How’s business?
This question probably comes up multiple times every week–kind of like, how about this weather?
Business is great. We’re staying very busy.
For most people, the answer is probably driven by how busy you and everyone who works in your business is. If everyone is busy and customers are paying you in a timely fashion, then business is probably good.
But there’s so much more to a business’s success than being busy. To truly evaluate how you’re business is doing, you need a full view of your organization’s vitality. Great businesses use real data to drive business operations that add value. What you can measure you can manage. Consider these questions to gauge how your business really is doing:
- How sustainable is your business model?
- Are you taking advantage of all the opportunities being offered by your market?
- Do you have a measurable, long-term plan?
- How do you measure up against your business peers?
To answer these questions at a minimum, you need accurate financial statements and these financial statements should be produced at the end of every month. It’s a discipline and good business people adhere to it religiously.
Business owners who want to take their business to the next level should consider producing financial projections. Among other things this tool will help you know when you can expect cash to be tight. Bankers are impressed when you can tell them 6 to 9 months in advance of the need for short term cash as opposed to calling them the day you can’t make payroll.
Another habit of good business owners is comparing the operations of their business to industry benchmarks. Comparing the operating results of your business to your competitors and peers will provide a more precise answer to the question of “how’s business.”
Do you know if you are producing financial statements that allow this comparison?
A CPA can produce reviewed or complied financial statements that will allow you to easily compare your business to that of your peers. We can also help you format your internal financial statements to better facilitate benchmark comparisons.
How do you measure your businesses success? Which measurements can you manage? Share your thoughts in our comments section.
