Introduction to Business Health Profiling
Introduction to Business Profiling
The business profiling is a self-evaluation tool that helps you to understand the current state of your business by looking into the two dimensions of business viability and liquidity. Generally, there are four categories in which a business could be classified into. By mapping the scenarios to the relevant category, you are able to know the exact roadmap for your business in the immediate future.
The characteristics and recommended strategies for businesses under the four corporate scenarios are as follows:
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Liquidity |
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Liquid |
Not Liquid |
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Business Viability |
Viable |
GROWING & GLOWING •• Profitable and able to generate strong cash flow. •• Well positioned in the industry with good growth prospects. •• Primary focus is to look at what can be done to expedite the growth. Pursuit of growth through M&A can be one of the options. |
GROWING PAINS •• Good growth potential but lack of resources to tap the potential. •• Experience strain in cash flow and facing difficulty in meeting debt obligations when due. •• Primary focus is to improve working capital management, review funding requirements and look into the need to restructure debts. |
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Not Viable |
REJUVENATION NEEDED •• Suffer sale losses, price and/or margin erosions. •• Has sufficient cash reserves and has no problem in meeting debt obligations. •• Primary focus is to review the business model to find new lease of life to take the business further. Diversifications through M&A can be considered. |
SURVIVAL IS AT RISK •• Laden with debt, the business is unable to generate sufficient positive cash flow. •• Viability of business is at risk with little prospect of recording sustainable profits. •• Primary focus is to review current state and find ways to turnaround or mitigate the impact of failure, if it happens. |
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By understanding your business and the environment that it operates in, and the degree of viability and liquidity, you can develop the next course of plans. Some business owners choose to do it themselves; others hire experts and external consultants to help move businesses into the desired strategic objectives. While there are fees involved in getting help from experienced external advisors, the key benefit is that they can review the state of your organisation, not through rose-tinted spectacles but tapping on their experience from looking at organisations and businesses like yours and to work with your team to develop a plan that will achieve the strategic goals.