The Small Business Report Card
If you own a business, you know how much hard work and dedication it requires. Sometimes your energy is so focused on day-to-day operations that you forget to step back, look at the big picture and gain valuable perspective.
How can you tell if your business is performing well? By using numbers from your company’s financial statements, you can calculate ratios and formulas that grade the performance of your business. This report card reveals the strengths and weaknesses of your company – and provides an opportunity for solid improvement.
By comparing your grades to industry averages, acceptable lending ranges and prior years’ performances, you will begin to develop “big picture vision.” Remember, these are averages of the health of your business, so expect your current grades to fall above or below them. Factors that can create differences include the company’s age, the number of locations, the expertise of managers and the efficiency of operations.
This book will walk you through the two financial statements that are used to calculate ratios and formulas – the Balance Sheet and the Income Statement. These two statements will help provide a clear understanding of your business health, but remember that they need to compare the same time periods (this year vs. last year, this quarter vs. last quarter).