Knowing the Numbers to Evaluate Your Business’s Financial Health


The beginning stages of any entrepreneurial life are always filled with obstacles, hesitation, and uncertainty. While many news headlines, shows, and 30-Under-30 listings create an idyllic stereotypical image of a young CEO with thriving company, the harsh reality is actually quite shocking. Statistically, 90% of all startups tend to fail. While there can be a variety of reasons of why so many startups tend to fail, such as lack of management or lack of public interest, the main reason can attribute to the fact that their business leaders do not look at the numbers.

When running a business, you need to make sure that you are internalizing the overall value of your company. By understanding the financial health and financial position of your company, you will be able to move your business to the right path for the future. Many business leaders assume that because of their success from the previous months that their business is growing, if not stable. This is a huge mistake. Regardless of where your company stands, make sure you know your numbers. As we enter into a new year, you want to make sure you are gaining a strong stance over your finances. This type of organizational understanding will give you the ability to outline your personal and financial goals while additionally altering any necessary steps so that you can further better your company. One incredibly beneficial way to do this is by analyzing your company’s balance sheet.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Warren Buffet


A balance sheet is the primary financial tool for assessing the relative financial health of a business at any given point in time. Oftentimes, this is referred to a snapshot because it provides a business leader with a clear and accurate picture of where the business is at that current moment. When looking at your balance sheet, the figures are broken down into three figures: assets, liabilities, and equity. When we are talking about assets, we are generally referring to the economic value that an individual, firm, or company owns and controls. This figure is often compared against a company’s liabilities. Liabilities, by definition, are a company’s legal debt and expense obligations that arise during the course of a business operation. These two figures are then compared and contrast to calculate the overall equity and net worth of the company. Equity is found by simply finding the difference between the assets and the liabilities. By evaluating these numbers, you will be able to plan and strategize big managerial, operational, or financial decisions to further better your company for the 2016-year.

Once you have analyzed and understood the overall figures for your company, begin preplanning for any big expensive moments. Remember, there is always room and growth for saving. Review the quantitative monthly expenses through your liabilities and begin mapping out any future expenses for the year. For example, rent increase, office materials, company expansion etc. This will allow you to prepare for those financial speed bumps later on and recover when need be.



Last but not least, create various financial goals for the 2016-year. Many companies already do this with quarterly evaluations. Like them, see this as a window of opportunity to improve your company in hitting stronger financial objectives. This, of course, goes back to the numbers on the balance sheet. After attaining a holistic understanding of the previous year, try and set up specific financial goals you want to hit at the end of three months. For example, say you want to hit half a million in sales. Ask yourself how that number compares to the previous year and what you can do to attain that objective. When planning these goals, keep in mind that number in mind and plan out an overall attainable action plan. The main idea is to be both ambitious and realistic. Take those numbers and create a tangible goal that you know your company can hit, especially for the end of the year.