Hi Mr. CEO! How are you doing?

Introduction

In my book Make A Difference (2018) for aspiring and early stage entrepreneurs, I talked about the Ten things that one ?must ‘check list’ before setting up a business. These are based on my 30 + years working in various organizations of various sizes from MSMEs to MNCs at positions starting from a trainee to a Business Leader. Barring cases where a business fails either due to unfavorable echo systems or improper management, a business that is established on solid fundamentals and run professionally succeed and grow in the years that follow.

There is, however, an important catch!

According to Georgia McIntyre, Director at NerdWallet in her article “What Percentage of Small Businesses Fail? (And Other Need-to-Know Stats) says that while 20% of small businesses fail in their first year, 30% of small business fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail in their 10th year in business. This article deals with the regular ‘health check’ the businesses must undertake, when and how.

Why are Health Check Required

Janet Berry-Johnson, CPA, puts it the best when she says, “Your car needs an oil change every 3,000 miles, a wash every few weeks, and a new battery about every five years. Just like you take your car to the mechanic to keep it running smoothly, you need to perform regular check-ups on your business health. It’s not just about performance, it’s about safety.”

Moving from cars to business, the reason I describe these as “health checks” is that these are quite similar to our physical health checks. Almost all of us – at almost all ages, go for a periodical health check not only to check if we are in good health but, more importantly to detect early some potential health risk we may be carrying asymptomatically. My experience of working with several businesses, about 8 in every 10 businesses are sitting on such risks and not aware of the same.

The CEO and management are either busy enjoying the “feel good” behind the operational results or too busy in fire-fighting day to day problems and thus unaware of the time bomb they are sitting on silently.

Which is why the title of this article “ Hi Mr. CEO, how are you doing”

So, what tests must be carried out in Health Checking a Business?

Before we talk about the suggested tests, we must keep in mind that tests are only a diagnostic tool, and neither the diagnosis nor the prescription to cure. More of that, later.

Ten most common missing parameters that I find unattended are:

1. Top Line yes but what is it’s quality? Almost everyone would call Sales or Revenue as the most important parameter. I have seen companies that reached a huge line but one fine day closed. One needs to test the quality of the Top Line.?
2. Do you even have a Budget? Or just a Sales Target? What is the ratio of budget to actual? Why? What more?
3. What is your source of revenue? Your clients or your products? How do you know? What could be the impact of the answer?
4. Are your clients, giving you business or destroying it? Very few companies measure this vital parameter.
5. Is your business making more money than you are spending? As the revenue grows – are your expenses increasing or decreasing, even though you are making profits. My own experience shows a definite 5-8% improvement in Operating Efficiency is possible even in the companies with tight controls. And that is direct profit! ?
6. Is your money lying with you or your clients? How are the receivables measured, monitored, controlled?
7. What if you were to buy your own business? How much would you pay for it? Have you got your business evaluated? Why is this important?
8. What is your company’s risk management system? Risk is not only data security. Are you immunized against market risks, currency risk, inflation, geo-political factors?
9. Is your business future ready? In terms of Talent, Technology? Funding? Market reach and access?
10. Do you have a Five-year strategic growth plan? Are the strategic priorities and strategic results mapped?

When Do You Need a Check-up?

One would think that just like in a physical health check-up, the health check of a business would be needed based on the present health of the business, and if we are doing well, a health check is not urgent. Agreed, but just as in a physical health a check-up is needed when we are in good health, because some of the dreaded potential health risks could be asymptomatic. Same way, a business doing well needs a health check-up because what worked yesterday doesn’t work tomorrow. Remember, the title of a famous book, "What Got You Here Won't Get You There" by Marshall Goldsmith - a global guru in executive coaching.?

Who should carry out the health check-up of your business?

As an Owner /CMD / CEO you may think that a business health check-up is best carried out by a senior management team. This could be fatal in a way and not produce any material result. In fact, it is the same like doing our own our routine physical health check-up rather than going to a lab and a doctor. Internal teams including the highest management have a natural tendency to focus on the laurels, what we are doing well, why we can’t do anything better and what are the difficulties. This exercise honestly is as futile as we undertaking self-check-up of our physical health.

Hire the best?

Yes and No. Pretty often, growing businesses feel that the best consultant is the one that’s most expensive. Again, this can be wrong on several counts. For one, the fee structure of Big consulting firms could deter you from conducting a health check – thus leaving it un-checked.

The best approach would be to hire an external expert who has hands on experience of running a medium business and who can not only give you a test report but hang hold till the results are interpreted, acted up on and correctives made. Right till the time the measurable results are achieved on the ground. Link the fees to results, if need be, but insist on curing the disease?and also create a healthy business that is scalable and sustainable.

Conclusion

• Whether a business is big, small or medium a regular health check-up is needed to cure present problems and bring out the potential ones in time to be addressed before it is too late.
• Health Check-up must ask the tough but needed 10 questions. so that the right diagnosis is made and addressed before it’s too late.
• It is best done by a neutral third party that has the experience of running and growing business on the ground.
• Health check-up need not cost a bomb, and the engagement can be made ROI based.

That’s when if anyone tells you, how are you doing, Mr. CEO, you can boldly say “I am doing fine!”