Stress Tests for Private Companies

Much publicity has been given to the stress tests handed down by the Supervisory Capital Assessment Program and applied to the Banking Industry. These tests are designed amongst other things to ensure banks have sufficient capital reserves to trade safely. What about the rest of the population? What stress tests would you apply to private companies to ensure they have a healthy, robust, sustainable future?
Here are a few:

#1: Cash Balances are fit for purpose.
Gold Standard: Under all reasonable future rolling 12 month sales forecasts, your cash flow can pay for your cost base over that period.
Comment: You need to think like a start up, take a very cynical view of sales lead times.

#2: Your compelling story defines your unique market.
Gold Standard: Your positioning in the marketplace articulates how you will dominate your unique market and the business result you will achieve for clients.
Comment: You embrace the phrase, companies are either invisible or remarkable.

#3: Drive passion, talk the walk.
Gold Standard: Staff need to be educated about your compelling story, inspire with your vision but remember to lead with action.
Comment: Executives need to spell out their message in a laconic (terse to the point of being rude) with clear expectations from staff.

#4: Recruitment of quality world class staff is a constant process not an event.
Gold Standard: You are constantly interviewing people, looking to upgrade staff and build a stronger team.
Comment: Think virtual bench, constantly in recruitment mode even during times of hiring freezes!

#5: Product & Service Innovation never stops.
Gold Standard: Think simplicity, clear out products that suck up resources and generate low margins, constantly create new relevant features for the winners and consider holes in your unique market worth filling.
Comment: Surprisingly, large corporations have not turned off R&D but in fact many show increased ratios, R&D as % of sales.

#6: Dependency is dangerous.
Gold Standard: Largest customers account for less than 10% of sales.
Comment: Use dependency in the short term to build cash but aggressively seek new enterprise deals to avoid being trapped.

#7: Private Company growth should be double digit.
Gold Standard: Smaller private companies (sub $100m sales) should be shooting for 10 to 15% growth despite the recession. (some are achieving 70%)
Comment: If you believe you have defined your unique market you need to be ambitious on growth