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‘Reality-Based’ Diagnostic Check-Up

In this competitive environment, financial management, business process assessment, market analysis and corporate culture evaluation comprise key metrics for determining your firm’s long-term success and viability. Today, companies are compelled to deliver enhanced visibility, improved customer and supplier interaction, and a competitive cost structure. How you maintain your firm’s financial stability, brand and culture today determines your company’s role in tomorrow’s world of commerce. Leaders must take a fresh, reality-based approach to leadership, management, competitive prowess and fiscal responsibility.

Try our reality-based diagnostic check-up:

• How are you doing? Is your answer based on fact, or wishful thinking?
• Are you making or losing money? How much? Why?
• Do you have enough cash to meet your short-term obligations?
• How efficiently are you utilizing your assets?
• How does your growth and net profits compare to your industry peers?
• Where will you come up with the funds needed for capital improvements?
• Are there ways you can reduce the amount of cash needed month to month?
• Have you benchmarked your operations?
• Do you know the industry averages and compare those statistics to your sales, operating expenses, gross margin, and net profit numbers?
• Do you have written policies and procedures for each department?
• Have you developed a strategic plan and outlined the implementation tactics in a measurable, actionable form?
• How does your brand compare to your competitors?
• How successfully do you recruit new employees?
• Do you have a stable workforce or do you experience high turnover?
• Overall, are you in good shape financially?
• Overall, is your brand in good shape?
• Overall, how is your corporate culture and is it conducive to meeting your goals?

Profitability: While start-ups often aren’t profitable during their first one to three years, a firm must quickly become – and remain profitable to provide a return to its owners and maintain viability. Are you delivering a satisfactory return to your investors?

Liquidity: Your ability to meet your short-term financial obligations. Even if you are profitable, you need a ready supply of CASH to meet routine obligation, including payroll, in a timely manner. How’s your cash flow?

Efficiency: Have you measured your firm’s ability to utilize assets relative to revenue and profits? Every industry has specific metrics that help determine efficiency…do you know what yours are?

Stability: What’s the strength and vigor of your overall financial posture? What are your debt ratios? How do they compare to others in your industry?

Financial Statements: How often do you review your company’s financial statements? Are you receiving, scrutinizing and comparing your Income Statement, Balance Sheet, and Cash Flow statements regularly?

Historical Financial Statements: Publicly traded firms are required by the SEC to prepare these statements on a quarterly and annual basis. All companies benefit by keeping thorough historical records of their financial performance. Have you seen yours lately?

Pro Forma Financial Statements: These two to three year (or more) financial projections are planning tools for expansion, capital improvements, new long-term projects. Do you utilize these tools in your forward and strategic planning?

Forecasts: Do you routinely prepare and review forecasts based on your company’s estimates of future income and expenses, as determined by past performance, current circumstances and future plans? Are you managing your finances in a proactive or reactive manner?

Sales Forecast: How accurate are your sales forecasts? How did you estimate product/service demand? Do you know all the factors that could affect future capacity and demand?

Cost of Sales Forecast: Are you using the percent-of-sales method? Is it the most accurate method for expressing your expenses in relation to sales? What method are your competitors using? How accurate have your cost of sales forecasts been in the past?

Budgets: First, do you routinely compile and review detailed budgets? Do you use these itemized forecasts as a tool for financial planning and control?

Financial Ratios: These ratios are the analysis of relationships between items on your financial statements. They enable you to determine if you are meeting your financial objectives and how you stack up to others in your industry. How do you stack up compared to your competitors? Do you have any financial ‘red flags’? How financially ‘sound’ is your firm?

Business Processes: Have you recently reviewed your business processes? Have you developed any new processes to speed delivery, reduce overhead, or create new market opportunities? Are your business processes positively influencing and adding to your firm’s competitive advantage?

Project Management: Do your projects deliver substantial ROI? Do you routinely measure departmental/project success against achievable and measurable parameters? Do you measure benefit accrual over both the short- and long-term?

We’ve highlighted only a few of the ‘reality-based’ measures that can help you determine your firm’s viability. Today, companies are driven by industry change, a global playing field, and economic challenges – and, many of the old business models and process are no longer effective. Companies and their leaders need to strive for breakthrough performance to remain competitive. Gray Stone Advisors can assist you to turnaround or renew your company’s performance, enhance your leadership capabilities and better position your firm today to meet the business demands of tomorrow.