Everyone thinks that turning around a business is coming up with creative strategies and tactics that are dramatic and require lots of money thrown at the problem.
Not true.
We leant something from the medical work and that the simple solutions known for hundred if not thousands of years are the basis for a turnaround. The medical world that has become so sophisticated, technical, and complex still relies on the simple of measurement.
A turnaround comes from constantly measuring
Everyone in the medical profession knows the vital signs.
These are Body Temperature, Pulse Rate, Respiration Rate, Blood Pressure and height and weight is also measured once. These simple measurements are used if you visit your GP or are carefully monitors during complex surgery.
Your vital signs measure a body’s essential functions. Vitals display a snapshot of what’s going on inside your body. They provide crucial information about your organs. Therefore, the importance of vital signs monitoring is that it allows medical professionals to assess your wellbeing.
These vital signs will tell if the body is distressed. They will measure over time give an idea of survival and ability to thrive. They provide a look into the person future and future health. And all this comes before biopsy’s, medical tests, x-rays, and exploratory surgery.
The medical work has learnt to use this information to advise a person on what must happen to change their health and survive and thrive without waiting for complex reports. We have all experienced this (every doctor tells me to lose weight).
A lender also needs these vital signs to see if a business is distressed and can it survive, evolve (change financial habits) and thrive. Also, to live and protect the loan and repay the advanced loan.
Vital signs for a human are taken; for example, in hospital hourly, this check is ongoing.
All a lender has had are accounts that are completed to a government compliance timetable and not the need to check the health of a business. A mistake or pattern stopped now could mean a turnaround rather than a collapse right now.
With open banking, we can quickly determine the vitals of a business because the cruncher will crunch the numbers and quickly give you the vital signs.
(Note this is not automated, but it’s very quick and accurate with some human input)
From primary bank data, we will tell you
What are the gross and net margins on a cash basis? This is before we look at the drawings and balance sheet payments. While we look at accrual accounting after this, it’s possible to find great and underfunded businesses, but the bank statements may not show this.
While we don’t see accrual lists (debtors and creditor), we see if the business is profitable. This does have some tie in with fluctuation as well.
Is the owner burning all the surplus money after paying suppliers? What are the drawing habits of the owner?
Is this business giving away too much in labour and material costs, and a measure on margin will tell you this?
I am looking at the payment of creditors, for example. If it is in round numbers, then there is a problem. Are payments hurried, and do they occur precisely when cash comes in.
And from this, a small list of tactics can be applied to turn this business around. Subject to the operator’s participation, results can be quick.
Sick of struggling?
Sick of overloaded with tax?
Know something is wrong, but can be made right?
