One of the first things we do for our clients is conduct a Business Health Check. This focuses on assessing the most important elements that are required to maintain a healthy business. A business health check is about more than measuring whether your business is running efficiently – how you deliver your product or service is just as important.
In this article, we’ll break down some of the key things that we look for when we’re assessing whether someone is running a healthy business or not. It’s worth evaluating your own business while you’re reading. You might find that you’re fighting fit in some areas, but falling behind in others.
Are you investing in your staff?
Making sure you’ve got the right team behind you is crucial to running a successful business. You should make sure that you’ve surrounded yourself with people who understand your industry and can help you effectively run the back-end of your business.
Make sure you’re paying them well and providing a flexible work/life balance – trust me, their productivity will skyrocket. Humans have much more ingenuity to offer when they’re feeling valued, and not like a burnt-out worker drone.
If you haven’t already, it’s worth investing time into training programs, group activities and casual staff-bonding exercises. Think of your staff as your support base. If you can build that base to be as trusting & knowledgeable as possible, your business will reap the rewards
Is your digital infrastructure up to date?
A lot of businesses that have been around for a long time are still doing everything the same way they did a decade ago. And sure – if it ‘ain’t broke, don’t fix it. But when it comes to technology, that’s not always true. Upgrading your IT infrastructure – installing new Customer Management Software (CMS) or One Touch Payroll, for example – can save you a lot of time and money in the long run.
At the very least, you should be investing in cloud-based accounting software, like Xero or MYOB. Cloud-based accounting programs are faster, more secure and more flexible than single-device systems. You can access it from anywhere, and it provides transparency between you & your business advisor when you’re analysing things like income and profit.
Are you using the right financial team?
A lot of businesses might just have one cash-savvy staff member handling everything financial, or they contract a generic accounting service. A better idea is to employ both a bookkeeper and a business advisor.
Bookkeepers can record and track your profits and expenditure, providing you with things like cash-flow forecasts and tax statements. A business advisor takes a holistic look at everything, figuring out where you & your business are at and where it’s all heading. They’re the ones who guide you through strategic decisions to help your business grow.
Think of it this way – a bookkeeper takes care of the past, while an advisor takes care of the future. When you get the two working together, it’ll leave you free to enjoy the present without stressing out about money.
How organised are you?
Most people just react to things as they happen. You might be able to react quickly and effectively most of the time – but you’re still putting yourself on the back foot by winging it. It’s much better to be prepared instead. You should always have a rolling 12-month plan ahead of you – at a minimum, it should cover cash flow, expenditure and any payment instalments.
It’s worth tracking other data in this plan as well, like client leads or your average monthly conversion rate. This way, you can make informed decisions about things before they happen. Another organisational ‘must do’ is making sure your business and personal accounts are kept completely separate – make it nearly impossible to mix the two up. It’ll keep things a lot cleaner in the long run.
Is your working capital strategy secure?
Cash is the most important part of your business. If you’re consistently struggling to maintain working capital, you’re going to have a tough time maintaining a business – let alone steering it into a position for growth. Working capital is the difference between your current assets and your current liabilities. Essentially, it’s how much money you have to cover your day-to-day operations and cushion yourself against any short-term debts.
A healthy working capital ratio is usually somewhere between 1.2 – 2.0 (Assets to Liabilities), though how much you need can differ depending on your industry. It’s worth spending some time making sure you’ve got a sound strategy and that your business is safe from any short-term shocks. If you need to access more, don’t just drill down into your mortgage or take out a loan – it’s not very tax-effective. You should look into alternative methods or speak to a financial advisor.
These are some of the key areas we look at when we’re assessing whether a business is healthy and likely to succeed.
If reading this has helped you identify any problems or areas for improvement in your own business, then don’t stress. We’re here to help. Get in touch with one of our advisors today – they’ll work with you to discuss and develop a solution.
Disclaimer: This advice is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether this advice is suitable for you and your personal circumstances before acting on it.