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What is a business financial health check and why is it important?

What is a business financial health check and why is it important?

Do you want to grow your tech business more freely, and on your terms?

Just like people who take control of their health by having regular medical checkups, a business financial health check can empower your management team to execute growth plans on your terms and with confidence.

My point is this. If you can prove your tech company can serve, support and sustain your people and your client base, reliably, profitably, and with longevity, then you can attract and borrow money to fuel your growth.

Let me show you how a business financial health check works.


What is a financial health check?

The aim is to arm you with:

  • Knowledge to keep your tech business running smoothly and in good financial health
  • Information to put together a long term plan for financing your growth strategy
  • Metrics you can present when raising capital, that demonstrate your long term strategic planning.

As a result of conducting regular financial health checks, you’ll be ready to tackle the next stage in the development of your tech business.


What does a financial health check involve?

A financial health check requires you to answer a series of questions and track essential metrics so that you can:

  • Understand where you are now
  • Set realistic goals and track your progress over time
  • Forecast and predict problems before they happen
  • Forecast and predict growth opportunities
  • Have the information you need to make strategic decisions


What are the different parts of a financial health check?


The taking of a financial pulse of your growth metrics

First off, a financial health check reviews performance metrics to look for signs of trouble or indeed evidence of success:

Chiefly it will review your:

  • Monthly Recurring Revenue (MRR)
  • Customer Acquisition Cost (CAC)
  • Customer Lifetime Value (LV)
  • Burn Rate (The rate at which you burn capital)
  • Gross Profit Margin (Your revenues after paying the cost of goods sold)
  • Cash reserves and cash flow (To protect you in an emergency or to get you to the next funding round)
  • Churn rate
  • The value of your assets. In particular, your intellectual property


Helps you to identify your future needs:

Once you know where you’ve come from, a business financial health check will help you to uncover opportunities to support you as you grow and develop your company:

For example, it will help you to know what capital you need to:


Identifies where improvements to finances can be made to keep you on the right track

As your tech business progresses along its growth curve, so your financial needs change.

A business financial health check can help you to identify opportunities to refinance your business debt so that you can access:

  • More time and cash resources to execute your business growth strategy, reduce churn rates, increase ARR and build a sticky revenue base
  • More capital investment to expand and scale your business into new markets and internationally
  • Also, capital to further develop and market your products/services


Prevention is better than cure: Helps you to be better able to deal with pivots/inflection points

Any doctor will tell you; early detection is crucial to survival rates.

A financial health check helps you to overcome obstacles and navigate inflection points, such as changing market conditions, that stand in the way of your growth plans.

As a result, you’ll have the information you need to drive investment decisions and deal with problems before they occur.

For instance, did you know that for every 1% increase in customer retention, your company’s value could increase by 12% in 5 years? A financial health check will prompt you to reduce churn rates, by prioritising investment in customer success teams.


Reviews your financial support

Knowledge is power. Armed with the results of your financial health check,  talk to a specialist debt advisor and broker who can:

  • Show you what debt finance options you have beyond traditional bank lending
  • Create a realistic plan for developing and navigating your tech company along its growth curve
  • Help you to plan your exit strategy

Elsewhere, a debt advisor and broker can turn the results of your financial health check into a compelling investment memorandum for private debt funds, in a format that improves your chances of success.  


To sum up

Sound financial management puts you in control. It shows you understand your marketplace, your essential business metrics and demonstrates your ability to deploy capital effectively to drive growth.

And, for every business, sound financial management starts with a regular business financial health check.

What could be more important?


And finally

If you’d like to control your tech company’s finances instead of being

controlled by them, drop me a line about debt advisory and brokerage services, and we’ll set up a time to chat.