When you start a business, you probably don’t want to think it’s going to fail. Nobody does. However, a very high percentage of businesses fail in the first year so there are no guarantees you are destined for success, no matter how amazing your idea is. Catastrophes rarely happen without warning. There are always signs trouble is ahead, but you need to be alert enough to spot the signs.
Cash Flow Dries Up
Great businesses are more likely to succeed, but nobody is immune to the fluctuations of the financial markets and global economy. When your business overdraft is maxed out and you have no money left to pay the wages, things are dire. Payday loans can tide the business over in the short term, but long term cashflow problems cripple businesses and send them to the wall.
Employees Are Leaving
Employee morale is more important that you think. Employees inevitably come and go. That’s the nature of the beast and you can’t keep good people tied to their desk forever. However, it’s not a good sign if all of your best staff are leaving like rats from a sinking ship. Talent drain is a very real problem. If one person leaves, it’s unfortunate, but if several leave in quick succession, you need to start asking why.
The Business Isn’t Adapting to New Market Forces
Markets change over time, but if your business is static and fails to adapt and change, you are in serious trouble. Good businesses come and go over time, but successful businesses are able to innovate and evolve. You cannot rely on past glory forever and your business reputation is only as good as your next product. Apple knows this, which is why they continually strive to produce new products. Reinvention is the key to success.
No Research and Development
Smart businesses continue to invest in research and development. It’s the way forward. Businesses that fail to think ahead are vulnerable to the winds of change. Remember Betamax video? Don’t let this happen to you.
Reduced Sales
Sales are a good indicator of how healthy a business is. When sales begin to slow down, it isn’t a good sign, as this directly affects cash flow and the business’s ability to pay its creditors. Pay close attention to your sales. There will be inevitable fluctuations in sales patterns, which you will become familiar with the longer you are in business, but if you notice any unusual slumps in your sales, pay close attention and act fast.
No Brand Recognition
Brand recognition is important. If people don’t talk about your business or leave positive testimonials, it will be hard to attract new customers. It won’t take long for apathy to affect your business and for the rot to set in.
Always plan ahead. Set three, six and twelve month targets for business growth and keep a close eye on your cash flow and sales to make sure you are on target. And if you do spot any of the above warning signs, act fast.