6 Signs Your Small Business Is in Good Shape

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It’s easy for business owners to focus on the day-to-day and lose track of the bigger picture. Watch for these signals that show you’re on track for success. 

Almost every business owner will have a different idea of what success looks like. For some, it may be the point where they can sell their business and use the profits to retire (or start another business). For others, it might be getting their 1,000th customer. Or their 100th. Or generating a certain amount of revenue. Or going on holiday without things falling apart in their absence.

That said, there are some universal signs that your small business is doing well. Here are six of them.

1. Your finances are in good shape

Are you able to pay your bills and cover payroll each month without having to stress about where the money is coming from? And is your bank balance firmly in the black? If your revenue is steadily increasing without huge jumps in expenses or debt, these are healthy financial signs.

Cash flow is another important indicator. Running out of ready cash can do serious damage to your company. Look at your cash flow and cash flow projections to see whether there are any problem spots on the horizon. Will you be able to cope if you lose a couple of key clients — or people start to pay you late? Do you have a solid business emergency fund?

2. You have good business credit

Good business credit can make it easier for you to qualify for a loan — something that can be a challenge for many small businesses. It can also help you negotiate better terms with suppliers and build credibility. Like personal credit, it can take time to build a business credit history and get a good score.

Don’t wait until you need to borrow money to work on your credit. Start by getting an employer identification number (EIN), opening a business bank account, and registering for a D-U-N-S Number. A business credit card can also help you build business credit, particularly as card issuers will often look at your personal credit score when you apply.

3. You get good feedback from your customers — and some even recommend you to others

There are all kinds of ways to find out what your customers think of you, particularly if you use CRM software to automate aspects of your client management. One piece of feedback that speaks the loudest is customer referrals. If you impress your customers so much that they want to recommend you to their friends and families, it speaks volumes.

Referrals are also a great way to get new business, so it’s worth considering ways to encourage this behavior. Great customer service that consistently goes above and beyond is a good place to start. You might also set up a referral program or look at ways to encourage people to share your posts on social media.

4. You attract new customers — but the old ones aren’t going anywhere

When you’re starting out, getting new customers is often a top priority. After all, if you can’t get people to buy and use your product or service, you’re unlikely to get anything off the ground. The challenge is that many small businesses continue to focus on acquisition without also working to retain their existing customers. Shark Tank’s Kevin O’Leary says this can be a “silent killer” for small businesses.

If you’re meeting your targets for customer retention, it’s a great sign. Not only does getting lots of repeat customers show you’re doing something right, it can also save you money. It costs less to keep an existing client than it does to attract a new one.

5. Your company is a place where people want to work

Attracting and keeping talented workers has been a challenge for companies of all sizes recently. Indeed, a recent Goldman Sachs survey found that over 80% of the small businesses trying to hire staff are finding it difficult to recruit qualified candidates. If you can boost morale, you’ll find it easier to retain your best people and attract new ones.

However, as a boss, people don’t always tell you when they’re not happy at work. Try to make a point of checking in with your team — both to congratulate them on any achievements and ask how they’re doing. Another good way to measure employee satisfaction is your absentee rate. If people often call in sick or seem reluctant to take the initiative, it may be worth finding out if there are other issues at play.

6. You are meeting your goals

One of the best ways to know if you’re in good shape is to see whether you’re on track with your business goals. It’s all too easy for goals to get lost in the day-to-day firefighting that is running a small company. However, a regular review of your progress can make all the difference. Let’s say you set specific goals to improve your customer retention rate or boost productivity. It’s important to schedule periodic checkups to know whether you’re meeting them.

If you don’t have any business goals, set aside some time to evaluate where you want the company to be in the coming years and how you plan to get there. Your goals are essentially a roadmap to achieving your vision. They are measurable targets that everybody can see, so your team knows what you expect, which can boost morale. (Indeed, having clear goals can help you achieve most of the other items on the list above.) Most importantly, as and when you meet each goal, it will build confidence as you’ll know your business is in good shape.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Target. The Motley Fool has a disclosure policy.

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