There’s nothing like a crisis to teach an entrepreneur a hard lesson — the most recent example being the collapse of Silicon Valley Bank, an event that taught companies like Roku exactly why it’s a bad idea to leave $487 million sitting in your bank account.
Hindsight is 20/20, and a good crisis is virtually impossible to predict, but the SVB collapse is a good example of why entrepreneurs must stay focused on business health fundamentals. The pinnacle of success for the tenacious and hardworking, a healthy small business is one that actively manages its finances, has access to credit and optimizes financial performance.
Keep these indicators in good shape, and a business is more likely to overcome challenges like a bank failure and keep growing without missing a beat.
A business requires a fitness regimen just like humans; in this case, it’s financial fitness businesses need to be focused on. And the first step in managing financial fitness is to measure it. Based on key indicators identified through decades of research from leading financial institutions, researchers, and small business data, the Business Health Score provides a window into a business’s current health and identifies areas for potential improvement. The goal is to offer entrepreneurs everywhere a free snapshot of where they are today and how far they can go if they take the right steps.
Once you’ve measured your business health, dive into these three high-impact areas every owner can focus on to boost their score.
1. Create transparent financial workflows — and stick to them!
Where is your money going? How much cash are you leaving on the table? What kinds of risks can you afford to take? Financially fit businesses know the answers to questions like these, and they can act on that information with confidence.
Creating a durable, transparent financial workflow ensures you have this information at your fingertips. Here are some items to take into consideration:
2. Monitor and improve your credit scores
A healthy business needs flexible and scalable sources of capital to grow, and for small businesses, that typically means relying on some combination of personal and business credit scores.
Maximizing your credit scores starts with knowing where you stand. Experian, Credit Sesame and Credit Karma are all excellent tools to monitor your personal credit score. Whether the scores are good, bad or ugly, it’s in your best interest to get them as high as possible. To do that, I recommend that you:
3. Optimize your sales and marketing
When it comes to improving your company’s financial performance, you want to see good margins and predictable, recurring revenue. But you don’t need to reinvent the wheel to get there. You don’t necessarily have to introduce new products or services, either. Instead, focus on maximizing your profit margins and sales volume with two strategies:
Building a healthy business isn’t that different from taking care of your personal health. Practicing good habits can potentially yield huge results in both the medium and long term. Make the time to focus on financial management fundamentals and watch your small business thrive!
This content was originally published here.
