10 Keys to a Healthy Business

Focusing on what is important to you, understanding that not all sales are healthy and more. Check out the 10 ways to test to see if your business is healthy and on track for a successful 2018.

You see your doctor for health check-ups and a mechanic for car tune-ups, but where do you turn when something just doesn’t feel right with your business? During the recent “COSE WebEd Series Webinar: 10 Keys to a Healthy Business,” Greg Gens, area president for FocusCFO—a provider of CFO-level services to the small- and medium-size business market—discussed some “tests” you can give your business to see if it’s doing well and prepared for a successful future.

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    Listed below are Gens’ 10 keys (questions to ask yourself) to ensuring your business is healthy and running the way it’s supposed to.

    Key No. 1: Do you understand cash versus cash flow?

    There are only three real sources of funding: investors, banks and businesses. Investors and banks bring cash to the table, even if it is only borrowed. They are more complicated avenues of getting cash and bring their own share of potential conflict. Your business itself is often your best source of cash flow and is frequently overlooked. Look inside your business at accounts receivable (is it time to bill?), inventory and equipment, and overhead and capacity. Every business can better optimize cash flow.

    Key No. 2: Is your cash locked up in working capital?

    A great source of capital can be found on the left side of your balance sheet. Unlock your cash by making sure your billing and collections are up to date, getting rid of slow-moving or low-markup inventory and reducing equipment that doesn’t get much use. Ask yourself, “What if you couldn’t get money from an investor or bank; what are the opportunities inside your business for cash?”

    Key No. 3: Do you have a clear understanding of debt and a good connection with your bank?

    There are three types of bank debt: real estate, equipment and lines of credit. Real estate and equipment debt are tied to specific assets or collateral, and have a fixed term (usually three to 10 years). A line of credit is usually tied to working capital (accounts receivable and inventory) and should not be used to fund equipment, expansion or overhead costs. Lines of credit are often tied to temporary or seasonal expenses, and ideally will go to zero during the rest of the year. Make sure you can show your bank that you can pay down a debt, that you have all information at your fingertips and that you can give it to them as soon as they ask for it.

    Key No. 4: Do you have the tools for effective management reporting and financial statements?

    “Your books,” or your internal accounting systems and reports, are very important to your company.  A healthy business is able to fairly easily “close the books” at the end of each month. Keep your financial statements as simple as possible and consider something off the shelf, such as QuickBooks, Peachtree, Dynamics or others. Gens advised outsourcing this part of your business to a CPA or bookkeeping firm.

    Key No. 5: What is important to you?

    For this test, Gens outlined four questions to ask yourself and the areas of your business to consult when answering the questions.

    • What happened yesterday? Accounting.
    • What is happening today and tomorrow? Operations.
    • What will happen three months from now? Revenue.
    • Will I run out of money from either moving too slowly or too quickly? Cash Flow.

    Key No. 6: Do you have an understanding that not all sales are healthy?

    Examples of unhealthy sales include:

    • Too much revenue from one customer;
    • not enough revenue from one customer;
    • gross margins that are too low to cover overhead costs;
    • sales commissions that exceeds gross margin;
    • clients who pay too slowly; and
    • orders that cause too many disruptions.

    To have a clear understanding if a sale is healthy, Gens advised knowing the exact numbers tied to that sale, as well as looking for common trends or problems associated with sales across the board.

    Key No. 7: Are you being thoughtful about your financial strategy?

    Are you current on paying your taxes? Do your books check out? Are you able to prove that you can pay off a debt so that banks feel comfortable loaning to you?

    Key No. 8: Do you have the ability to drive positive cash flow from operations?

    Cash flow from operations refers to the amount of money a company generates from the revenues it brings in, excluding costs associated with long-term investment on capital items or investment in securities. It is cash flow from operations that will be used to make capital expenditures, design new products, make acquisitions, pay dividends, reduce debt and more.

    Key No. 9: Does your budget and forecast plan for what you want to happen?

    Understand that if you can’t make it work on paper, you don’t have much of a chance of making it work in real life. Gens suggested looking forward, not backward. If you are running your business strategy by financial statements, you’re always looking at last month’s budget. The key is a budget with a forward-facing perspective.

    Key No. 10: Does your business have good advisors and are you communicating well with them?

    Your banker, attorney, CPA and others: Are these some of your most trusted advisors and do you bring them in and talk with them regularly? Don’t be too proud to admit when you need some extra guidance.

    The COSE WebEd Webinar is just one example of the dozens of educational events COSE hosts every year. Check out the COSE Events page to see if there are any upcoming events that might help you grow your business.

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    Next up: 11 Business Books You Should Have Read by Now

    11 Business Books You Should Have Read by Now

    With so many business books out there, it can be difficult to pinpoint exactly which ones will help you accomplish the goals you have set for you and your business. To help you narrow down your choices, here’s a list of quality reading material and what aspect of your business they will help.

    It started during my military career. Successful leaders provided reading lists prior to new assignments or to help us prepare to successfully operate with and visiting nations around the world.

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    The list included articles, books and policy publications that helped us become knowledgeable of a culture and history of people. It was clear: The better I prepared to work in new environments the more effective I was as a leader.

    As I moved into my business career, addressing new challenges or gaining new insights came from a well thought out reading list. Successful leaders know and accept the markets they compete in are not static environments. Success in business is a choice. Be ready to adapt to ever changing conditions or become irrelevant and perish.

    So, my stack of books, my reading list, helps me stay ahead of my client’s need by:

    1. Being a student of the business they are in and increase my business acumen, my strengths and my ability to impact their results.

    2. Being responsible for my own professional development. My customers, their employees and their customers need me to help them prepare to win. I need to be viewed as ready for the challenges they face.

    3. Being distinctive by outlearning my competition and prepared to anticipate and overcome new or unforeseen challenges.

    With that in mind, here’s a list of 11 business books that you should have on your own reading list, and how these books will help you accomplish your business goals.

    To grow professional relationships and networks
    I recommend Dale Carnegie’s classic “How to Win Friends and Influence People” and Napoleon Hill’s “Think and Grow Rich.” These focus on developing relationships and self. I also added Keith Ferrazzi’s “Never Eat Alone” among many titles to help build the relationships I need in my coaching business.

    To increase business acumen and strategic thinking
    There are many but Jack Stack’s “The Great Game of Business” is a solid reference based on the real story of turning around a dying company. His “Open Book Management” is a great resource to help my clients grow their businesses. 

    To grow as a leader
    Carol Dweck’s “Mindset” addresses the impact of fixed vs growth mindsets. Marshall Goldsmith’s “What Got You Here Won’t Get You There”, John C Maxwell’s “21 Irrefutable Laws of Leadership” and John Kotter’s “Leading Change” help develop “rising” leaders.

    To build and lead engaged teams
    Building and leading engaged teams requires leaders getting results through engagement and accountability. I start discussions with Patrick Lencioni’s “The Five Dysfunctions of a Team” and ideas from Roger Connors’, Tom Smith’s and Craig Hickman’s “The Oz Principle”.

    What am I reading now?
    Right now, I’m reading Tim Ferriss’ “Tools of Titans” to find ideas, strategies and blueprints of success that will help my clients.

    So … which of these do you need in your “stack” of books?

    Wayne Bergman is a business and executive coach and founder of Consistent Business Growth. Questions or comments about this piece? Email him directly at wayne@cbgrowth-gfm.com.

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    Next up: 2010 CIO Symposium Plenary Session - CIO 3.0

    2010 CIO Symposium Plenary Session - CIO 3.0

    CIO: 3.0 - A forward view of the industry landscape from CIOs and select vendors. 

    CIO: 3.0 - A forward view of the industry landscape from CIOs and select vendors. 

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    Panelists: Lev Gonick, CIO - Case, Sandra Rapp, CIO - LinguistaLogix, Dan Dugan - Cisco; John Sprecher - Microsoft

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    As the pace of advances in technology continues to quicken, leveraging new technologies can be a challenge as well as an opportunity. Advances in mobile technologies, open source applications, collaboration platforms and more provide IT executives with wide-ranging tools to foster IT innovation in the enterprise. 

    As the pace of advances in technology continues to quicken, leveraging new technologies can be a challenge as well as an opportunity. Advances in mobile technologies, open source applications, collaboration platforms and more provide IT executives with wide-ranging tools to foster IT innovation in the enterprise. 

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    But what are prominent technologies being deployed or coming on the horizon? And how are CIOs innovating in their organization with new technologies? 

    This opening session features successful CIOs and prominent vendors sharing their vision of "the near future". Confirmed panelists include Bill Blausey, CIO-Eaton Corporation; Greg Kall, CIO-Summa Health Systems; Jim DesPres, Regional Manager, Google Enterprise; and Terry Quinn, District Sales Manager, Hewlett-Packard.

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    Mark Adams, an NCAA coach and noted program turnaround specialist, now regularly brings his inspirational insight to leaders across the country. A regular fixture on ESPN broadcasts originating across the country, Mark is a resident of Springsboro, OH. We’re delighted that we have Mark in our state long enough to meet with us – he’ll be at the CIO Symposium before and after his presentation to meet with attendees. 

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    Mark has prepared a special presentation for the CIO Symposium audience: Wolfpack Leadership for Technology Leaders. The distinctive howl of the leader, the thrill (and the danger) of the chase, and critical keys to the long term success of a sometime cooperative, sometime hostile pack — sound interesting? Sound relevant? 

    We think so, too. 

    Listen here.

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