Is Your Business Financially Healthy? 5 Questions to Ask
You can have the best product, service or app in the history of the universe and it matters not if your business isn’t financially healthy at the core. Is your business positioned to last for decades or to execute a sale that allows you to sit on the beach sipping a fruity drink? Ask yourself these 5 questions and you’ll have the answer, and the path.
1. If I had to tattoo my primary role in my business on my forehead, what would it be?
How do you view your role in your organization, no matter its size? Are there to innovate, to manage staff, to create an epic customer service experience?
The most game changing piece of business advice I ever heard came from Natalie MacNeil of SheTakesontheWorld.com at the Renegade Women’s Conference. Your primary role is to drive revenue. Your job to is bring the dollars in the door. Without that mindset, you’ll always be swirling in a vortex of competing tasks. And as business owners we know there are no shortage of tasks to be completed.
With the mindset that your role is to drive revenue, each decision to be made presents the answer as a clear path laid out before you. The question becomes, will this decision drive revenue, today or in the days to come? Revenue is the gas for your high performance business engine.
2. Do I have my bookkeeper on speed dial and, if so would (s)he answer?
Unless your passion is accounting, your first hire should have been a bookkeeper. Bookkeepers take what otherwise would be a shoebox of receipts and turn it into reports, or score cards, that tell the story of your business. Unless your business is large, you only need a few hours of a bookkeepers’ time to get reports you can use to guide your business. Those hours are easily affordable and good bookkeepers are (thankfully) not too hard to find. Go out and get one of those now, because our next question is…
3. Do you and your P&L spend at least an hour of quality time together each month?
How valuable is a report in a drawer? About as valuable as a cheesecake in the fridge. You’ve done step one, you have it, but until the cheesecake is on a plate in front of you, fork by its side, it may as well not even exist. When a P&L is generated in a forest, but no one is around to analyze it, does it create value? I submit to you that it does not.
A P&L is only a tool. Use the tool and feel the power. You need at least an hour of time each month to familiarize yourself with the contents of your P&L and then to brainstorm that they mean for your business. Are you happy with the revenue? What can you do to increase it (see question one, that’s your primary job)? Are you pleased with the level of your expenses? What is the best allocation of your overhead money?
Many business owners only really see their P&L once a year, when it’s in the hands of their CPA. It’s too late to make any changes then. What’s done is done. Know your numbers so you can make the pivots necessary month by month to increase your bottom line. Increased bottom line = more time with fruity drinks.
4. Do you have a written revenue plan?
After you’ve read this far, you know a healthy business is not just winging it. That works in lemonade stands and mowing the neighbor’s yard, but it doesn’t work for a business that’s going to support you and your family for years and position itself to be sold. A written plan that details how you make your money, which products or services are most profitable, what the overhead is on each, etc., also guides your day-to-day decisions. It makes you mindful of how your spend your time and resources because those time and resources directly relate to your bottom line. Here’s a good place to start.
5. Does your business feed you or do you feed it?
Money is flowing and it’s flowing either to your business or from your business. Of course in the beginning, we all need to feed our businesses to some extent, but like children, the earlier they learn to feed themselves and use the potty, the easier it is on everyone.
Know just how long you intend to baby this business and when this business is expected to do some heavy lifting. Everyone in the business should understand the numbers and the time frame, including yourself. Your goal is to you’re your business independent from you financially as soon as possible and be giving back.
Be careful of a business that can’t support itself and needs constant cash infusions. Something’s wrong. Your numbers will tell you what it is. Be sure to be honest with yourself. Will this business ever support itself? If not, you’re an entrepreneur, I’m sure you had 5 new business ideas while reading this article. Is one of those a better way to go?
How do you feel after answering these 5 questions? I hope you skipped through feeling like a rock star. If not, please reach out. We’re happy to help you get back on track.
Let me ask you: What other questions should we as business owners ask to be sure we have, and maintain a healthy business that will feed us for years to come? Tell us in the comments below.