What is a healthy company?
~ May 2019 ~
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Companies that seek overall health are the ones that not only survive but go on to even better things and create opportunities that would never appear otherwise.
The first attribute of a healthy company is that it has a stable roster of clients or steady sales of its product or service. This typically means that the company has a product or service that is valued by its customers and they choose to do business with that company. The challenge at this stage is never to presume customer loyalty or that their product will continue to be desirable.
Stable revenue is another attribute that ties in with steady sales, but the accounts receivable and accounts payable must be watched very closely. Uncollected bills are lost profits, and unmanaged vendors happily take inflated fees from clients.
Having a budget is a next-level indicator of a healthy company, and a cash projection is a natural extension of a budget. Beginner companies are satisfied with merely knowing where they presently are, or worse yet just making sure they don’t overdraw their checking accounts, but the real power comes from knowing how much growth potential a company has and leveraging all of that potential. A beginner company also incorrectly believes that staying in the same place as “we can pay the bills and put some money in our pockets(!)” is safer than reaching for the next level, but the companies that search for long-term success know that stopping in the middle of the road will surely lead to being run over.
A company that expects that it will naturally grow is healthier than one that remains stagnant. We know from practically everything else in the universe that there is only growth or entropy and the same holds for business. Just think of that store that you walked into that hadn’t been updated in twenty years and how your regard for that store immediately dropped to one of possible suspicion of their offerings (maybe you look if the milk is out-of-date or expect horrible customer experience?).
Having solid books is not only the exclusive way for a leader to understand their company’s position, but it creates opportunities to exit the business at some point. Did you know that a company needs three to five years of rock-solid financials before any investor will even look at a company for purchase? Even if there is no plan right now to sell one’s company, there must be planning for that, even if that preparation is used to secure an emergency line of credit from a commercial lender.
This one is more for a company that deeply understands itself, but every healthy company is hungry to provide a desirable service, create new offerings and remain a leader in their industry. This comes from the correct understanding that taking the foot off the accelerator will eventually lead to decline.
We will continue with attributes of a healthy company next month, or you could contact us directly and get those answers immediately!
If you need assistance with anything we’ve discussed here, let’s talk so you can reach your financial goals, growth, and revenue. Spend your time doing what you do best and make more money by having us solve your most pressing financial issues.