Have you asked yourself lately? How healthy is our business? Have you given yourself an honest answer? So many times, entrepreneurs and business leaders put on the rose-colored glasses when asking this question about their business. They land a huge new deal or hire 5 new people and think, “Our business is really making it. We’re healthy!” Never looking deep enough to realize that, in reality, they are one late payer away from total disaster.
As you analyze your business and ask yourself this question, “How healthy is our company?”, consider the following:
- What are your margins? When you sign a new deal that requires you hire 5 new people, are you actually making money on that deal? The revenue bump may make your top line look great, but if your costs to generate that revenue produce only minimal margins, or worse, exceed the revenue, you’re not improving the health of your business, you may actually be causing more harm.
- If your line of credit went away today, how long could your company survive? When you have a good month, is your line still maxed out? Have you ever paid down your credit line to $0 in the last year?
- If your largest customer left tomorrow, how quickly could you replace the revenue?
- Does your level of revenue justify the level of staff you have? So many times, businesses think they need additional staff because they are growing rapidly or because they need to fill each “slot” in their business (marketing, sales, accounting, administrative, etc.). They hire a full time marketing person, because they need someone to manage social media, or a full time office manager because they can’t keep up with the paperwork. Or, they may hire an additional developer to get their product off the ground more quickly, but the product isn’t generating any revenue. Sometimes, hiring is necessary, but many times, the level of hire goes beyond what the business can really support.
- How much profit has the business truly generated over the life of the company? Are you really growing? Are your shareholders taking home more today than they were 3 years ago?
- Do you regularly hear yourself say, “If we just sign one more client, we’ll be profitable,” or “We just need to get our name out there and then we’ll hit our sales goals.”?
If your business is consistently in a state of “If, then…,” it’s probably time to take a serious look at the health of your business. And, don’t sugar-coat it. If you’re 100 pounds overweight, it’s time to diet. If you’re in need of a cardiovascular shape-up, get on the treadmill and get to work!