There’s more to business health than financial results
Ask a manager or owner how business is going and the chances are that you’ll get an answer about sales, profits or growth. But there’s a lot more to being a healthy business than financial results.
Healthy businesses should naturally post healthy results. But the characteristics of healthy businesses mean that they will post consistently good results and be better able to cope with adverse changes than less healthy competitors.
So what characterises a healthy business?
- Strong sales growth
- High levels of profitability and returns to equity
- Solid balance sheet
- Satisfied customers
- Top quality employees
- Best-practice management
- Effective use of the latest technology
- Adaptable organisation and strategy
- Resilient infrastructure
Of course, the correct answer is all of the above.
Nowadays there is an increasing emphasis on a holistic approach to business health. Research by McKinsey (see the link below) indicates that the best performing businesses “don’t merely learn to adjust themselves to their current context or to challenges that lie just ahead; they create a
capacity to learn and keep changing over time.” The healthiest companies actively manage all key aspects of their business including some areas that may seem “fluffy” – but this attention to detail across the board allows them to reap sustained and long-term rewards.
And just because a business is small doesn’t mean it can’t have the attributes of successful larger businesses – you don’t need an HR department to have good staff recruitment practices. SMEs may have insufficient resources to put into formal processes, risk management and the like, but well-run SMEs can adopt a mind-set of quality in everything they do without adding unnecessary costs. This sort of enlightened approach leads to better long-term results even in the smallest of companies.
So how should you start the journey to improving your business health? The obvious first step is to measure your current business health by taking a business health check. This should give you a balanced scorecard type assessment of your business across all key dimensions: people, processes, infrastructure, strategy, customer relationships and, yes, financial results. A good business health check will also provide you with an action plan for how to improve, focused on minimising any business weaknesses and exploiting your strengths.
A business health check is just the start to improving your business health. You then need to prioritise, develop and execute your business health improvement plan. And keeping your business healthy won’t just happen, it needs constant attention, monitoring and review – but the rewards are worth it.