We’ve all watched that movie where a dangerous gas or virus leaks out in a laboratory or research facility. Almost immediately, a very loud alarm goes off, red lights start to flash, heavy doors slam shut to keep the danger in – trapping everybody who weren’t lucky enough to slide underneath the dangerously-fast closing door just in time (usually either the hero or the villain) – and people in “space suits” rock up at the other side of the door with the mission of saving the day.
If only it was this easy to spot the danger when a business is starting to fail. The warning signs that your business is heading for financial stress are a lot more subtle, but if you know what to look for, you can save your business from failure if you act in time.
Let’s look at a few warning signs that can help you to spot imminent danger in your business:
1. You’re Always Putting out Fires
It’s like you’re always one step behind. You feel disorganised, you have to juggle bills, and you never have time to do the things you really want to – like calling up one of your best clients or developing a new product – because you’re too busy doing damage control. It may seem counterintuitive, but if you’re constantly in damage-control-mode, you have to take a step back and assess the situation. Why is this happening? Is there a problem with your product? Do you not have clear processes in place? Or does your team need more training?
2. You’re Not Paying Your Bills on Time
Many businesses go through short-term difficulties where they need to juggle their bills a bit while waiting for a big payout or during a slow season. However, if paying your bills late is an ongoing problem with seemingly no end in sight, you need to take a step back to assess why this is happening. Paying your bills on time should be a priority because if you don’t, your suppliers may cut you off, decrease your payment terms, or charge you late payment penalties. These can have far-reaching repercussions.
3. Your Clients Pay Their Bills Late
On the other side of the coin, it’s just as important that your clients pay their bills on time. If they don’t, you can’t pay your bills on time and this creates a vicious cycle of constant late payments. This is something you should address immediately. Maybe your debt collection team is not taking their job seriously enough or your clients’ credit terms are too generous. If your debtors often pay late, you may want to consider taking away or shorten their credit terms and your debt collection team should follow up more often to collect outstanding money.
4. There Is a Lack of Communication in the Business
There should always be a two-way stream of communication in the business. If any of the parties stop communicating with each other, this is a clear sign that something’s wrong and you should address it. Maybe you don’t feel that you can be transparent with them about the state of the business anymore. Or maybe your staff don’t have the courage to talk to you anymore – either because they can see the signs that the business is in danger, or you’re so stressed out that you’re difficult to talk to.
5. You Don’t Have Proper Control over Your Team
You shouldn’t micromanage your team (that’s dangerous and we’ll talk about it in a later point) but do you know what your staff is doing? Are they on track with their tasks or projects? Are your clients taken care of the way they should? If it feels like you’ve lost control, here are a few ways to address this problem:
- Make sure they’re clear on what their tasks and responsibilities are
- Develop or update the standard operating procedures
- Measure KPIs regularly
- There should also be regular feedback from your staff
6. Your Best Employees Are Looking for Greener Pastures
If you have a high staff turnover rate or if your best people are resigning, you need to investigate the problem. It may be that they feel you’re not caring about their well-being enough, for instance, if they haven’t received a raise in a long time or their complaints were ignored. Or they are seeing the warning signs that the business is going down and want to jump ship before it’s too late. Hiring and training new employees are costly, and when you have great employees in place, you should strive to keep them happy – within reason, of course.
7. It Feels like You’re the Only Decision-Maker
If your staff come running to you for answers about every second decision they need to make, you have a serious problem. It’s exhausting and stressful, and if you’re running around trying to take responsibility for everyone and everything all the time, it will inevitably lead to burnout.
Some of the reasons why this may happen:
- You don’t have proper procedures in place.
- Your staff aren’t trained sufficiently
- They’re not taking responsibility for their own work
- Your managers aren’t pulling their weight
- You’re micromanaging your team, clearly signalling to them that you don’t trust them to make decisions. You have to let them take responsibility and make mistakes. They will make mistakes – that is part of business – but if you’ve given them the responsibility they’ll also feel compelled to fix their own mistakes and learn from them.
8. There Is a Rise in Customer Complaints
If there’s a rise in customers who aren’t happy with your product or services, you need to find the cause of their dissatisfaction as quickly as you can and make changes to address the problem. When your customers aren’t satisfied anymore, not only will they stop buying from you, they’ll also tell everyone they know that they shouldn’t buy from you.
9. You Are Taking Uneducated Risks
Even with the best planning, your business can still fail, but without any planning – that’s a surefire way to fail. Taking risks is part of any business. However, we can mitigate risks by analysing data, comparing different scenarios, and carefully planning each step in the process once we’ve decided on a plan of action. If you take risks based just on your gut feel, you’re gambling with the future of your business.
10. You’re Complacent
When the wheels are oiled and everything runs smoothly, it doesn’t mean all is well. Many great businesses have gone under because of complacency, like Kodak and Blockbusters. The market is changing all the time and you cannot afford not to stay ahead of the curve. Improvements and innovation should be part of your plans every year.
11. You’re Not Taking a Market-Related Salary from the Business, or None at All
As business owners, we tend to stand last in line when it comes to taking salaries. If cash flow is tight, most of us pay our employees first before we’ll pay ourselves – like the captain leaving the sinking ship last. However, if this is an ongoing problem and you can’t seem to catch up, it’s time to take a step back. Paying yourself late or not taking a market-related salary from the business is not sustainable. Not for yourself, and not for the business.
12. You Haven’t Taken a Holiday in a Long Time
Everybody needs a break now and then. When you take time away from the business, you come back fresh, energetic, and with new ideas. When your nose is in the business the whole time you don’t see the bigger picture anymore, you stay in a constant bubble of stress, and eventually, you will come to despise your business. If you haven’t taken a holiday for a long time, then go and book something tonight – even if it’s just a long weekend!
13. You’ve Stopped Laughing
You started your business because of some kind of passion, right? You’re either passionate about the product or service, or you just love the game of business. Either way, if you don’t enjoy running your business anymore or if the stress is killing you, then it may be time to step back and take a deep look at what’s going on. No dream is worth sucking the life and joy out of you. Maybe you just need a break, maybe you need to make a few changes to how you run your business, or maybe it’s time to close shop. Whatever the solution, you cannot ignore the problem.
Is Your Business Heading for Financial Stress?
Do you spot any of these signs in your business? If so, take some time out and take a hard look at your business. If you don’t, you’ll keep on making mistakes and you’ll eventually run your business into the ground. It’s hard to hear, we know, but you simply don’t have a choice if you want your business to succeed.
As the CEO or business owner, it may be too difficult to look at your business objectively. You may not be sure whether you’re really seeing the warning signs, and if you do, what you should do about it. If that’s the case, you need to reach out to someone that can help.
With the right help, you can get back on track quickly. The longer you wait, the harder it will be to rescue your business.