Running a business doesn’t always equate with success. Sometimes things don’t work out the way you’d planned, leaving you struggling to keep the business afloat.
But before a business approaches its last leg, there are warning signs to watch out for. By being vigilant for these indicators of trouble, you may be able to avert disaster by taking preemptive measures.
Here are five classic signs that suggest a business is on track to fail and how to change course.
-
Funds are dwindling
This is the most obvious and alarming sign that problems are percolating.
If you find funds are continually low (or getting low), your business’s future could be on shaky ground. Your business cannot grow, and you could have a host of other big problems at hand, such as the risk of losing employees and compromised product or service development.
How to fix it: Start by tracking cash flow and every penny that goes out or comes into the business. Identify your problem areas, and check whether your prices are too high or too low. Consider whether you can afford to reduce prices that may be too high, or whether you need to increase prices. Think about using accounting software or obtaining professional help from an accountant to get on top of your business’s cash flow.
In addition to monitoring your cash flow, do a thorough audit to see where you can cut costs or unnecessary expenses.
-
You’re not talking to customers — and sales are plummeting
Customers are the lifeblood of your business. Without them, you can’t earn a profit. So, if you’re not talking to customers, your business could be going astray.
Similarly, a year-round “slow season” (sales going down) could actually signal that your business is failing.
If plummeting sales coupled with disappearing customers becomes a pattern at your business, you need to take immediate action to correct the course.
How to fix it: Examine your budget to see if you have the bandwidth to increase advertising spend; host in-store promotions, such as buy-one-get-one deals; offer coupons and giveaways; and organize special discount sales.
If you don’t have enough wiggle room in your budget for the latter, consider asking current customers for feedback, volunteering in your community and posting more frequently on social media to build a strong online presence.
-
High turnover
There are any number of reasons your employees might be quitting. But consistently poor employee retention could be a sign that your business is doomed for failure.
In the current job market, higher employee turnover is a more common phenomenon as opposed to the pre-pandemic era. But that doesn’t mean you shouldn’t keep an eye on a climbing turnover rate.
How to fix it: If you notice higher than normal employee churn, even in the wake of the COVID-19 pandemic, try boosting your employer brand and showing staff that you appreciate and value them. Consider offering more competitive benefits and raising pay, in addition to showing your employees a clear career path with your business.
Provide recognition and encouragement to employees who are performing well, and work to provide a welcoming environment to new hires. Last but not least, allow flexible work schedules to the extent possible to help employees create a work-life balance.
-
You’re always extinguishing fires
Every business owner has to deal with periodic crises. But if you constantly find yourself putting out fires, it is an indication that your business is heading down the wrong path.
How to fix it: List out your business’s problems to determine effective ways to tackle and resolve each one. Then, plan a strategy to avoid each one in the future. And instead of just extinguishing fires as they erupt, try to get to the root of the problems and fix them once and for all.
-
You’ve lost your passion
Think back to the days when you started your business. Remember how excited you were about starting your own venture? Recall the blood, sweat and tears you poured into making your business dream a reality. If you don’t feel the same way today, your passion may be waning, another potential sign your business is sinking.
How to fix it: Dig deep within and assess whether your heart is still in your business. Ask yourself if you want to fix the problem. If your answer is no, it’s probably time to pack it up.
But if the answer is a resounding yes, take a step back and think about what motivated you to start the business in the first place. Then consider ways to reignite your passion. It could be taking a vacation to refuel or assigning more work responsibilities to staff. The solution may even be as simple as giving yourself a daily reminder of why you’re in the business.
