Is Your Business Fit and Healthy or is it in need of immediate resuscitation?
Andrew Wallis Wednesday, February 28, 2018
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“Is YOUR business healthy?”
When I was asked this question, the answer I gave that day was “yes” and I based that answer on the fact that there was money in my business account.
Truth be told, I was slightly taken aback by such a direct question and thinking back I had no real idea on whether or not my business was healthy. Thankfully for me, my client (who now happens to be a good friend) could clearly see that I had no real idea.
He sat down with me and outlined some straightforward metrics to help me examine my business which helped me perform a health check to help determine whether or not I had a business that would receive a clean bill of health. Some of the key performance indicators he shared that day were financial measures, whilst others as you will see, were not.
To help you determine if your business is healthy—or in need of resuscitation, here are six questions to ask yourself:
1. Is there more money in your account at the end of the month than there was at the start of the month?
After you have paid your expenses for the month, has your bank account balance increased over the month? This is a pretty straightforward way to measure if you’re heading in the right direction or simply treading water. If you are operating a healthy business, then you will see increased profits every month.
2. Do you have a rainy-day fund?
My parents taught me from an early age to aim to live on less than I earned and save money for a rainy day. Now in my role as a business consultant, I always encourage the fitness business owners I work with to make sure they have cash on hand to cover emergency expenses or to take advantage of unexpected opportunities that may arise.
How much you need to set aside depends on the nature of your business, your tolerance for living by the seat of your pants, and probably whether or not your business is generating more profits each and every month.
Setting aside cash to address unforeseen expenses is important—and the mark of a fit and healthy business.
3. Do your overheads increase at the same rate as your revenues?
As your business grows, you will no doubt find that your overhead expenses will also increase as well. If overheads are growing at the same rate as your revenue, then something needs addressing.
This goes back to our first question. Looking at how your overhead expenses are growing compared to your revenues over the course of several months might even give you an early warning that you’re not making headway with metric number one.
4. Do you have a high staff turnover rate?
This isn’t a financial metric, but if you find you are regularly having to find new members of staff due to staff moving on to pastures new, then this should throw up a red flag or two, particularly if they are your best staff members.
Most employees quit their boss, not their job—and if they’re ignored when they bringupconcerns, if their contributions aren’t recognized, or if there’s a bad culture in the business, then it’s not uncommon to see an exodus.
Every business experiences staff turnover, but a healthy company manages to keep staff members happy and motivated.
5. What are your clients and members saying?
Every fitness business will at some stage receive a bad review from an unhappy client. You can’t keep everyone happy all the time. Although it can be an issue if you have a number of clients complaining, it can actually prove to be informative if they are all complaining about the same thing.
Your ability to resolve issues and address client concerns quickly and efficiently will ensure your business gets back to full health. It’s no surprise that healthy companies have a greater ratio of happy over unhappy clients.
6. What does your credit score look like?
There may be times during the lifetime of your business that you wish to take advantage of lending from your bank. Your bank will consider both your personal credit score and your business credit profile when they evaluate the health of your business.
Not only is a good personal credit score and business credit profile an indication of a healthy business, it also means you are much more likely to have more loan options offered to you, at better terms and at better interest rates if and when you need small business financing.
Hopefully, by now you can see that in order for you to work out whether or not your business is fit and healthy means much more than just looking at your business bank account.
Before you give me your answer, work your way through each of these six questions and you will have much more clarity on whether your business is healthy and growing, treading water, or in trouble.
So, let me ask you again…
“Is YOUR business healthy?”