Ready to Find Out How Healthy Your Small Business Is? Let’s Take the Test!

This Awesome Test is Brought to You by Nextiva, Your Trustworthy Partner in Business

I’m going to talk about something important today – assessing how healthy your company is. It’s good to do this around this time of year. I’ll give you 10 elements to review, and based on that, you can find out your small business health score and see where you stand.

So, what exactly is your small business health score?

1) Cash Flow

If you want your company to be successful, it’s crucial to have a positive cash flow. This means that you have more money at the end of the month than you did at the beginning.

Here’s how to score this element: Give yourself 2 points if you have a positive cash flow. Take away 2 points if your cash flow is negative (meaning you have less cash at the end of the month).

2) Quick Ratio

This may sound a little technical, but it’s actually quite simple. The quick ratio takes the difference between your current assets and your current liabilities. If the ratio is greater than one, it means that you have enough current assets to pay your current bills.

Here’s how you can score: If the company’s quick ratio is higher than one, add 2 points. If it’s lower than one, subtract 2 points. Just remember, what’s considered a healthy quick ratio can vary depending on the industry.

3) Customer Annuities

This means that repeat customers automatically pay the company every month.

How to score: If this is true, add 2 points. If the company constantly needs to find new customers and rebuild its revenue every month, subtract 1 point.

4) Fixed Overhead Expenses

When a company has high fixed overhead expenses, it doesn’t have much flexibility when its sales and profits change.

How to score: If most of the company’s expenses are variable, add 1 point. If most expenses are fixed or if they’re high compared to sales, subtract 1 point.

5) Management Team

Strong companies are not just about their owners; they rely on a team of strong leaders.

Here’s how you can score points for your organization:

6) Employee Turnover

Having loyal employees is important for a company’s success. They bring in more profit compared to employees who leave frequently.

Here’s how you can score points:

Add 2 points if employees stay with the company for at least 5 years. Add 1 point for 3-5 years. Subtract 1 point if employees stay for 2 years or less.

7) Strategic and Focused Plan

Companies that have a clear, written plan about where they are headed and ensure that all employees understand this direction are more likely to succeed.

Here’s how you can score points:

Add 1 point if every employee in the company can explain the plan. Subtract 1 point if they can’t.

8) Systematic Sales and Marketing Plan

When I look at many small businesses, I often notice a pattern. They only seem to focus on marketing when they’re struggling to make sales. But as soon as they start seeing some success, they inexplicably stop marketing altogether.

Now, let’s talk about how we can measure a company’s marketing efforts. Here’s what I propose: if a company has a well-thought-out and consistent marketing plan that includes social media, let’s give them 2 points. On the other hand, if a company relies mostly on improvisation for their marketing efforts, let’s deduct 2 points.

Now, let’s move on to infrastructure.

Imagine this: a growing company needs a solid infrastructure to support its operations. At Nextiva, they understand this, which is why they have integrated tools from Marketo, Salesforce, and NuviApp (a social media platform) to provide reliable communication solutions for their business clients.

For this criterion, let’s give a company 1 point if their systems are integrated and can be effectively used by both employees and customers. However, let’s deduct 2 points if each system operates independently and fails to work effectively together.

Lastly, let’s discuss the importance of seeking outside advisors.

As a small business owner, it’s crucial to remember that asking for help is not a sign of weakness but rather a smart move. Sometimes, we need guidance from experts who can provide valuable insights and support.

Here’s how you can calculate your small business health score: If the owner has a formal advisory board, add 1 point. If the owner never seeks advice from anyone outside the company and keeps to themselves, subtract 1 point.

Calculating the Score:

Above 10: Congratulations! Your small business is doing well and is set up for success in 2014. Try to improve areas where the score was negative to strengthen your business even further.

0 to 9: There’s some risk involved! Certain parts of your small business need improvement. You are susceptible to internal and external changes. Pay attention to the areas where your score was negative.

Below 0: Danger! Multiple aspects of your business are not in good shape, and there’s a risk of bankruptcy this year. It’s essential to seek help immediately!

So, what’s your small business health score?