Keep Your Business Healthy With a Diagnostic Check-Up

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When it comes to business, there are few things you can count on with certainty. But you can count on this: to keep your company healthy and growing, you must be continuously monitoring its progress.

You are not just your company's leader, you are its personal physician too. That means you should be conducting regular check-ups. How else will you know your business is healthy? And what if it's not? You can't prescribe a course of treatment without a working diagnosis.

It's time to give your business a check-up. Get out your stethoscope-let's see how your #1 patient is doing.

1. Identify Strengths and Weaknesses
Chances are, you already know your company's strengths and weaknesses. But you may be taking your strengths for granted, just as you might be ignoring your weaknesses in the hopes they'll go away. (They won't, without your help.)

Consider: what are your company's greatest strengths? Service? Sales? How can you maximize them? Can you extend those strengths to other areas of your organization? If your firm has real weaknesses, don't just slap a bandage them. Determine the root problem and fix it, no matter how painful. If you don't, your other efforts will be wasted.

2. Evaluate Human Assets
In most small businesses, employees are the most valuable asset. Review your staff, person by person. Who is actively contributing to your company's production and creativity? Who isn't carrying their weight?

Ask yourself: would I hire these people now that I know them? Do their strengths complement their jobs? Be sure you are properly rewarding your top-performing employees. As for your non-performers: do you realize they are tainting your entire organization? Take steps to make sure they improve their performance-or terminate them. Period. It's a tough action to take, but failure to do so will hurt your firm's health.

3. Review Your Sales Strategy
Smart companies are constantly recreating their sales strategies to meet the changing demands of clients, trends, and market conditions. Categorize your customers. Who's profitable? Who's not? Are you dedicating assets where you can make the greatest profit? Identify customers and niches that offer the strongest future potential and pursue them.

On the other hand, if you have unprofitable customers-customers whose excessive demands are draining your resources and poisoning morale-consider "firing" them by imposing major price increases. "Bulk up" sales by focusing on your most profitable goods. It's easy to identify them: use gross profit as a measure-or better yet GMROI, gross margin that considers inventory turns on products.

4. Measure Cash Flow and P & L Activity
Cash is your lifeblood. Make sure your lines of credit are healthy. If you allow yourself to run short of working capital, you will spend your time managing cash instead of running the business.

If you don't have formal financial controls, it's critical to get them in place. Some day, you may need them to survive, but you will always need them to grow. These cash flow projectives are especially important to your company's financial health:

* Cash flow projections and statements
* Monthly revenue projections
* Monthly expense projections with variances
* Capital equipment budgets
* Inventory acquisition budgets and variances

5. Assess Your Compensation Plan
Employee compensation is probably one of your greatest expenses. If your compensation policies aren't tied to performance, you're wasting a prime motivational tool. Consider implementing a performance-driven compensation structure. Is it possible to lower base salaries, while increasing results-driven bonuses? Not just for sales, but for everyone?

Many small businesses don't actually measure employee performance. They work by subjective standards, not objective measurements. The problem is, you cannot reward performance unless you can measure it. Measure and reward performance-and give your company a shot in the arm.

Stay On Top of New Developments
As your company's physician, it's up to you to monitor your company's health. But it's equally important to stay on top of business trends and ideas. Read the new business books. Attend seminars. Join a business peer group and learn what other local business leaders are doing. These activities are not a waste of time, but an endless source of inspiration. A company isn't really healthy unless it's also growing.
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