In a Business Owners Board business advisory meeting, when we ask this question, the answer is usually something like “Vitals, what are you talking about?” or “Yes, my blood pressure is a little high. So what?”
According to Wikipedia: “Vital signs (often shortened to just vitals) are a group of the 4 to 6 most important signs that indicate the status of the body’s vital (life-sustaining) functions.”
Your business has “vitals” as well as your body. They are the 6 or so most vital (life-sustaining) numbers that tell you the health of your business. The critical ones are usually found in the financials.
Sadly, our experience is that the majority of business owners only look at their “numbers” or financials at “tax time”. Even then, they often only look at how much tax they have to pay.
So what do you do?
You decide what are the 6 most important numbers in your business. Make a regular time once a week for your admin person or bookkeeper to produce the numbers for you and then sit down and review them. We recommend you involve some other “trusted” person in that process. Someone in your business or maybe a coach. If you are a ‘bob’ member use the time once a month with your bob coach to review things.
What the 6 (or so) most important numbers are will vary from business to business, but common to most businesses would be:
- Income – by week or month and also Year To Date and compare to previous year
- Expenses – by week or month and also Year To Date and compare to previous year
- Debtors (Accounts Receivable) – look at the trend and the aging report
- Creditors (Accounts Payable) – look at the trend as well as the amount
- Aging report by client – how long have people owed you money?
- Cash at bank – look at the trend and do a cashflow analysis to make sure you can cover debts and accrued liabilities
When you review these “vitals” regularly (the frequency will depend upon the business) then you will quickly pick up anything that is going out of the “norm” and then you can address it. Remember, if you can measure it, you can improve it!
Measure and track your vitals for greater SUCCESS!
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If you are a business owner and want to know more about the Business Owner Board process, you can apply to attend one of our bob group meetings free of charge.