I can’t imagine any business owner who is not on a quest for a healthy and stable company. This begs the question: What does a healthy company look like? Here are ten traits to measure against:
Business cannot stand still or move backward, we can agree on this fact but keep in mind that growth counts on both the top and bottom line. Growing sales and sacrificing bottom line profits are often necessary and acceptable in the short term but long term success requires growth in both.
How much do you want to grow? According to some experts at Inc. Magazine, once a company reaches $10 Million + in sales the company infrastructure changes dramatically. Are you ready for that?
2. Adequate Cash and Cash Flow
Entrepreneurs juggle three balls. These are: Cash, Clients, and Staff. It is wonderful when all three balls are on the table but the fact is they usually don’t stay there for very long. There are times when our cash is flowing yet experience staff shortages for client servicing. There are times when staff is abundant and we need more clients to keep them busy. Then there are times when the receivables are extending past normal or a rapid staff ramp-up has drained the cash. It is a juggling act for sure. Cash flow projections can allow time to prepare and eliminate unpleasant surprises.
3. Little to No Debt
This is the dream of most business owners: Zero company debt! It took us more than ten years to get there and we plan to stay. If you are there as well, relish the day, it is a good place to be.
4. Appropriate Line of Credit
During our 14 years of business we have learned three important points with regard to banking. For most companies, cash flow is erratic and the LOC is needed to cover those short-term gaps. Here are the points:
- Strike when the iron is hot! Every time the company has a good year, pay off open credit lines and go to the bank to get the line increased. It is nearly impossible to make this happen at the time you really need the credit.
- Don’t bank with just one institution. Bank with two or three different companies and obtain a line of credit from each. All bank organizations have different rules for lending and different underwriter practices. If credit is eliminated at one institution, you need another one to fall back on. We learned this lesson the hard way when we consolidated all our banking due to a friendly staff that helped us consolidate all our debt. Everything moved along fine until the line of credit request arrived at the underwriter and was declined. The friendly staff who lured us into an exclusive arrangement inadvertently put us in a position that could have put us out of business!
- Be aware of underwriter blinders and timing. Our experience with the large banks is that underwriters don’t believe financial statements. The only documents they rely on are completed income tax returns. This is a real bummer when you need additional funding in July due to a rapid increase in staff and the underwriters expect you to wait until March or April to have the appropriate documentation for a line of credit increase. Can’t they look at the increase in deposits for crying out loud?
5. Safe Staff Environment
Nothing will hurt company growth and productivity more than a demoralized staff. Employees coming to work regularly fearing ridicule, disciplinary action or termination are unlikely to be giving their best for the company. Surveys show that employees in the larger organizations are largely disengaged. This is where small companies like ours can shine! Treat the staff like family and avoid hiring a human resource director!
6. Minimum Capital Investment
We are in an age of “Cloud Computing”, Voice over IP, SAAS and open-source software. Our company has functioned well in a virtual environment since inception. If you are hemmed in by “brick and mortar” just be sure it is necessary. Working in a virtual environment is a new way of thinking about how work gets done and what is important. Is it important to know how many hours the “at home” staff is working or are they paid strictly for the job and results? How does equipment ownership work? Moving to a virtual structure requires thought, planning and often a culture shift but the savings in capital investment can be huge. Woe to the commercial real estate people!
7. Uses Technology Well to Enhance Business
Most companies do not begin business with the idea of becoming a technology company. Yet technology is playing an increasing role in how business is done. The good news is that affordable platforms in the cloud are increasing exponentially reducing the need for custom programming or the “lock-down” of an expensive enterprise system. If there is any area of business management that requires a competent team of advisors it is this one, which is surly true in our case. Technology is expensive and changing rapidly. We have been blessed with some of the best talent without the need for dedicated technology people on staff although this could change as we continue to grow.
8. Credible Leadership
Company managers are either already gone or going! In this business environment managers are no longer needed and leaders are in the forefront. A company is only as good as the people in leadership positions around the organization. Are your company leaders genuine and trustworthy? Hire well in this area and groom people who demonstrate integrity.
9. Compelling Purpose
What is that driving desire to succeed? Healthy companies are on a mission to positively impact the world! What is your mission, and does the entire staff embrace it? It is a good idea to reflect on this point and “shout it from the rooftops” to the world; especially to the staff.
10. Reasonable Risk Compliance
Businesses are always a target and naturally at risk. The key here is to take reasonable precautions and avoid the trap of allowing attorneys dictate how business is to be done. All business leaders must be on guard for vulnerable areas and install reasonable protection. No business can afford 100% protection for risk avoidance. It is stupid to under-protect and stupid to over-protect. Don’t be stupid!
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