Most business owners equate greater success with higher sales. However, if the business is not run efficiently, greater sales volume could do more harm than good. It could trigger substantially higher costs, production/service shortfalls, and customer dissatisfaction. As a result, the company may actually be worse off than before the increase in sales took place.
The first step in preparing your business to be more successful is vital to lay a proper foundation. The best way to lay that foundation is by understanding where your company’s strengths and weaknesses lie, making sure your income and assets are being used as effectively as possible, and by increasing your efficiency and productivity.
To do that, every business owner must have a clear understanding of their financial situation. Could your assets be used more efficiently? Are your bill collection efforts helping or hurting the business? Do you have too much or too little inventory or cash? How do you compare to your competition? Are you on the right track? These are all important questions that business owners must answer in order to be successful.
A thorough analysis of your company’s income statement and balance sheet can give you answers to those questions, and at the same time uncover problem areas before they have major impact on your business. The analysis should start by evaluating your company's liquidity, efficiency, operating, financing, and profitability ratios compared to industry norms. A three year trend analysis is also important to help you identify the direction your company is heading. Finally, the analysis should offer discussion ideas for improvement of financial ratios that rank below the norm.
As a result, you will be able to make better decisions, give your company a substantial edge over the competition, and increase profitability. You will have laid the foundation to become more efficient and take advantage of growth opportunities.
Doing things right always pays off, and when your business is at stake, nothing could be more crucial. Contact StarPoint Financial today if you like to start on the road to becoming more successful.
James Demeaux, President
StarPoint Financial, Inc.