership? Do you make decisions in the best interest of your employees and the business? Have you put together the best team to achieve your stated goals? Do you set the example for your team by being an authentic, transparent and value-based communicator? Do employees feel appreciated? Do you lead by example or manage by demand? Does your team readily follow you?
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Are your policies formalized, clear and communicated? Are the organization’s policies and procedures well documented and communicated? Do all the members of your team have access to the organization’s policies and procedures? Is there an opportunity for them to ask questions of leadership to assure they understand the standards of performance that are the foundation of the enterprise?
Do you manage poor performance? When recognized do you address poor performance quickly and effectively? Does your team value your leadership in addressing corrective action when identified? Do you invest in employee training and education to address deficiencies?
Do you offer ongoing training opportunities? Is there room for upward mobility in your organization when team members undertake training? Do you provide them that opportunity through webinars, classes at Cape Cod Community College or outside professional organizations?
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Do you demonstrate the importance of lifelong learning? Do you invest in ongoing training for yourself and your team to improve skills and learn new ones? Healthy businesses never stop learning whether it be formal or informal.
Do you adapt to change? Is your organization opportunistic? Do you embrace opportunities to grow and expand your sphere of influence? Do you adopt new technologies to improve the business’ efficiencies and effectiveness?
Do a financial audit as well. Do you have steady revenue growth? Do you have a steady and predictable growth in revenue? Which sources of revenue are growing, which are stagnant and which are not growing at all?
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Is your debt ratio low? When you examine your revenue — what is coming in against what you owe, you are showing healthy signs? Look at your debt (what you owe) compared to assets (what you own). A healthy business has a 2:1 asset to liability ratio. What’s yours?
Are your expenses under control? Just like looking at revenue, you need to keep your eye on expenses to operate your enterprise. Are your expenses rising faster than your rising revenue? If so, this is a sign of an unhealthy business. If your expenses are flat while your revenues rise, then you have a healthy enterprise.
How many new customers are you attracting? Loyal customers are the key to most businesses. However, new customer acquisition is the lifeblood of a business and a sure sign of a healthy enterprise.
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Is there cash in the bank? In the beginning, a business needs to reinvest in itself, however, over the longer term, having cash in the bank is a sure sign of a healthy business. Being able to address emergencies with reserves is important to sustainability.
Just as in personal health, doing a regular check-up or check-in keeps it healthy and sustainable, and has the potential to pivot when necessary.
Contributed by SCORE Cape Cod & the Islands. Marc L. Goldberg, Certified Mentor, SCORE Cape Cod & the Islands. www.capecod.score, [email protected], 508-775-4884. Sources: Rose Johnson, 1/29/19, CHRON; 7 components of a healthy business, Alexander & Co., 9/21/2018; Top 5 signs Your Business is Healthy Financially, Aldridge Borden Company.
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