What is a Business Health Check? 4 Essential Components
I’m often asked by people how often they should conduct a health check on their business, but once in a while I am also asked a question we sometimes overlook which is – What is a business health check? More accurately, what are the essential components of a business health check?
I believe there are four primary “boxes” that need to be assessed in any business health check.
Relationships covers all people interactions your business engages with. Your suppliers, distributors, customers, lenders, creditors and of course your team.
Regularly checking in with each of the representatives from these groups is essential. And in many ways, this is the most important component of an honest business health check. If your team are happy but your customers are not, then you won’t have a happy team for very long. Equally, it is hard to keep customers satisfied consistently if you have a high turn-over of team members.
If you are dependent on third party supply channels then managing that relationship is important to ensure safe and timely delivery of products or services to your end customer.
Undertaking a regular review and obtaining feedback from all the people that make your business what it is will help ensure you have your finger on the pulse of the mood and satisfaction of all interested parties.
Remaining in regular contact with your financiers and lenders is also important. One mistake many business owners make is overlooking this until they need additional lending. Obtaining funds for expansion is much easier if you have regularly nurtured and maintained your relationships with those who can organise funding.
Staying on top of how your business is performing in a “real time” sense gives you the ability to respond and repair before a problem gets out of hand. Regular reviews of your profit and loss, cash-flow forecast, aged payable and receivables should all be a part of regular management accounts process.
A health check though means that a more in-depth review of these key measures needs to be undertaken. I’m not suggesting that you need to audit your financial accounts every month. However, doing a more in-depth review every quarter will help you to stay on top of the financial wellness of your business. Developing the necessary skills to undertake this component of your health check program will lead to a reduction in your stress as a business owner.
#3. Products and Services
As with any business, conducting a regular review of the products and services you offer will help you stay on top of the needs and expectations of your customers. Thinking back to the first item – relationships – you have the opportunity through regular liaison with your customers to ensure your products and services remain current and relevant to their needs.
If the marketplace is asking for renovated products or services it is absolutely vital that you stay in front of those needs. For many business owners, this part of the health check can be an emotionally challenging one. Your amazing product idea? It was perfect 5 years ago, but it’s probably not now. Just because you have a product or service you think is relevant, it doesn’t mean the customer still regards it the same way. It’s just an unfortunate reality of being in business. Try to be objective and listen to the feedback you are receiving and respond accordingly.
#4. Business Owners
Remember the reasons you started the business? As a general statement, at least one of those reasons would (hopefully) have been for a sense of enjoyment and satisfaction. There is no faster way to bring a business to its knees than to have a disengaged business owner. Now that means that you need to include yourself, your motivation, commitment and satisfaction in any thorough business health check.
If, as the owner and leader of the business, you can feel your commitment sliding, then you need to explore avenues to reinvigorate, renovate or restore your enthusiasm. No one wants to work with a demotivated business owner. And in the long run that will filter through to your customers and other stakeholders.
Make sure to find ways to stay connected with your starting passion. Take steps to redesign your approach if you feel it starting to slide.
As a final note, remember that the first step to solving any problem is acknowledging that there is one. Sometimes a fresh pair of eyes can be helpful. So, don’t be afraid to reach out to people that can give you an arm’s length perspective. If you had the courage and passion to start a business, then you still have the courage to health check, adapt and change.
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