In the middle of your everyday business routine and challenges, have you ever asked yourself “If your business is truly viable”?
What Does Business Viability Mean?
Simply, viability in a business sense is the ability to survive. Viability assessment can cover a broad area. Briefly, this can include the analysis of Market and Product Viability, Management Viability and most important of all Financial Viability.
Ultimately, a viable business is either:
- Returns a profit to be able to meet its commitments and provides a return to the business owner
- Provides enough cash to sustain itself while not making any profit (Cash flow positive)
4 Alarming Signs You Should look For in Your Business
1- Negative cash flow and working capital
2- Excessive amount of debt
3- Poor profits
4- Lack of financial oversights
8 Steps to Guarantee Business Viability
1- Create a Business Road-Map
Do you have a clear plan of where your business is heading to in the next 12 months? Hence, predict a bigger picture and draw a road-map for the next 1 to 3 years. This can simply be achieved by creating your foretasted cash flows and profit and loss statements. If you need a template to start, click here.
“If you don’t know where you are going, any road will take you there”.
Lewis Carroll
2 – Calculate Financial Forecasts
Does the business plan indicate how much revenue will flow into the business to cover the costs. How about future cash availability?
3- Plan Your Working Capital
Do you have enough cash-on-hand to pay the bills, cover emergencies and support future investments and growth? So, if the business always struggles to sustain enough cash, maintain a detailed cash flow to have the matters under control.
4- Maintain a Business Budget
Do you follow a well-structured budget that emphasizes on your business priorities? A solid budget enables your business to stay on track and be sustainable. Check out these blog posts to learn more: Part 1 & Part II
5- Track Your Customer Satisfaction
Do not forget that customers are the life blood of your business. So, what plans do you have to capture your customer satisfaction and to retain the profitable customers?
6 – Lower your Receivables and Analyze Debtors
What are your invoicing and collection policies? Do you carry old aged receivable? If so, they can put your cash availability at a greater risk. Consider reviewing your receivables on a weekly basis. Check out these simple steps on how to manage your receivables.
7 – Slow Down your Supplier Payments Ethically
How do you handle the supply chain and how is your relationship with the supplier? Take advantage of good relationships and ask for discounts and extended payment periods.
8 – Have an Exit Strategy
What would be the end game? The exit strategy should be a cornerstone of your business planning as it will determine how you carry the business into the future.
“It is much better to over- deliver than to fall short”
So, how do you feel about the health and viability of your business? Leave us a comment below and let us know if you have already taken the assessment.
