It doesn’t matter how big, or successful your business is, a start-up, an established business or even if you rule the market at some point you’re likely to have trouble. Sometimes things can seemingly be running smoothly, with a business being self-sufficient and sustained. However, if things tip in the wrong direction, you could find yourself massively struggling. So, what are the tell-tale signs that things aren’t heading in the right direction?
You don’t understand how well the business is performing
Running a business and working as a director are two different things. Owners can easily get distracted with ongoing projects or other important aspects of the company. Naturally, owners and directors have to delegate jobs within the business, but unless you have accurate knowledge of money coming in and out of the business, the feeling of team chemistry within the business and the view of the general public, it’s unlikely you will genuinely know how well you are really performing.
An owner should know every aspect of their business, including in-depth knowledge of how every aspect of your company works. This will enable you to have a clear understanding of your strategy, what you are looking to achieve and where your business is headed. Without you can lose track of what your business is really about and where it’s headed. Knowing the key statistics of the business is key to its success, without that knowledge, it can be hard to keep track of how well it’s really performing.
Creditors are breathing down my neck
If creditors are breathing down your neck, it is perhaps the most significant indicator that something is not quite right within the business. Creditors will be looking for their debts to be repaid as quickly as possible and if you don’t pay on time, it’s more than likely they will start sending letters or applying for repayment through the courts. Constantly repaying creditors and being behind with all your payments puts the business into a much worse position, monthly.
If you are really struggling with repaying your creditors, there may even come a time when they send round bailiffs or debt collectors. Although they only have a certain amount of powers when it comes to collecting goods from your premise, this can be an intimidating experience. If you haven’t already taken action at this point, finding a professional solution is crucial.
Constantly on the back foot with cash flow
Cashflow is a critical part of any business. Simply cash is key, without it, a company would not be able to survive. Maintaining a healthy level of cash flowing through the business is critical to survival. If you are always just managing to scrape by, month by month, it could signal the beginning of the end. It could be down to a variety of reasons, but importantly it indicates that there is something fundamentally wrong in the business. This could be the way you handle collecting money, poor profitability, or outgoing costs are too expensive.
The more you find the business is on the back foot, the more you will find yourself always playing catch-up, which essentially adds extra pressure on the business. If you find you are in this position, then explore your profit margins, check stock prices against your sales. Explore your sales and check what measures you have in place to retain and attract new customers are your current processes working. Luckily when it comes to closing a company, an owner will not be held personally liable for its debt. So, if a company does end up being too negatively affected by cashflow, it would not be a director’s responsibility to take those debts upon themselves.
There are financial solutions available to help restructure the company, such as invoice factoring or invoice discounting, however, it all depends on the circumstances of the business and what is at the root of the problem.
A revolving door of staff
If staff are continually moving on from the company, it can be a significant indication that things aren’t right within the business. Hiring, training and replacing staff is a large cost, alongside the extra expense involved in advertising and interviewing. Replacing staff can also have a negative impact on staff morale and atmosphere. Having an exodus of staff can easily be recognised by a workforce and can lead to a lack of belief within a company.
Any well-organised company should have staff who want to come to work and not only work hard, but work for the company. Happy staff perform better and represent better company values and ethos.
Some businesses can go on despite having lots of problems and are still successful. Although these aren’t always defining problems, they are a good indicator of what can be improved.