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How Do You Know If Your Business Is Doing Well?

Running a business can be complex, and you need to try to keep everything working in the right direction. If you get it right, your business can do well and go long enough for you to retire when the time comes. But did you know that 4% of businesses fail within the first year, rising to 50% failing within the first three years? 

This makes it important to know whether your business is doing well, or whether you need to make improvements to keep it running into maturity.

5 signs your business is doing well

1. Healthy cash flow

Graph showing an increase in cash flow

A business’ cash flow is how much money is flowing through the business, including both money in and out.

Suppose a business is facing large expenses without any money coming back in. In that case, that’s not a healthy flow, and the business will likely run out of money before becoming financially stable.

This leads to the thought that having money coming into the business with very little expenses is a good thing. However, that’s not always the case. A business with no expenses isn’t growing. It could be that the expenses are related to staff costs, or buying new equipment to enhance and improve processes. Without any expenses, a business isn’t viable in the long run.

If your business has a healthy cash flow, it’s able to take the hits of the big expenses without suffering too much damage, which, in the long run, can lead to growth.

2. Revenue growth

Similar to cash flow, business revenue is the amount of money generated through sales. Consistent revenue growth can lead to greater profits in the business.

If both revenue growth and profits are increasing, it’s a sign that your business is heading in the right direction.

However, be aware that after starting trading, revenue growth may be slower as the business is new and untested. Once you’ve been trading for a while, you should start to see it pick up.

3. Expenses are under control

While it’s good to have expenses in the business, they can quickly spiral out of control. Spiralling is typically the result of increased expenses through attempting to grow the business. For example, it may be the result of hiring staff. When you hire staff, you need to keep in mind the additional expenses that go along with it, such as taxes, additional equipment, HR, and pension payments.

If you don’t keep an eye on these additional costs, they can quickly overtake the amount of money coming into the business, meaning you start to haemorrhage money.

If a business is to do well, it needs to be able to keep an eye on the expenses and manage them effectively, even during times of growth.

4. Customer satisfaction

Gaining new clients is always seen as the hard part for any new business. But one thing that can help is making sure each client is satisfied with your product or service.

Happy customers are more likely to spread the word about you to others who are experiencing the same problem they came to you for help with.

Measuring satisfaction might be challenging, but sending out quick surveys asking for an opinion can go a long way. 

5. Meeting your business goals

When you first have an idea for a business, it’s best practice to put a business plan together; then once you start trading, you can use this plan to map out your actions within the business. Part of your business plan should include goals that you intend to hit in the business, such as generating a certain amount of revenue, or hiring your first employee after x amount of time.

If your business is able to hit the goals you’ve set out in your business plan, then you’re heading in the right direction and you know your business is doing well.

However, don’t fret if you’re not hitting your goals, or if you’re falling a little short on them. Small setbacks are to be expected, and as they say, “Rome wasn’t built in a day.”, it’ll take time for your business to do well and start hitting the milestones you’ve set.

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