Determine the viability of your business
- KVK Editors
- Background
- 12 November 2020
- Edited 26 March 2026
- 4 min
- Managing and growing
- Finance
Are you experiencing major financial setbacks? Or have you been facing financial problems for a long time? Then you may be wondering if your business is still viable. But what is a viable business? And how can you find out if your business can survive setbacks? Read about how you can work out the financial health of your business.
What is a viable business?
A viable business is one that operates with a profit for an extended period of time. It can also meet its financial and organisational obligations.
Gain insight
Insight into your business viability gives you, your suppliers, and your financiers an indication of the health of your company. If you know more about the factors that determine financial health, you can make better decisions about the next steps.
Next steps might be, for example, reducing your costs, adjusting your revenue model, or seeking financing. Or, in the worst case, ending your business. A financier’s judgment on whether to provide financing depends on the factors that determine viability. For example, profitability. If you have that insight yourself, you are in a better position to ask for financing. Financial advisers such as a bookkeeper or accountant can help you with this.
A tool to gain financial insights
The (Future check, in Dutch) gives you insight into your company's liquidity. With the check, you can see where you stand financially and what the outlook is for the next 12 months. It also shows how your company is prepared for various future scenarios.
How do you determine viability?
You can assess your business’s financial health using key financial indicators. Key indicators include: profitability, solvency, liquidity, and cash flow. You get these numbers from your profit and loss accounts and balance sheet, which together form your annual accounts.
Financial performance indicators
Below, we explain what each indicator means and how to calculate it. We use figures from the sample balance sheet.
- Profitability: shows whether your business is profitable. You compare the profit with the average total capital employed (equity capital + debt). Financiers usually consider a profitability of between 5% and 10% to be sufficient. Higher is better.
In the case of an eenmanszaak, VOF, or maatschap, part of the profit is the entrepreneur's salary (remuneration). In the example, this is €40,000. - Solvency: indicates how much equity capital you have in relation to the total. The higher this percentage, the stronger your business is financially. Financiers consider 25% to 40% to be a healthy solvency level. You are then less vulnerable. The standard for solvency varies by sector, by type of business and by financier.
- Liquidity: shows whether you can pay your bills in the short term. You look at the current ratio, quick ratio and net working capital.
- Cash flow: the difference between what you receive and what you spend. Cash flow is also known as cash flow. Is the cash flow positive? Then more money is coming in than going out, and you have a positive cash flow. With a negative cash flow, you are spending more than is coming in. In that case, you need to reduce costs or seek additional financing.
Sample balance sheet for calculating key figures
| Assets | € | Liabilities | € |
| Fixed assets (1 year) | Equity | ||
| Real estate | 100,000 | Equity | 55,000 |
| Company assets | 25,000 | ||
| Current assets (< 1 year) | Long-term loan capital | ||
| Inventory | 25,000 | Mortgage | 80,000 |
| Debtors | 10,000 | Short-term loan capital | |
| Cash | 10,000 | Creditors | 10,000 |
| Current account credit (overdraft) | 25,000 | ||
| Total Assets | 170,000 | Total Liabilities | 170,000 |
Calculate your financial performance indicators
You calculate the profitability in 3 steps:
-
Take the net profit + interest paid. From this, subtract the entrepreneur's allowance.
- Divide the result by the average total capital employed.
- Multiply the result by 100%. The result is the profitability.
The formula:
(net profit + interest paid - entrepreneur's allowance) / (average total invested capital) x 100% = profitability.
Calculation example for an eenmanszaak:
((45,000 + 2,500 - 40,000) / 50,000) x 100% = 15%
Calculation of profitability for a BV:
In a BV, the work of the entrepreneur(s) is already rewarded via a salary or management fee.
- Take net profit and add interest paid and tax on profit.
- Divide this by total assets.
- Multiply the result by 100%. The result is the profitability.
The formula:
((net profit + interest paid + tax on profit) / total assets) x 100% = profitability.
Calculation example for a BV:
((50,000 + 25,000 + 15,000) / 800,000) x 100% = 11.25%
You divide your equity by total assets. You multiply the result by 100%. The result is solvency.
The formula:
(equity / total assets) x 100% = solvency
Calculation example:
(with numbers from the sample balance sheet): (55,000 / 170,000) x 100% = 32%
Current ratio
This ratio number indicates whether you can pay your (short-term) debts from your current assets. The value must be at least 1. For healthy companies, it is between 1.2 and 1.5.
Calculating current ratio
- Add current assets (including accounts receivable) to cash and cash equivalents.
- Divide the result by the current liabilities (current account overdrafts and creditors).
- The result is the current ratio.
As a mathematical formula, this is: current assets + cash and cash equivalents / short-term debt = current ratio
Specified: (inventory + debtors + cash) / (overdraft + creditors) = current ratio
Calculation example:
(25,000 + 10,000 + 10,000) / (25,000 + 10,000) = 1.29
Quick ratio
The quick ratio number also indicates whether you can pay your (short-term) debts from your current assets. The difference from the current ratio is that you do not include the value of the inventory in this calculation. A positive value for this ratio is at least 1.
Calculating quick ratio
- Add debtors to cash.
- Add overdrafts and creditors.
- Divide the result of 1 by that of 2.
- The result is the quick ratio.
As a mathematical formula, this is: Specified: (debtors + cash) / (overdraft + creditors) = quick ratio
Calculation example:
(10,000 + 10,000) / (25,000 + 10,000) = 0.57
Net working capital
Net working capital is money you can use to pay bills. It is money to use on a daily basis in your company and is therefore called working capital. Net working capital is the difference between current assets and short-term loan capital on a company's balance sheet. Net working capital is positive if current assets are greater than short-term loan capital.
Calculating net working capital:
current assets + cash - short-term debt = net working capital
Specified: (inventory + accounts receivable + cash) - (overdraft + accounts payable) = net working capital
Calculation example:
(25,000 + 10,000 + 10,000) - (25,000 + 10,000) = 10,000
Calculation example:
An entrepreneur receives €30,000 in turnover in a quarter and spends €20,000 on purchasing and costs. The cashflow is €30,000 - €20,000 = €10,000 and positive.
Private income
Financial indicators provide an insight into the financial health of your business. However, your business must also generate sufficient income to cover your personal expenses. Check how much personal income you are drawing from your business. Financiers use guideline figures for income, such as:
- eenmanszaak / VOF: usually at least €30,000 per entrepreneur
- husband-and-wife partnership / spousal partnership: approximately €45,000 combined
- BV: standard salary of at least €58,000 (amount for 2026)
A lower income may be sufficient for you. You must convince your financier that you can meet your private obligations with that (temporary) lower income. Making a private budget helps to prove this.
Other factors to consider
Your way of doing business influences the viability of your company. This is also the case for environmental factors.
Entrepreneurship
Investors do not just look at the figures. They also look at you. For example, they consider your experience, your plans, your network and how your business is organised. They also look at your legal structure, your activities and your key performance indicators. It is also a good idea for you to consider these factors if you want to assess how healthy your business is.
Environmental factors
These are developments that you cannot influence, but which are still important for your business. For example:
- changes in the economy and purchasing power
- legislation
- trends in your sector
- new technology
- demographic trends
- geopolitical developments
Set out in your plans how you will deal with these factors.
Video: Determine the viability of your business
Conclusion: is your business viable?
If you calculate and analyse the financial and non-financial aspects, you will gain a clear picture of your business’s viability. Are the figures satisfactory? And do you see prospects for the future? If so, your business is fundamentally in good shape.
If the figures are not looking good and you see little scope for improvement, it is wise to consider your options. For example, using a step-by-step guide from KVK:
- Continue or stop - take stock and think about whether you can continue or if it is time to stop,
- Ending in a controlled way - no matter how difficult it is, stopping appears to be the only option. Look at how to handle things properly,
- Dealing with debts - you have problematic debts and are looking for a solution. Find out how to solve debt and who can help you.
Help with financing
Help increases your chances of financing. With the right adviser and good financial arguments, a 'yes' to your financing application could be within reach. These advisers will help you on your way. Use the financing finder to choose an appropriate type of financing and increase your chances of securing funding.
