Is it time for your business physical?

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It’s August. That time when the northern hemisphere takes a breath and slows down, if just a bit, and enjoys some sun and fun.

That slowing down and taking a breath is a good tradition. A rhythm that’s connected to the seasons, the school year and even the business calendar. Taking a break at this time can connect us to our families and the rest of the community. It can be the pause that refreshes.

Just because things are slowing down doesn’t mean that this is a time when your business stops moving forward. However, a slight lull in activity can give you a chance to stand back, take a deep breath and get some perspective. Just how are things going around here? If I took the time to ask the question, and look for the answer, would I find that I have a healthy business?

This is a great time to give your business an annual physical. And if you disagree, fine. Pick a different month. But find the time to do it and do it once a year. Here’s my best tips and advice for evaluating business performance:

Check your vital signs

Just like your body has vital signs your business has vital signs — what are the numbers that are indicators of health for your business? What are the things that, like pulse, body temperature, or blood pressure, serve as warning signs that there might be something seriously wrong?

  • Cash. What does your bank account look like? If you run out of cash — your business dies. So having a strong cash balance is a necessary, but not sufficient condition for your business health. Do you have more cash than you had at the start of they year? Are your receivables coming in (nearly) on time? What percent of your total receivables are over 60 days past due? You want to keep that number below 20% – 25% of your total.
  • Where is your artery spurting blood? If your business was a human patient, what would prompt the doctor to say “Well, we need to take a closer look at this?” Where is the festering wound that needs medical attention? You could find this anywhere–a chronic cramp of dysfunction with individuals or departments, or a hemorrhage of resources invested where there is no return in the shape of a vendor or an initiative that is just not delivering. It could be as simple (or complicated) as a poor use of space, or a need for better tools.

Blood work

If the vital signs are strong the doctor will likely do some lab tests to check for indicators of more serious issues that may be lurking below the surface.

  • How’s your chemistry? Have you established a strong company culture? Does that culture reinforce the behaviors and values that you know your marketplace values? If you were to measure the efficiency of your office culture how would you score?
  • Is there good will with your customers, partnerships and strategic alliances? If your business is strong you will be delivering a lot of value to your customers. They will be more than satisfied — they will be thrilled with your products or services. Is your business making thrilled customers? Are your customers telling others about your services? How about your referral partners and other strategic alliances — are they hearing great things from your shared customers?

How are you aging?

Yes, even young businesses are growing older every year. Your body and your business are impacted by age in all different kinds of ways. Don’t get a false sense of security from the longevity of your business!

  • Are the bones strong? Are your services still in demand? How is demand changing? You can start a business and see success, but success is always vulnerable to forces from within and without alike. What has happened to your success over time? Is it getting harder to find new clients? Are existing clients buying less than last year? You might be seeing a market shift!
  • How’s your memory? Are you documenting your processes so that you are making fewer mistakes every year? Is your business momentum accelerating based on the learning you did the year before?
  • How are your eyes? Where is the marketplace going? Are you starting to see shifts in your marketplace before they happen? Do your employees see those shifts as well and are they helping you to get there?

Now that you have taken that physical, you have discovered areas of strength as well as areas of weakness. But it isn’t over yet. Just like when I see the results of my own physical exam, when I’m looking at the strengths and weaknesses of my business, I have to ask the question: What changes am I willing to make in order to see improvement in those weak spots?

Where is your business strong? Where is it weak? What are you planning to do differently in the second half of the year so that you end the year in a different place than you are today?

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