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Business Tip: Have a heart healthy business

By By Lindsay Young
Feb. 25, 2014 at 4:05 p.m.
Updated Feb. 24, 2014 at 8:25 p.m.


February is heart month. We wear red, we have heart healthy screenings, and we are reminded that heart disease is the leading cause of death among Americans.

During the month, we learn how to mitigate heart disease. While our bodies and our small businesses may not be an exact parallel, it makes for a good analogy.

Your small business is like your body. The heart of your small business is finance related. Most businesses fail because of lack of financial management - lack of capital.

Finance, generally speaking, pumps life in (or out of) your business. Your financial statements are like an EKG. It can help identify problems or underlying issues. While you should have a check-up on both your body and your business frequently, it's advantageous to at the least have an annual checkup.

But what good is your EKG if you don't know how to read it? For your heart, you have a cardiologist interpret the erratic peaks and valleys.

But who helps you analyze your business financial statements? As a business adviser, in order to assist in the analysis of my client's financial statements, I use a software program titled ProfitCents. The program allows us to financially analyze a business' historical financial statements based on industry benchmarking.

In the past, the analysis has been highly valuable for our clients, as it assists them in making sound financial decisions. The information provided uncovers a business' financial strengths and weaknesses, as compared to its industry, and provides risk mitigation suggestions. The interesting thing about this program is it converts your small business' financial statement figures into a plain language narrative.

Part of the analysis determines how efficient your business is. That is, how quickly your inventory and account receivables turn.

How do these efficient ratios compare to the industry? Is it average? Is it below average? How do you improve the ratios, thus improving efficiency? These are all questions we can help answer through a financial analysis.

In order to know where your business is going, you should consider knowing where it has been. There is no better way to decipher this than performing a thorough financial examination.

February is heart month. Take time to screen yourself as well as your business.

Lindsay Young has a Master in Business Administration and is a Certified Business Advisor at the UHV-SBDC. For more information on the SBDC programs, call 361-485-4485 or sbdc@uhv.edu.

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