It’s time for your check-up, time for your check-up! If you happened to read that in a sing-song voice to the musical intro of the Disney show from a decade ago, ‘Doc McStuffins’ then I’d guess that you have a teenager in the house now too. My how time flies, and I miss the simplicity of that pink/purple stethoscope. So Doc McStuffins was checking the health of her stuffed animals, while her Mom was checking out the health of real live patients. I would like to challenge you for a Small business health check-up.
Here’s what’s in store for your annual check-up.
- How do you know if your business is healthy?
- What areas you should be checking.
- What to do to improve your small business health.
The success of a small business hinges on its (or your) ability to adapt, innovate, and thrive in ever-changing markets and circumstances – hello, COVID. Just like the human body requires regular check-ups to ensure optimal health, your small business also needs periodic evaluations to gauge its well-being. In this blog post, we’ll delve into the essential aspects of small business health and provide recommendations for how to be the best version of your entrepreneurial self.
How do you know if your business is healthy?
You may think that this is a complicated answer, and I’m sure we could make it that way – but I’d like to simplify.
Is it profitable? That is the KEY question.
And that doesn’t just mean that you have revenue exceeding your operating expenses. That means that you’re also paying yourself a fair wage, (and your employees, if you have any), you’re setting aside money for future expenses including taxes, and you aren’t a slave to your business working 16 hour days.
It has to be profitable for today, and tomorrow – and not at your expense.
This is the health equivalent to – are you breathing? Will you be able to breathe tomorrow, and without the help of some breathing machine? Can you stand on your own two legs?
So, what areas do you need to check around the health of your business?
This is that ‘annual physical’ that you probably need to be scheduling personally AND professionally. Since we started with profitability, let’s dive into where you might want to poke and prod around your finances first.
1. Financial Fitness
If you aren’t making any money…what are we doing here? You didn’t get into business to volunteer.
Cash Flow Analysis:
Explore the ins and outs of your cash flow to identify patterns and fluctuations. In other words, do you have a budget for your biz?
Assess the liquidity of your business and its ability to meet short-term obligations. How much buffer do you leave in your accounts to cover said expenses? Do you understand the flow of money in and out on a daily, weekly, monthly basis?
Profit and Loss Statement:
Analyze your P&L statement to understand your revenue, costs, and overall profitability. Personally, I’m a big fan of the Profit First System where I can see at a glance how this is functioning for me in a few different checking/savings accounts. Identify areas where you can trim expenses or enhance revenue streams – similarly to your personal budget – there are two ways to massage; increase revenue or decrease expenses or a combo of both…which is my personal favorite.
Debt Management:
Evaluate your business’s debt-to-equity ratio and assess the impact of outstanding debts. For the micro businesses that I work with, we don’t have to get this fancy. It’s really just an understanding of how you’re using debt in your business. Develop strategies to manage and reduce debt effectively…debt is going to weigh you down and reduce that profitability.
2. Operational Wellness
Your operations are like your key organs; heart, lungs, and I don’t know circulatory system – my health knowledge has now reached its limit.
Efficiency and Productivity:
Review your business processes to identify bottlenecks and streamline operations. We tend to have a lost of ‘waste’ in our processes. Redundancies, inefficiencies, opportunities to utilize technology to save time, you name it. Taking a careful look at these is incredibly important.
Team Engagement:
If you have an employee(s) that works for you; their level of interest and engagement is so impactful to your company. Have regular, open and honest conversations and help them find what works for them – ditch titles and fit for duties; know what motivates them and give autonomy whenever possible.
3. Customer Satisfaction
If your product or service isn’t satisfying a need – and doing it well, you are going to have a hard time repeating the process.
Customer Feedback and Reviews:
Collect and analyze customer feedback to gauge satisfaction levels. Constant reiteration and areas of improvement – if you’re open to it (and I think you should be) get feedback. It’s a gift, whether positive or negative. Use it to adjust your processes and deliver the best product or service possible. Reviews are also an excellent way to spread the word about the work you do without having to be the fog horn.
Customer Retention:
Evaluate customer retention rates and implement strategies to enhance customer loyalty. Your current customers and clients are easier to retain or act as advocates for you than getting new clients. Make sure you’re serving the heck out of them for as long as you can.
4. Owner Enjoyment
That’s right, if you aren’t enjoying the process 9 days out of 10 – we have a problem.
Time Balance:
I’d bet that you love your business. But I’d also bet that you love someone(s) else more, and you may even have some hobbies or friends to throw in the mix too. Check how you’re spending your time – make sure you are doing the things you love, with the people you love while still managing your entrepreneurial role.
Talent Use:
Are you working in your sweet spot? This spot will change as your business grows – but you need to be mindful of where you might be the bottleneck of your own business. You also should be hiring the roles that make the most sense…that are not in your zone of genius.
Personal Development:
Are you making time and space to grow yourself? Cracking a book? Joining an accountability group or mastermind? Ensure that you have time to grow yourself alongside your business.
Other
Knowing your market and staying on top of trends and changes is important, and of course legal and regular compliance is too…but so much less fun to talk about.
Skinny-Fat Metrics
Hang with me for a minute. “Skinny-fat” is where your weight and BMI (body mass index) are very much in the normal range, but your muscle mass is light and your body fat is high – not a healthy place to be, even though the numbers on the scale or chart would indicate otherwise.
Vanity metrics can be found in your social media following, email subscribers or any other tracker that ‘looks good’ on paper – but it doesn’t equal profitability.
You could have 30k followers on a social channel, and still not be profitable. And if you aren’t profitable – what’s the point?
Next Steps
Evaluate your business. What grade would you give yourself? Have anything below a B – start working on it, one at a time. Use this scorecard from the small business assessment tool I have for my entrepreneur clients.
If you’re ready to take it a level further and get some support, I’d love to have you complete the small business coaching application so that we can talk more.
Sign up below to get a weekly email with tips, tricks and truth about intentionality with your time, talent and money.