Assessing the health of your business
What constitutes a "healthy" business? When you set out to assess the health of your business, you need to look through a wide lens and capture the entire picture. A periodic business health assessment should be a staple of your ongoing business planning cycle. A proper assessment will help you to determine the direction of your business, moving forward.
When assessing your business, there are a number of questions you'll want to take into consideration. Keep your answers honest and accurate — it's imperative that you create a true picture of your business. Once you've answered all the questions, take the time to determine where your deficiencies lie. Whether you're constantly chasing your customers for payments or you find that you're spending a large amount of time and resources on equipment repairs and maintenance, addressing your deficiencies is the first step towards the coveted "clean bill of health".
Your business is a direct reflection of who you are. Examine your qualities, both positive and negative, and determine your impact as a leader and manager.
- What are your strengths and weaknesses?
- How can you improve your skills to better manage your business?
Employees are the lifeblood of your business. Make sure that you recruit and manage your employees with a focus on organizational vitality.
- Do you employ the "right employees", each of whom contributes to making your business run smoothly, or are you forced to rely on a small percentage of key employees to get the job done?
- Does your business suffer from a high employee turnover rate?
- Do you feel the pinch when a few employees are absent from work?
- Do your employees know what is expected of them?
Your management team
Ideally, your management team works well as a unit towards fulfilling your vision for success. Great management teams boast members with diverse skills that complement one another. Analyze your team and determine its value to your business.
- Who are the members and what do they bring to your team?
- Do their strengths and weaknesses create a strong balance?
- What training can you offer them (internal or external) to complement their skills?
A viable market makes your business profitable. Review your sales patterns and recognize the areas in which you've flourished and floundered. Examine new possibilities for growth.
- What are the demographics of your market: who are your customers?
- What portions of your customer base are most and least profitable?
- Do you anticipate entering new markets?
- Do you have a large customer base, or are you dependant on one or very few customers?
Your accounts receivable
Offering credit to your customers can act as an incentive for them to make larger purchases. It can also attract new customers, but extending it does not come without risk. If you do offer credit to your customers, ensure that you take every measure to minimize your personal risk.
- Do you offer credit to your customers?
- Do you conduct thorough credit checks before extending credit to customers?
- Do you keep detailed records of accounts receivable?
- Do you have outstanding debts that have been owed to you for an unreasonable period of time?
If you run a successful business, you will always have competitors who want a share of your market. Rather than fret over competing businesses, examine them and use your knowledge to determine where you can make improvements.
- Do you know who they are, and what their strengths are?
- How do your customers perceive your competition?
- Have you used benchmarking tools to see how you measure up to your competition?
- How would your customers compare you with your competitors?
Your products and services
You are what you sell. Take the time to analyze how each of your products and services perform in the marketplace. Remember, each product and service that you sell is only an asset if it brings value back into your business.
- Which of your products and services are the most and least profitable?
- Which of your products and services do your customers favour and why?
- Do any particular products or services cause frequent customer complaints regarding their price or quality?
- Do any of your products sell out particularly fast, or do any seem to linger on your shelves? If so, do these situations occur during certain months or seasons?
- What do you do with unsold stock?
Your marketing strategy
With the wide range of media at your disposal, it's important to recognize the marketing streams that best attract your customers. Evaluate the methods you currently use, and examine new marketing strategies to determine the most effective approach.
- Is your marketing strategy providing enough "bang" for your buck?
- Do you survey your customers to find out which of your marketing efforts are most effective?
- What methods do you use to attract new customers?
You depend a great deal on your suppliers. Your management of supplier relationships can deeply impact the efficiency with which you do business.
- Do you have a strong working relationship with your suppliers?
- What are your suppliers' strengths and weaknesses?
- How could your suppliers improve their service?
As a business owner, it is absolutely crucial that you effectively manage your finances. Keeping detailed financial records and accurately forecasting future cash flow will allow you to keep a firm handle on where your business is and where it is going.
- Do you consistently forecast upcoming sales, cash flow and profits?
- Are your forecasts reasonable and accurate?
- Do you keep detailed financial records that allow you to monitor performance?
- Have you noticed a decline in sales this year compared to previous years?
- Have financial difficulties caused you to:
- Get behind on payments for supplies or taxes?
- Get turned down for financial assistance from the bank?
- Are overhead costs outrunning your profits?
- Do you have an effective Customer Relationship Management system in place?
The right equipment for your business can increase productivity and, therefore, profits. On the flip side, inefficient equipment can slow or halt production and drive profits down. Examine your equipment needs carefully and research the best options for your business.
- Do you spend a large amount of time/ resources on equipment repair?
- Do you have the best equipment for your needs?
The location of your business should not only allow you to thrive in your current situation, but should also offer you room to grow. Don't let your location prevent you from achieving your business goals.
- What does your location have to offer?
- Can your location handle growth to your business?
- Does your location cause any operational deficiencies?
Business health resources
The following sections of our website will help you assess and manage the health of your business.