Every business should have an annual “health check.” The goal is to identify problems before they become more serious and assure the owner they are following the right course.
If your cholesterol was trending higher, you would make lifestyle changes before it became a greater health risk. Your business deserves the same timely monitoring, care and attention.
Health checks can be conducted at any time but generally are done around the budgeting and planning process, at year end, or other performance-review cycles. The health check should focus on the “vital signs” of the company, including metrics in finance, operations, customer and staff satisfaction, as well as innovation and growth.
A business’s financial results are a key indicator of company health. Reviewing historical information and comparing current numbers to prior years and the budget is an important baseline indicator. However, historical results are just that and may not necessarily be what is in store for the future. Some questions that should be addressed:
• What trends are we experiencing in revenue by product or service category?
• Are the cost components of our major products or services changing? What are we doing to address such changes?
A fully balanced health check should also encompass operations, sales, marketing and technology. Each of these areas have critical vital signs that could affect the business.
Understanding … changes that may be occurring in your customers’ world is vital.
The financial component of the health check should be accompanied by a thorough review that focuses on potential changes in the marketplace for your products or services. Developing a strategic and operational plan based on changing market conditions allows you to be proactive in maintaining the growth of your business. Understanding not only your company’s competitive landscape but changes that may be occurring in your customers’ world is vital to your longevity.
This should also include an assessment of your capital needs to support expansion, along with the need to secure new distribution outlets, manufacturing capabilities or technological enhancements to compete effectively.
Consider the condition of your organization from a “people” perspective, too. The greatest products and services will fall short of delivering optimal value for your customers if the people within the organization are not aligned with the overall vision of the company. Among the human capital areas to address through a health check:
• Whether there is alignment across personnel on core values and where management wants the company to go.
• Whether the right skills and capabilities exist within the company to execute on the strategy and grow the business.
Understanding the changing needs of your employees and customers and really listening to them will allow you to react and adjust as needed.
Failure to monitor these health metrics can lead to deterioration in market position, lost customers, increased staff turnover and eroding financial results. Consider, for example, the Yellow Cab business. While the industry was once mainstream, it ignored innovation for way too long and didn’t recognize there was a better way to serve their customers until it was too late – and Uber and Lyft captured the ride-sharing public.
A comprehensive health check of your business should become an annual event, such as renewing your medical insurance policies every year. Hopefully, you will receive a clean bill of health, but if not, you will have plenty of time to adopt a course of treatment to ensure the company’s well-being.
Janice DiPietro is the founder and CEO of Boston-based Exceptional Leaders International.