Why You Need a Business Assessment and How It Can Help

Business assessments are evaluations conducted to analyze a business’s performance, efficiency, and overall health.  They aim to diagnose what’s working well in the business, where it’s getting stuck, and what needs to be done differently as follows:

1.  Purpose of Business Assessments

Business assessments diagnose what’s working well in the business, where it’s getting stuck, and what needs to be done differently.  The real payoff from consistent business assessments is making smarter decisions with less stress.  With a data-driven understanding of your business, you can confidently allocate resources, plan investments, refine marketing strategies, and set a clear direction for future growth – all leading to increased profits and higher cash reserves.

2.  Business Checkups are Like Physical Exams

Business assessments are like physical exams, where a healthcare provider studies your body to identify any physical problems that need medical attention.

The results of a physical examination establish if all is well, continue doing what you’re doing or if immediate corrective actions need to be taken, and any necessary lifestyle changes to keep you healthy as reflected below:

• • • For those that are healthy, their physical is confirmation that they are taking care of themselves as they should.
    • For those with hereditary or lifestyle risks, their physical confirms whether intervention is needed to improve their well-being.

Those who choose not to get an annual check-up lose out on establishing their health status, robbing them of early intervention and prevention insights they are currently at risk for.

Those who choose to avoid getting an annual checkup lose out on establishing their health status, robbing them of early intervention and prevention insights for which they are currently at risk.

3.  Key Components of a Business Evaluation

A well-designed business evaluation serves the same purpose as a physical examination.  Vital signs are checked, the equivalent of physical appearance is evaluated, medications are reviewed, and lab work is performed.  All of this is done to assess for any issues that may become medical concerns in the future.

The business vital signs assessed start with changes in Net Sales, Gross Profit, Operating, and Net Income to measure the quality of business operations.  A balance sheet review is performed to establish the effectiveness of ownership decision-making.  Here, we look at the sales, profit, and cash reserve health of a business shaped by the cash quality and speed of collection the business generates each time it completes a transaction.

The faster and higher the return on the cash invested to get paid for a sale, the healthier the business.  Failure to earn a profit on a sale means the cash invested in assets and expenses is not generating a return.  Worse yet, failing to collect the money owed from a sale means you never get paid for the cash invested in assets and expenses.

4.  Analogy to Physical Health

Just as an unhealthy heart puts you at increased risk of flatlining if immediate changes to your lifestyle aren’t made due to cardiovascular disease, the same can be true for your business.  The health of your operating cash flow is shaped by improving your understanding of how your management actions shape the quality of your profits as reported through your financial statements.

5.  Significance of Regular Business Checkups

By conducting regular business checkups, management learns what needs to be started, stopped, and continued.  One key reason business assessments are important is that they provide valuable insights into the business’s current state.

6.  Business Assessments Enable Disciplined Planning

Positive cash flow and profitability never just happen in any business.  Both are achieved through disciplined planning, accountable follow-through, and accurate and timely reporting of your hard work and sacrifice results.

7.  Business Assessment Actions Lead to Better Results

Businesses with predictable cash flow, strong profits, and accurate and timely reports never face the question, “Is this a good business to buy?”  People buy these businesses at a premium because they can easily understand how cash is generated, and profits are achieved through the financial reports produced. These businesses have disciplined owners who assess the quality of their decisions and actions, as verified by their financial results.

8.  BusinessCPR™ Business Assessment Offer

Get a “no charge” BusinessCPR™ Business Assessment to identify where your business needs you most.  Click here to take the no-obligation BusinessCPR™ Business Assessment to learn about your business’s health. After completing the diagnostic, you’ll receive a risk profile indicating your business’s susceptibility to cash flow and profit problems over the next three years.

9.  Business Risk Profile Categories

Your “no charge” BusinessCPR™ Business Assessment results will fall into one of the following five risk of business cardiac arrest categories:

• Low (Green): Congratulations! Your risk of business failure is unlikely. Your proactive use of financial reporting helps you identify and address issues promptly, protecting cash flow and boosting profits.  If sold, your highly attractive business would likely fetch a premium.
• Moderate (Blue): You’re managing to avoid the worst consequences, but your business may be experiencing some cash flow issues despite your efforts. While you adjust spending, you struggle to build cash reserves or maximize profits.  Better utilization of management tools and understanding of financial statements can help you trim waste and enhance profitability.
• High (Yellow): Your business shows elevated risks due to recurring cash flow problems and inadequate profits. Expenses may be excessive, and certain costs are hard to control, especially during slow sales periods. You’re not using key metrics or profit planning effectively. Immediate action is needed to control waste and boost profitability.
• Very High (Orange): Your business faces increasing risks of cash flow problems and substantial losses. Continuing on this path will lead to prolonged stress and financial instability. To prevent further damage, immediate action to cut expenses and seek expert guidance is recommended.
• Extreme (Red): Your business is in dire straits, with prolonged losses pushing it into full-blown crisis. Every month of losses worsens the cash situation. Urgent action is required to halt the bleeding and salvage your business. Seek immediate help to prevent further deterioration.

A special offer for those expecting more from their business …

If you’re too busy for a complete business checkup but want to understand how your business model affects your profits, click here to submit your P&L statement for a certified BusinessCPR™ Scientist to identify where your business model is draining profits at no cost. These insights are ideal for those seeking to make more money with less stress.