Your bank manager will tell you that the truth about your business lies in the bank balance, your accountant will tell you it lies in the balance sheet, and your business coach will say it’s in the client files. They are all correct in their own way. To really tell if your small business is healthy or floundering you must monitor all three.

You know the core of your business includes providing advice and support services to your clients—things like offering suitable health plans to cover them and their employees, explaining benefits to employees, answering their questions and solving problems, educating potential clients about new initiatives, getting prices, and closing new business.

Working hard at these should result in you having a healthy business, but how do you know? That is where the monitoring comes in.

The Bank Account and the Balance Sheet

• Know your Accounts Payable Turnover (APT). Know when your bills (of all sorts) are due, and then monitor how often you can pay without over-borrowing, and how long it takes to pay.
• Know your Current Ratio. This simple metric tells you how much ready cash, short term investments and accounts receivable you have compared to your liabilities that are due. You want a ratio of at least 1.5:1. A ratio of 3:1 is great - you have three times as much ready money as you need this month. A ratio that's less than 1:1 says you will have to borrow to pay your debts. Some, or occasional, borrowing is okay, but if it becomes regular, your business is not in a healthy cash position.
• Know your Debt-Funding Ratio. This tells you how you are funding your growth. Too much debt for too long means your costs are mounting. Your marketing plans are not yet bringing in increased sales. When this happens, your books will suggest you are probably increasing your overdraft, you are not paying your suppliers quickly enough, you are incurring too much debt by, for example, advertising, inbound marketing and so on. You must lower those costs, refocus your marketing and win more client business.

The Client Files

Your files show you the sorts of health plans you write and where new business comes from—for new and existing clients. They show you what simple additions to existing plans you get because new employees have been brought on board, for example. They also show you where those clients are geographically, and who they are—by line of business, company size, etc. Your files tell you a lot about your business's health.

• Know how 'balanced' your business is. Are you focusing on only a few plans that currently sell well, or have you diversified your portfolio of offerings to allow for changes in demand for traditional products?
• Know how localized or how spread out, geographically, your clients are. Could a town's major employer positively or negatively affect your smaller clients who supply that major business? What effect would that have on your business?
• Know who and where there are companies that are similar to your existing clients that you prospect. How much new business are you winning from them?
• Know your client satisfaction scores. Are they really satisfied or are they ripe for picking by competitors? To know this you must carry out 'Satisfied Client Surveys.' It not only tells you what they think but it tells them how seriously you take servicing them. Find out how they would score things such as overall satisfaction, how many issues they have in a month or quarter, how speedily queries (or problems) are handled and how well they are handled.
• Know your client retention rates—and know exactly why a client leaves you, so you can make sure others don't.
• Know your client referral rates.

These metrics are simple to measure, they make you focus on critical areas of your business, and they tell you exactly where you must focus to either reduce problem areas or to improve your successes. There's an old adage in business: focus on your strengths, and you will squeeze out your weaknesses. A healthy business starts with knowing where the truth lies!