5 sure signs your business is on the rocks

Most businesses fail. It’s a fact of the Australian market. Indeed, this is true globally. That’s not to suggest that most businesses need to fail. Incompetence and mismanagement are the number one reasons that an established business will collapse. A crucial step to ensuring that your business doesn’t become just another depressing statistic is making sure you recognise the signs of danger. Is your cash-flow drying up? Cash-flow is the lifeblood of any company. As such, it should be your first weather-vane indication that your business has issues. No liquid assets means no room to move. If your business encounters a crisis situation and you don’t have the cash-flow to manage it, you’re already looking at dismantling other, potentially crucial parts of your business. Your tight cash-flow might be a considered decision, or it may be due to other market conditions, but low liquidity is a problem in and of itself. Figure out what’s cutting into your profit margin and cut back on your expenditure. Are you having trouble securing finance? One very useful sign that you should sit back and take stock often comes at a counter-intuitive time. When a business is seeking to grow, it will look to secure funding or investment. At this time, the business and the directors are at their most optimistic, ready to take on the next leg of business development. It can be puzzling then, to be constantly turned down or pushed back for finance. Lenders wouldn’t be lenders if they were just stingy. What they are, is excellent at assessing risk. If you’re having trouble securing finance, then I would advise you to have a hard look at your business – no matter how good you think your money situation is. Are you having trouble managing your debts? Perhaps you’re in a stabilisation phase, and are merely trying to manage your business after a period of growth or change. You start to notice that meeting your current repayment schedules is more difficult than usual. This is a bad sign. It doesn’t matter if you’re expecting things to perk up or not, if you notice that you’re starting to run afoul of your creditors, you have a serious problem. Whether it’s due to some cash-flow issue, or poor planning on your behalf, falling behind on your debts is the quickest path to insolvency. In this circumstance, there are a few options.

July 13, 2023

Uncategorized

Is your cash-flow drying up?

Cash-flow is the lifeblood of any company. As such, it should be your first weather-vane indication that your business has issues. No liquid assets means no room to move. If your business encounters a crisis situation and you don’t have the cash-flow to manage it, you’re already looking at dismantling other, potentially crucial parts of your business. Your tight cash-flow might be a considered decision, or it may be due to other market conditions, but low liquidity is a problem in and of itself. Figure out what’s cutting into your profit margin and cut back on your expenditure.

Are you having trouble securing finance?

One very useful sign that you should sit back and take stock often comes at a counter-intuitive time. When a business is seeking to grow, it will look to secure funding or investment. At this time, the business and the directors are at their most optimistic, ready to take on the next leg of business development. It can be puzzling then, to be constantly turned down or pushed back for finance. Lenders wouldn’t be lenders if they were just stingy. What they are, is excellent at assessing risk. If you’re having trouble securing finance, then I would advise you to have a hard look at your business – no matter how good you think your money situation is.

Are you having trouble managing your debts?

Perhaps you’re in a stabilisation phase, and are merely trying to manage your business after a period of growth or change. You start to notice that meeting your current repayment schedules is more difficult than usual. This is a bad sign. It doesn’t matter if you’re expecting things to perk up or not, if you notice that you’re starting to run afoul of your creditors, you have a serious problem. Whether it’s due to some cash-flow issue, or poor planning on your behalf, falling behind on your debts is the quickest path to insolvency. In this circumstance, there are a few options. Either cut back on your expenditure so you can meet your repayments, or if that’s a problem you should get in touch with your creditors at the earliest possible moment. Seek some professional guidance about how to approach the conversation and discuss your options given your circumstances. I assure you that creditors will prefer a more manageable repayment schedule than you panicking your way into some unresolvable situation.

Are you losing clients?

Customers are often quite savvy. People don’t like to be messed around. If you can’t retain customers or secure the kind of word-of-mouth referrals that support both ongoing and single-sale business models, then it may be a sign that something more serious is going wrong with your business. Are your workers being treated more harshly because times are tight? This might come out in your customer service. Are you having to cut back on your sales and marketing? The issue here is that low customer retention/referral is going to hurt you more in the long run. You might need to consider cutting back elsewhere to better manage your client base. Or you might just need to consider treating your clients better. Don’t let tough times affect the people you rely on.

Do you hate coming to work?

We’re not being glib here. Running a business is hard work. It takes a lot of strength some days to pick up the briefcase and walk through the door. But these kinds of moods can devastate a business. A lack of enthusiasm can lead to poor decisions and mismanagement. If you’re struggling to find the value in your business it’s time to consider taking a break, or maybe even moving on. Much better to hand the reins over to someone else, temporarily or otherwise, than running the company you worked so hard for into the ground.