We’ve repurposed and updated this article, originally published August 6, 2015.

How is your business doing? “Good,” you say? But is your business really doing well? If you’re basing your response on a feeling instead of tangible measurements, you may be unaware of how your business is truly performing.

Successful entrepreneurs are realistic about their company’s current state. They know what the problem areas are and have a plan to fix them. And in order to know what the problem areas are, you first need to take an in-depth look at your business. Benchmarking and financial ratio analysis can shed light on issues that are hindering the success of your business. This analysis will:

1. Compare and contrast how your company has performed over time.

2. Help you understand how your company’s financial performance stacks up against the industry.

3. Highlight areas of concern that may need to be addressed, such as:

  • Revenue continually increases while your available cash flow seems to lag
  • A credit policy that is too lax as indicated by your average time to collect receivables
  • Your company’s inability to secure additional outside financing from creditors if the need arises
  • Your management team utilizing resources ineffectively.

4. Reveal weak spots and shortcomings and in what areas they reside.

Benchmarking and financial ratio analysis are tools that help you assess how your business is doing, allowing you to make informed decisions to either get your company back on track or to maintain your current success.

Our Business Development Planning team can help you evaluate your current situation and then tailor a custom plan to meet your needs, addressing every aspect of your business’ financial health.

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