Key Takeaways

  • A business check up involves reviewing financial health, operations, and strategic alignment.
  • Monitor profitability, cash flow, and your balance sheet regularly.
  • Use performance metrics and benchmarking to measure success.
  • Assess customer satisfaction, employee engagement, and compliance risks.
  • Conduct quarterly, mid-year, and annual business reviews.
  • Refresh your business plan, goals, and leadership alignment for continuous improvement.

Steps for how to check up on a business are as shown below:

  • Check profitability
  • Observe cash flow
  • Study your balance sheet
  • Make projections
  • Evaluate your product or service
  • Update and enhance the business
  • Ensure a quarterly inspection.

Check Profitability

Entrepreneurs tend to measure profitability and try to achieve it by focusing on the raw cash rather than observing and managing margins. The margins measure how much profit in cents your business is earning on every dollar of investment you make. It's a more reliable indicator of how much buffer your business has to survive the moments of poor sales.

Observing the margins also helps to indicate how easy or difficult scaling the business will be. Observing the increase or decrease in the margins of your business's profitability will reveal a lot about your company's health. It's also important to keep track of your progress. For instance, if your business is succeeding:

  • How did you achieve its success?
  • How much money did you invest to get it there?
  • How long did it take to get there?

Review Key Performance Indicators (KPIs)

In addition to evaluating profit margins, track essential KPIs that reflect your business’s operational and financial health. Some common KPIs to include in your business check up are:

  • Gross profit margin and net profit margin
  • Customer acquisition cost (CAC)
  • Customer retention rate
  • Inventory turnover ratio
  • Average payment period and accounts receivable turnover
  • Employee productivity metrics

Consistently monitoring these KPIs helps you identify areas needing attention and supports data-driven decision-making.

Observe Cash Flow

Some businesspeople and finance professionals tend to overlook their cash flow statements. However, the cash flow statement of a business is one of the most important indicators of its financial health. The cash flow statement from operations is especially important because it shows how much operational cash went in and out of the business within a given period. The operational cash flow statement works by pulling financial information from the income statement and the balance sheet alike.

Profit isn't always the same as cash. For example, if you sold $2,000 worth of products and those sales are all in accounts receivable, you can't pay your due bills or reinvest money into your business with the profits in accounts receivable. This is because such profits aren't available for spending yet. Therefore, until you develop and maintain a workable cash flow culture, you'll have trouble running the expenses of your business and scaling the business up.

Assess Working Capital Efficiency

Working capital is the difference between your current assets and current liabilities. Assess whether your business has sufficient liquidity to meet short-term obligations. Consider:

  • Current ratio (current assets ÷ current liabilities)
  • Quick ratio (liquid assets ÷ current liabilities)
  • Days sales outstanding (DSO)

If these numbers indicate a tight cash position, explore ways to optimize inventory management, improve receivables collection, or renegotiate supplier terms.

Study Your Balance Sheet

Look at your balance sheet, take note of the average accounts receivable dates, and make necessary adjustments to increase the rate at which your business gets paid. If you don't observe and do something about how your receivables are flowing in, you'll soon have cash flow issues resulting from late payments from customers.

If your company's terms are monthly, its receivables ought to be monthly as well. You can offer your customers incentives to encourage timely payments. However, make sure to build the extra cost into your price.

Find out how much net worth increase your business has had in the last one year. Usually, during the startup phase of a business, progress seems to be slow or completely lacking because of the minimal cash the business has to show for its inputs. However, that's a wrong yardstick to measure progress with.

Benchmark Against Industry Standards

Compare your financial ratios and business performance to industry averages. Benchmarking helps you understand how your business measures up against competitors and where you can improve. Consider resources like:

  • IBISWorld reports
  • SCORE's Business Health Check Tool
  • Trade associations relevant to your industry

Look at factors such as profitability, growth rates, and operational efficiency relative to others in your field.

Make Projections

It isn't enough to have favorable profitability and cash flow numbers. You have to set up a system that helps to track the performance of your business and project its possible performance for:

  • A month
  • A year
  • Five years ahead.

There are several tools that can help with that. However, you're advised to choose a tool with a financial model that has room for adjustments to enable you recast your projections based on variables and costs that are likely to change with time.

Align Strategy and Business Goals

A successful business check up should align your projections with your overall strategic plan. Ask:

  • Are your current activities supporting your long-term mission and vision?
  • Do you have a clear value proposition and competitive advantage?
  • Are there emerging market trends or threats you should plan for?

Adjust your goals and action plans as needed based on your strategic review and market dynamics.

Evaluate Your Product or Service

One of the most reliable ways of assessing your products or services is by conducting yearly strengths, weaknesses, opportunities, and threats (SWOT) analyses. Recognize your internal strengths and weaknesses, and also take note of your external opportunities and threats. You can then easily tell what needs to be done for improvements. If possible, find opportunities that might have been missed by your business rivals and take advantage of them.

Measure Customer Satisfaction

Customer feedback plays a vital role in assessing your products or services. Use methods such as:

  • Net Promoter Score (NPS) surveys
  • Customer satisfaction surveys (CSAT)
  • Online reviews and social media listening
  • Focus groups or client interviews

Understanding your customers’ experiences can reveal gaps in service delivery and highlight opportunities for innovation.

Update and Enhance the Business

Make sure to update your business plan regularly. Aim for specific goals and discuss your long-term business ambitions and objectives with your mentors and members of your team. Keep in mind that your duty as a leader is to stay focused on how to improve the vision of your company and achieve it.

Conduct a Risk and Compliance Review

Ensure that your business remains compliant with all regulatory requirements and prepared for potential risks. Your compliance check should include:

  • Business license renewals and filings
  • Tax obligations and deadlines
  • Employment law compliance
  • Data privacy and cybersecurity measures

Additionally, evaluate operational risks like supply chain vulnerabilities, vendor reliability, and insurance coverage.

Quarterly Inspection

You can give your business a healthy checkup by looking at its minutest details from a new angle at least every quarter of the business year. You must extract yourself mentally from the affairs of your company and inspect it from the angle of an outsider. You can go further by involving other objective observers through customer feedback, surveys, etc.

Evaluate Leadership and Employee Engagement

A business check up isn’t complete without reviewing leadership effectiveness and workforce engagement. Consider:

  • Employee satisfaction surveys
  • Leadership development plans
  • Clear role definitions and accountability
  • Communication effectiveness across teams

Highly engaged teams and aligned leadership drive innovation and sustained growth.

Frequently Asked Questions

  1. What is a business check up?
    A business check up is a comprehensive review of a company’s financial health, operations, strategy, and compliance to ensure long-term success and identify areas for improvement.
  2. How often should I conduct a business check up?
    Experts recommend performing a business check up at least quarterly, with deeper assessments mid-year and annually.
  3. What should I include in a business check up?
    Include profitability analysis, cash flow assessment, KPI tracking, customer feedback, risk evaluation, and a review of strategic alignment.
  4. Why is benchmarking important in a business check up?
    Benchmarking helps you compare your business performance to industry standards, identify gaps, and recognize areas where you may be underperforming.
  5. How can I improve my business check up process?
    Use structured tools like SWOT analyses, KPIs, and industry benchmarks. Consider getting legal or financial advice to ensure compliance and risk management are properly addressed.

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