Many things in life that require regular check-up and maintenance to ensure that they perform well and that their functionality is not diminished in any way. Your car and the roof gutters in your house are prime examples. One might break down at a critical time while in the other case, overflowing water can even damage the foundation of your home.
Similarly, just as you would need a mechanic to carry out regular check-ups of your car to make sure that it runs well, you should have systems in place that looks after the health of your small business. You have to conduct periodical check-up not just from the performance angle but for your safety too.
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Here is a guide on how to create a small business health check plan for your business.
Business Health Check – Revenue
Revenue is the money that your business earns. After expenses are taken out from it, you get to see profits and become a viable well-run company. Hence, checking your revenue stream is the first step in creating a health check plan.
Evaluate how your current revenues are sizing up against your goals and budget, both annually and monthly. If you do not have a budget yet, structure one now. If you have exceeded your revenue targets, plan how you can build further on it. Otherwise, work out strategies that will help take your business forward in the next month or quarter or year.
Examine the buying patterns of your customers and find out if any of them constantly badger you for discounts and act as a drain on your revenue. If so, it is time you gently eased them out to stop this revenue leakage. On the other hand, you might have a client that contributes to the bulk of your revenue. That is good for you now, but what happens if the client decides to leave. Thus, you should also focus on building up a portfolio of revenue generating clients that can compensate for this eventuality.
Business Health Check – Expenses
While expenses are a part of any business, wasteful expenditure can pull your business down. It is always advisable to keep a tight leash on your expenses. Start your health check by scrutinising and tracking your expenses and finding out which ones are taking up the major part of your cash flow. There will always be an increase in expenses as your business grows. That is natural for any business. But look for areas that are showing exceptionally high expenditures and have got out of hand when you were not paying attention.
Once you have identified the problem areas, you should work out an approach to cost-cutting. As a small business, outsource business activities as much as possible while keeping core activities linked to development in-house. Departments such as payroll management and accounts can be outsourced to specialised agencies. You will save a lot of money as you will not have to set up additional hardware and software for these departments, not to mention recruiting staff to run the systems. You can take help of strategic business consultants to guide you through the outsourcing process.
Business Health Check – Receivables
Accounts Receivable is the money owed to you by your customers for goods and services provided to them. It is necessary that you carefully track your receivable to make sure that your customers pay on time. When receivables pile up, your cash flow will be adversely affected. Have systems in place that will closely monitor your outstanding invoices. For the long-pending ones, make sustained efforts to collect the money. If you are short on staff, outsource this activity and get back your dues as soon as possible. This aspect is a critical component of creating a health check plan. Chalk out a clear-cut policy for overdue invoices such as charging interest or in worst case scenarios, ceasing further relationship with the customer.
These are some of the aspects that should draw your attention. But for a professional opinion on the health of your small business, contact top business consultancy services to know more.