Watch Out for the Seven Signs of a Failing Business!
No matter how much hard work you put through your business, there are still times when you will find it challenging to go on. While it is helpful to be optimistic, you also need to take a step back and see if your company is showing the signs of a failing business.
1. You Are Finding it Hard to Pay Bills When They Are Due
Running a business entails many costs – it can be one time or regularly. The regular bills include rent, the salary of employees, utilities, suppliers, and borrowings from the bank.
If your finances cannot handle timely payment, you might need to check your cash flow. Is money coming into your business? Is it enough to cover the daily operations? You need to get to the bottom of this to know how to allocate your money properly.
2. Your Employees Are Leaving You
While employee turnover is expected in every company, you should be alarmed if it reaches a high level already. This usually stems from poor employee morale because of low pay, weak management or terrible working conditions. Some employees just leave for better job opportunities in other companies.
Hiring new employees can be costlier because the company will have to train them again.
3. Payments From Your Customers Are Always Coming in Late
Without regular cash flowing in your company’s pockets, it will be hard for you to pay your creditors on time. You might need to check if your payment terms or grace period is unnecessarily long that it hurts your cash flow. Setting up a cash flow projection can help you have a picture of your liquidity as a company.
On the other hand, you might also be having problems keeping your customer base. Your customers might be following your competitors instead.
4. You Are Not Earning Anymore
This is one of the ultimate—and very clear—signs of a failing business. If all the money that comes in your business is allocated in settling the bills, it means that you are not profitable anymore. You might also struggle to pay your employees their salaries and keep your portion of the revenues.
5. You Have Maximized Your Borrowing Limit
You will need to evaluate your finances if the bank declined your loan request because you have reached the borrowing limits. It means you still have a substantial amount of outstanding borrowings that yet to be settled. Before acquiring financing from other sources, check your cash position first to know if the company can still survive financially speaking. You might need to realign your spending priorities.
6. You Are Desperate to Find New Revenue Channels
You start a business with certain products or services that you intend to offer to your customers. This is your core revenue source—the main reason why you build your business.
Some businesses diversify their offerings as they grow, which is a good thing. But some are just forced to venture into a new revenue stream in a bid to generate more profits. This happens usually when their core offerings are not as profitable or marketable as before.
7. Financial and Other Important Data Are Lacking
Information is everything, especially when you are running a business. The information relating to your finances and operations should always be available. This is to help you make the necessary business decisions on time. Apart from this, these reports can help you identify your company’s weakness.
Maybe It is Not Yet Too Late
Even though you have seen three or more signs of a failing business, you should not quit right away. As they say, maybe it is not yet too late to turn things around. Here are some of the things you can do to fix what is wrong in your business:
- Prepare a financial report summarizing your assets and borrowings, among others. Use this as a reference to allocate your resources well.
- Adjust your business plans because your current strategy may not be working.
- If they have complaints, convince your employees that working conditions will get better. Then, deliver on your promise.
These tips may not be applicable for you, however, if you must file for bankruptcy already.
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