Spring is a season of renewal, growth, and optimism. Traditionally it’s time to air out the house, take stock of how the year is going and see what needs to still be achieved. It’s also a great time to take a look at your business and see how healthy it is. But what exactly is a business health check, and what steps can you take to start the process?
So what is a business health check?
Business health can be a confusing concept, but essentially refers to how well a business is operating. How financially viable is it? How is the business culture? Are resources being appropriately managed and how future-proof is the organisation as a whole? A business health check means undertaking a comprehensive assessment of business performance, risks, opportunities, and areas for improvement. It can help leaders identify and address any issues that might be impacting progress, as well as uncover new possibilities for growth and innovation.
Why you need a business health check
It might seem like a ‘nice to have’ over a necessity, but McKinsey’s Organizational Health Index (OHI) shows that, over the long term, healthy organisations deliver three times the total shareholder returns, greater resilience and higher financial performance compared to unhealthy organisations, regardless of industry.
The keys to operating a healthy business are to know where your business performs well and to identify opportunities where business efficiency and effectiveness can be improved and maximised. A health check can help to highlight and start building a management plan for a number of risks before they become an issue including:
- Business resilience: Are you prepared in the event of business interruptions – what is your disaster recovery process? Are structures in place to mitigate personal exposure to potential risks?
- Strategic blind spots: Is your business operating at its most efficient, and is there anything missing that could assist you in achieving your business goals e,g technology systems, strategies, profit retention, growth opportunities
- Systems and processes: Are your internal controls where they need to be? Do you have cybersecurity in place to protect your data? Are your systems and reporting in line with appropriate compliance expectations?
- Commercial considerations: are there any weaknesses in the various structures from a commercial, taxation, business or succession perspective?
By getting your management team involved, a business health check can present a holistic assessment of your business, and provide the stepping stones to maximising efficiency, security, and compliance.
Benefits of a health check
A business health check can provide many other benefits too, such as:
- Determine if a business structure is appropriate for current and future goals, (these may include, asset protection, succession planning, expanding overseas, or diversifying products or services)
- Identifying and mitigating any legal, financial, operational, or reputational risks that might affect a business – including compliance issues, cyber threats, or market changes.
- Assessing workplace culture and employee sentiment and building a strong Employee Value Proposition to engage and retain key people (who are the most valuable business asset)
- Analysing main sources of revenue and ensuring that they are sustainable and diversified. This can lead to identifying and increasing possible revenue streams, such as upselling, cross-selling or creating new offerings.
- Identifying and planning how to capitalise on potential opportunities for a business, such as new markets, customers, partnerships or technologies.
- Preparing for any potential tax audits or investigations, by ensuring that business records are accurate, complete, and up to date. You can also review your tax obligations and strategies and seek professional advice where needed.
- Assessing IT systems and ensuring that they are appropriate, secure, and reliable – and then identifying ways to improve your digital efficiency, productivity, and innovation.
- Provide key stakeholders; financiers, investors, employees and customers with comfort you have your finger on the pulse and are a ‘business of choice’.
Steps to a business health check
How you manage a business health check can be tailored to business needs, preferences, and resources. You can do it yourself, involve your team or obtain outside help from a trusted advisor. h Regardless of the method you choose, there are some common steps that you should follow:
- Define the scope and objectives. What aspects of your business do you want to assess? What are the outcomes that you want to achieve? Consider these 4 broad topics:
- People and Culture
- Strategy and alignment
- Structure and governance
- Financials
- Ground your decisions in data. You can leverage various sources, such as financial statements, customer feedback, employee surveys, market research, industry reports, or benchmarking data. (according to the OHI businesses that use data-driven decision making are 63% more likely to adapt to a changing business environment).
- Evaluate your strengths, weaknesses, opportunities, and threats (SWOT). It’s a useful tool to summarise findings and identify the key areas that need attention.
- Create and implement an action plan. Based on your SWOT analysis, you can prioritise the most important actions to take to improve business health and build out action plans to bring these strategies to life.
- Monitor and review your progress. Identify key performance indicators (KPIs) to measure the results of your actions and track your improvement. Review your action plan regularly and make adjustments as needed.
A business health check is a valuable exercise that can help improve business performance, resilience, and growth. By performing a business health check in spring, you can take advantage of the fresh energy and momentum that this season brings following EOFY and other major mid-year events. It’s the perfect time to prepare your business for the upcoming challenges and opportunities that the rest of the year might bring.
