Every small-business owner has good days and bad days, good months and bad months. But how do you know when you’re not just experiencing a temporary downswing but are in serious trouble?
Here are seven key danger signs that your business is about to fail and steps you can take to keep your business healthy:
1. You can’t pay your bills. If the three most important things in real estate are “location, location, location,” the three most important things in small business are “cash, cash, cash.” Profits are nice, but it’s cash flow that keeps your doors open. If you struggle to find cash to pay your employees, bills, or yourself, you won’t last long.
Solution: Get into the habit of checking your financial statements frequently, paying particular attention to cash flow: who’s paying, who’s not; how much you need to stay afloat. Cut costs wherever you can. And get your invoices out fast. Customers won’t pay until you bill them.
2. Sales fall off a cliff. If you aren’t making sales, you won’t stay in business. If you’ve been doing well in the past, but now see sales steadily declining – or taking a sudden nosedive – your small business is in big trouble.
Solution: Don’t simply yearn for the good old days, figure out the root problem. Do you just need to step up your marketing or is there a bigger issue? Is your product or service still relevant? Have your customers switched to competitors? Is your location no longer a good fit? Determine the problem and address it quickly.
3. Your employees keep quitting. Unless you’re a sole proprietor, you need employees to keep your small business doors open. If you continually experience rapid turnover of employees, it’s costly and distracting.
Solution: What’s causing the turnover? Are you paying a competitive wage? Do you give employees predictable schedules? Take a critical look at your own management style and skills. Are you the kind of boss you’d want to work for? It’s time to make some changes.
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