The Signs Of A Failing Business
Businesses do not usually collapse in one day. It's often a gradual process that can be stopped if you're paying attention to the important things. And as the captain of your ship, it is your responsibility to watch for early indicators of failure so you can navigate around them and keep it afloat. These are signs that should set off warning bells and actions you can take to save your venture.
1. Sales are decreasing.
This one is quite obvious, right? Without sales, there's no revenue and without revenue there's no cash. And a business without cash has one foot in the grave. If you can't seem to get new customers and the ones you have are either leaving or not referring your business, you're in a dangerous situation. Several things could be wrong, but it's best to begin by looking at your marketing and customer service.
2. You're borrowing a lot (or for the wrong reasons).
Yes, you can take loans for certain reasons, but if your business is constantly borrowing money to pay back loans or to finance basic operations, the end is near. Think about it, how much will you have to make to break even so you can pay back the loan you took to pay back another loan? This is enormous financial pressure, the kind that will soon wreck your business. To survive, you will need to stop borrowing immediately and get cash either by selling a stake in your business or forming a partnership.
3. You're slashing prices drastically.
End-of-year discounts are not unusual (even though we do not entirely approve of them) but let's face it, this one is an act of desperation. If you're reducing prices by a lot to keep customers and your profit margin is diminishing rapidly, your business is in trouble. Instead of discounting, focus on maintaining a profitable price point and giving your customers value they can't get elsewhere.
4. Your accounting is a mess.
This is nothing to take lightly. If you cannot keep your finances in order, you won't be in business for long. It takes discipline, yes, but every serious entrepreneur knows that numbers are critical so they do whatever it takes to keep track of them. Do it yourself or hire an accountant, your choice. Either way, get serious about your business account or there'll soon be no business.
5. You're losing employees.
We're not talking about just one or two people leaving, picture rats fleeing a sinking ship. And when there is that sort of mass exodus of staff, you won't only lose good people and their skills, you could lose customers too. Also gone are the time and financial investment it took to train those staff. To crown the misery, you will then need to spend more time and money hiring and training new staff. It's exhausting, really. This is a good place to start fixing the situation.
6. All your bragging rights are in the past.
If you have to keep referring to past glories to assert your relevance in the present, your business isn't making progress. It basically means that nothing noteworthy is happening. You are not innovating. And if you did not know, a business that is not evolving in the right direction isn't just stagnant, it will be overtaken and could be left behind for good.
As a leader, how much are you investing in improving yourself? Are you reading the right books and listening to the right people? Are you training your staff to be aware of market trends? Do they research your competitors regularly? How quickly does your business adapt to changes in your industry? Are you adopting new technology and using it to your advantage? How much effort do you put into research and development? It's time to sit up and build a business that is nimble, forward-thinking and dedicated to progressing. Anything less is a failure in the making.
To learn more about avoiding business failure, read our five-part series, Why Nigerian Businesses Fail, here.
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