Phimation Founder and CEO Dave Haviland was featured in an August 2010 Inc.com article exploring best practices by which to evaluate a company’s financial position.
The article examines where business owners can look in their financial statements and other data to gauge their company’s financial health, conceding that bank balances don’t provide a complete overview of corporate well-being.
The writer features Dave’s thoughts on why checking up on the health of your business requires more than just the numbers in the financial statements.
“Since financials are generally backward looking, they measure results,” he says. “To look forward, you need to look at operational metrics.”
Haviland suggests tracking metrics in each area of your business. For instance:
- Marketing and sales: Track the “backlog” (work already signed but not yet billed/produced) and “sales pipeline” (prospective work in the sales process). These are important because they give you a forward-looking view at what the revenue line will look like, says Haviland.
- Production: Track your “utilization,” which measures how efficiently your company is using its resources.
- Human Resources: By tracking “suggestions and complaints” (such as notes put in a suggestion/complaint box) you can learn how engaged your employees are. Another suggestion is take a “green/yellow/red” measure, where people put the color dot that represents how their day went. When you count up all the dots and track it over time, you can begin to get a sense of how productive your staff feels they are.
View the entire article here: How to Evaluate Your Company’s Financial Position
