Running your own business is a bit like being on a permanent roller-coaster ride. There will be highs when everything is going swimmingly, cash flow is good and the future looks bright; but there will also be lows when you’re flying by the seat of your pants and hoping for the best!
As a business owner you have to take these ups and downs in your stride. By ensuring contingency plans are in place, you can remain confident that the lows will be temporary and you are able to hang on until the next upturn.
But what if you’re stuck in a low and struggling to see the next rise on the horizon?
Do you stick your head in the sand and hope for things to improve? Or do you take stock and make a clear assessment of whether there is a future for your business?
Sometimes success can be salvaged but sometimes it’s better to stop pumping money into the business and cut your losses.
If you’re adopting the ostrich approach, good luck. But if you’re taking the latter stance, the good news is that businesses rarely fail without warning.
Here are seven signs to look out for that might help you decide whether the risk of failure is enough to make you call it a day, or at the very least seek help before it’s too late.
1. Higher employee turnover
Staff members are likely to be aware of impending problems. No matter how much you try and hide any concerns or issues you may have, it is inevitable that they will pick up on any sense of anxiety filtering down from management. Even if they don’t know the full details, this can be enough to prompt them to start looking for alternative employment. You will no doubt start to see a drop in morale and, in turn, a higher than normal turnover of staff. This is bad news for your business for a couple of reasons. Not only is recruitment and selection of replacement staff a time-consuming and costly process for employers, the loss of talent in your workforce can have massive implications. The upheaval of losing valuable and experienced employees can also leave remaining staff unsettled, reducing productivity and efficiency within the business and leading to a potential domino effect of further employees leaving.
2. A decline in business activity and falling sales
There can be many reasons for a fall in business activity or sales. There could be new or unexpected competition, your prices may be being undercut or a new rival on the block may have offers that are too good for customers to turn down. Perhaps market trends are changing and the demand for your services has dropped for whatever reason. Business owners should stay on top of this. One way to do so is through robust forecasting and planning of your finances. Keeping a close eye on sales figures on a regular basis is fundamental to being able to stem the tide of declining income. As is understanding when there are likely to be drops in sales in the future and planning cash flow to ensure you can ride the wave in slower sales periods. Conducting market research and adjusting your marketing and sales activity goes hand-in-hand with this, ensuring you are increasing marketing activity when necessary and using sales channels to their full advantage. If sales or business activity continues to decline, then trouble is certainly brewing.
3. You’re taking longer to pay suppliers than usual
As a business, you will have expenses to pay on a regular basis. That might be rent, utility bills, suppliers or payments on finance. Struggling to make the odd payment every now and again is inevitable, especially for small businesses, but if payments are being missed regularly it can be a warning sign that there is a bigger issue that needs to be addressed. It’s important to note that correspondence from creditors should never be ignored. Ignoring requests for payment could lead to more serious action being taken and could mean much higher costs in the long-term.
4. Negative cash flow
This goes hand-in-hand with the point above. Problems with paying debts often stem from cash flow issues with your own customers. If you haven’t got money coming in, how can you pay your own debts and bills? This can result in you having to borrow, creating more debt and liquidity issues. Cash flow can cripple any size of business if it is not actively managed to ensure there is enough coming in to cover costs going out. There are lots of ways an accountant can help with this, from working with you to reduce your business costs, spread payments or forecast to ensure adequate income will be available in the future. It is always advisable to have a healthy contingency fund to help in these instances.
5. Communication within the business is breaking down
Communication is key in business, both within the organization amongst staff and teams and externally with suppliers and customers. Trying to keep employees in particular in the dark when problems arise in a business will often lead to unrest and unease. This, in turn, has negative implications for communication externally. Unsettled employees aren’t good for your business, your reputation or your service. Staff are often the last line of communication between your company and your customers. Clarity and transparency are of critical importance.
6. You feel you are constantly fire-fighting
It would be great if all businesses could run like clockwork and as the boss you could sit back and watch. Sadly, this is not the reality of running a business, but equally you should not spend your whole time constantly lurching from one problem to another. You need time and space to stand back and focus on running the business, making sure it has a viable future. Being bogged down in problems every day can mean that you can’t see the big picture and spot any impending failure. If you feel you are constantly fire-fighting, you need to evaluate why this is. It could be your company structure, with no-one to manage the day-to day on your behalf, or your processes. Could you use better digital tools to streamline workload, for example.
7. You’ve lost your passion
You may feel that you are the only person who can make a decision in the business and you’re overwhelmed with responsibility. This can lead to inactivity and inertia in the workplace, ignoring creditors and putting off difficult decisions. This can go on to have a serious negative impact on your health. It can be the biggest indicator that it’s time to re-think whether your business is working for you, or whether you need to call it a day.
If any of these sound familiar, it’s time to act – NOW! The worst thing you can do, if you’re worried that your business could be facing troubled times ahead, is be an ostrich. Seek professional advice.
Like ailments in the body, a speedy diagnosis can lead to more effective treatment. Businesses are exactly the same – the sooner you get advice and support, the quicker amends can be made and the better the recovery will be.