Guide - Warning signs your business is in trouble
In most cases, businesses do not just give up the ghost and collapse spectacularly and instantaneously but, instead, deteriorate over time, eventually reaching a point where it becomes obvious that they can’t continue. This means that there are usually a great number of warning signs that should indicate something is wrong to managers of any business. These indicators give those in control an opportunity to find and implement a solution, reversing the fortunes of the business where possible. Business recovery specialists such as Moorfields can offer sustainable and practical assistance in dealing with everyone from creditors and financiers in this case.
We have taken a look at a few of the most important warning signs that your business is running into serious problems:
Without sales, your business is no more than an idea. If there are no sales, there is no capital coming into the business and, consequently, there is no way for it to survive. While there may be periods in which you tolerate low sales, such as during the first days of your business (though you should by no means be just waiting for increased sales, but actively building and changing the business), low sales is typically the most obvious sign of a failing business. The important thing here is to identify a specific reason, or reasons, why sales are low and focus efforts in finding and implementing a sustainable solution.
While low sales may be the most visible threat to the health of your business, a poorly managed cash flow is the silent killer. All businesses require a smooth flow of cash into the business, through the organisation and out again in order to ensure that they won’t run out of cash, and also to ensure they have the option to expand if they wish to. Poor cash flow practices usually stem from one of two sources. Either cash is tied up in stock that isn’t being sold quickly enough, pointing towards a problem with overstocking, or that the ordering and invoicing practices of the company aren’t detailed enough or shared effectively enough. An effective corporate recovery rescue plan should place a keen focus on cash-flow management and how you plan to improve it.
Lack of innovation
In order to survive and prosper, businesses must ensure that they continue to move forward, pushing into new areas, developing their products and upgrading the skills of their staff. Without innovation, businesses will soon find themselves displaced by a company that can provide innovative services and products, and can fill that gap in the market created by a lack of development. Unless a company maintains a position while on the crest of the wave, it is likely that they will be left behind. Keeping up to speed with developments in the industry and business world as a whole should keep you striving forward.
Lack of niche
All businesses should be aiming to provide a service or product to a particular demographic, focusing virtually all their efforts on capturing the business of those clients. In attempting to attract a wider customer base, businesses run the risk of diluting their appeal and failing to bring in the type of customers that sustain a business. If a company can’t succeed in the niche market it was created to satisfy, then there is something wrong with the business model, plan or management.
Warning signs aren’t just about customers, clients and how a business interacts with the market, it is also important to consider how it is functioning internally. All too often managers will focus exclusively on external factors and how they’re affecting a business, when really they need to be looking internally. Discontent amongst members of staff is a good sign that things aren’t going too well and probably won’t improve. If this is the case, conditions need to be improved and the workforce consulted on those issues affecting them. Members of staff are usually the first point of contact for customers and, to a large extent, will dictate the success of a business.
No word of mouth publicity
A lack of buzz, hype or word of mouth referrals can often be a warning sign that the business isn’t performing satisfactorily. This is usually a good indicator because any company that provides a customer or client with exemplary service should generate word of mouth recommendations, while any business providing innovative and exciting services or products should be receiving a great deal of industry interest.
Failure to act on analytics
Analytics are used by companies to evaluate the health of a business for a reason and are too easily discarded or ignored. Though their findings shouldn’t always be taken as gospel truth and data should be used carefully, it is vital that action is taken where analytics find major problems. The information provided by such exercises allows businesses to isolate issues more easily, in turn making the process of finding a solution and implementing it far more simple and successful. Any company running analytics programs should understand the importance of heeding warning signals provided by the data.
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