business-health-check

Three Questions to Determine “True” Business Health

When you get to the doctor, it’s basically a numbers game, isn’t it? They take your temperature (a number). Your blood pressure and pulse. Finally, they ask you the most important question: What’s going on?

Talk to people in small, medium, or even billion-dollar businesses and many of them will say that the health of their enterprise can be found strictly by the numbers. Inc Magazine has a great list of the top seven indicators of business health to do just that. Inc. includes the usual suspects like comparing operations cash flow vs. current liabilities; the correct ratio for assets vs. liabilities (which should be 2:1); and comparing average receivables with average sales to determine if you’ve got healthy liquidity. Good stuff for sure, but I’m here to tell you that most first-year business students could come up with these on a bet.

Let’s just pretend your company is sliding around on one of those flimsy paper things they put on a doctor’s examination table. You and the doctor will use the numbers first—like, if your temperature is 105 you’ll need to get some very specific attention for that right away. Same goes for the ratios and numbers we talked about above. But don’t you want to know “what’s going on”? Your balance sheet answers that question in the “dollars and cents” sense. But sometimes it’s time to get down to causes and conditions you might not see reflected there.

Here are a set of questions that can give you a second opinion, if you will, about what your company needs to thrive as a healthy, growing entity. If you’re a “by the numbers” guy or gal, this one might hurt. But take your medicine. You just might feel better.

  1. Do you get a lot of repeat customers? Do you track your repeat business appropriately? What about client referrals? General customer satisfaction?One way to tell if your company’s products or services are of high quality or if people enjoy doing business with you is to look at how many times your customers come back or refer you to others. An oversimplification, sure, and there are lots of specific things you can do to get some hard numbers on this. But figuring this one out will go a long way in ensuring long term business health.
  2. Do your employees stick around or take off the first chance they get? What is the average tenure of your employees in each department? Can you identify why certain departments have longer tenure and then replicate that environment?If you think healthcare costs are going through the roof you should see how much it costs the average company to hire and train a new employee. Your employee turnover should interest you just as much as inventory turnover, maybe more. Make a habit of looking at it often, with an eye to creating the best possible employee experience you can.
  3. If you are the owner, CEO or even the manager in charge of making sure a company department succeeds (a marketing-, finance-, or sales- manager, perhaps) ask yourself this: Is running this business fulfilling your professional goals and making you happy?Any measure of success that doesn’t include personal satisfaction on your part is doomed to fail. Remember what a dismal failure Willie Loman was in Arthur Miller’s seminal play, Death of a Salesman? That entire work is a meditation on the price of doing the same thing day after day without any meaningful return. Sure, you get a paycheck or a healthy balance sheet, but do you get any joy?Maybe you think we’ve stumbled into another kind of doctor’s office altogether with this last question. But I believe any measure of health that doesn’t include customer, employee and manager satisfaction is a short-sighted way to be well.
1 reply
  1. Jordan Lang says:

    Great post on an important topic. The three major areas of business health you mentioned are often overlooked by business owners. Also appreciate the reference to Death of a Salesman. Lots of valuable lessons in that play.

    Jordan

    Reply

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